Wednesday, April 26, 2006

Making Money From Stocks - Useful Tips

Investments & Trading
Making Money from Stocks – Useful Tips By J. Foley

Making money from stocks doesn't involve a magic trick. It happens through maintaining consistent goals and sticking to them. We know of many 'successful trader' legends who purportedly made amazing amounts of money from stocks in a fairly short period of time. Remember, legends are legends and reality is reality. There is no magic formula for getting rich on stocks. You have to work hard, as in any other honest trade.

It is imperative to have a can-do attitude. The time to start creating wealth is right now, not next week or next year or after that vacation. Do not keep postponing. Good solid investments that you stick with for the long term are your best bet for creating lasting wealth. This takes discipline. Here are some common and ready tips.

Develop a system of disciplined stock trading and strictly follow it.
Avoid playing too much in the short term, and take a mid- to long-term approach.
Keep with a trend-following trading style.
Go for fully planned trades. Be ready for all scenarios in advance with a pragmatic and cool approach equally to bad times and good times.
Try to cut losses early, but do not panic over this.
Avoid fear and greed, the two greatest enemies of the honest stock trader.

All these rules are violated everyday by common traders who know no better, and who pay very little attention, if any, to money management.

The most important component of a trading system is money management. Even more than a good entry-exit strategy, one needs good money management – that is, the ability to solve rationally the most important question of a trading system: how much to invest and how many positions to trade at the same time.

An active investor has to know the in-s and out-s of buying and selling stock. In order to obtain the gains and rewards from trading, one must be ready to learn the basics of different trading methods. Otherwise it will be better to follow a mutual fund manager who does.

In that case also, it is usually said that the first step is to understand mutual fund expenses and the next step is to avoid them! Mutual funds are meant for people looking for minimizing the costs inherent in buying and selling stocks and minimizing risk and volatility in investments, and for maximizing purchasing power by pooling their resources with others.

But surprisingly, not all mutual funds have low expense ratios: many of them charge exorbitant fees. The common sense investor needs to be aware of the fees and expenses involved in any mutual fund investment.

Understanding the different ways to buy and sell stock in the market is the first step to make money from stock investments.

Dollar cost averaging is a good investment strategy for the reason that you are not overexposing your investment to the risks involved in timing the trading while you consistently invest on a regular, periodic basis.

Consistent investment is the route to take for becoming a winner, which is possible through dollar cost averaging. This actually takes advantage of market volatility so that you buy more stock when the price is low and less stock when the price is high.

Another important tip is you should generally avoid companies with high P/E (price-earnings) ratios.

A company's P/E ratio is a very common means for comparing and understanding the value of a company's stock. It is calculated by dividing the previous day's closing price by the adjusted EPS (earnings per share). But high P/E may be deceptive and it is wise to avoid being guided by this ratio.

Investors in stock who have turned wealthy know all this, because they have all developed their own disciplined approaches. A wealthy future with money from stocks is closer than you think if you keep with these tips.

Investments & Trading by J. Foley

Sunday, April 23, 2006

How To Choose The Right Broker

Investments & Trading
How to select the right broker? By J. Foley
A stockbroker is your agent in the stock market and he is licensed to buy and sell shares. Against this service he will charge a fee and this fee varies from broker to broker depending on the nature of service provided. Brokers provide you with the market research on domestic and foreign trends, help you plan your investment and regularly update you and advice you on shares, government bonds and other listed and non-listed investment opportunities.
 
What kind of broker am I looking for? 
There are two main categories of brokers: full-service brokers and discount brokers. 

A full-service broker provides step-by-step guidance to the customer. He will advice you on the purchase of shares, plan your financials, analyze your investment and provide full customer support. Because of these services full-service brokers charge more than discount brokers. 

A discount broker on the other hand shall not advice you  on the investment trends or provide you with detailed market research. He will carry out transactions according to your specifications. Discount brokers charge lower fees but you lose out on customer support. The success of the dealings will depend on how well you are informed about the market. Before you settle on a broker it is recommended that you survey   different companies for their brokerage and decide which is best for you. 

Investors, who are stock savvy and capable of deciding which stocks they want to buy, approach discount brokers. But if they are not well informed about the company in which they wish to invest they will approach a full-service broker.      Where do I look for a broker? 
If you have friends dealing in stocks they can recommend you some names. Market survey will also provide names of brokers with good reputation. Broker Referral Service maintained by The Australian Stock Exchange will provide you with the list of brokers. You can search for brokers online and commence trading.   
What information should I gather from my discount broker? What are the charges for buying and selling shares? How will the broker be available to me: over the net of telephone? You need to clarify any doubts regarding their subscription fee. Sometimes brokers offer discounts if you are trading quite often with them. It is an incentive they offer as trader discounts. You should always enquire about perks offered to customers. Though you are aware of the nature of their services you should enquire if they provide any company research or market research data.
 
What information should I gather from my full-service broker?   
Know about their charges. As they provide customer support and personal attention their charges will vary according to the nature of services provided.  You should survey the market for their research capabilities. The advice you on investment strategies which is largely dependent on their market research skills.  

Know how they intimate their clients about the latest investment trends. Many companies have regular updates that they mail their clients. Information is the key here; you must clarify these points before deciding on a broker.
   
Another important consideration before you open a brokerage account is that of minimum opening balance and maintenance fees. The minimum opening balance required by some companies is quite high. Some brokerage firms also charge a maintenance fee if your balance falls below a specified amount. Know the company policies in detail before finalizing your choice.

Each brokerage type has its advantages and disadvantages therefore you need to be well informed and sure about what kind of brokerage would be ideal for you.

Investments & Trading by J. Foley



Friday, April 21, 2006

How To Choose A Stockbroker

investments & trading
How to Choose a Stockbroker By J. Foley

A stockbroker is a person who mediates buying and selling of stocks and shares. S/he is specifically trained to do this for investors in exchange for a fixed commission.

This commission, a percentage of the invested capital charged for the service, varies from broker to broker, or the firms they represent.

The stock market does not require buyers and sellers to assemble directly. Transactions are made mostly through these agents who charge a fee known as brokerage.

In general, the brokerage is determined at a flat rate per trade. But if you trade over a set limit, it may be charged as a percentage – for example, 0.11% for all online trades over $30,000 in value.

In most cases of buying or selling shares, you must use a broker who holds an authorized of Financial Services License, or is an authorized representative of such a license holder. But you have to know what type of broker suits your need. How do you locate the person and exactly what services shall you need as a share market investor?

You may need full-service or advisory brokers. These brokers ask for higher brokerage, because in addition to their normal handling services, they also make recommendations and give advice based on their own in-house research. They analyze your investment needs, help you to decide on short- and long-term goals, assess the risk tolerance you're prepared to take, and allocate your share portfolio accordingly.

Then there are discount brokers. These brokers do not offer advice or make recommendations. They only buy or sell the shares that you select. Their brokerage is expectedly lower than that of full-service brokers. You can buy or sell shares through a non-advisory broker online or by phone.

An advisory broker is of a great help if you're just starting out or have hardly any knowledge or time to research on investment possibilities. Some brokers do not charge for advice explicitly, but you can be sure that the fee is included in the higher brokerage they get from you each time you buy or sell shares.

Fees also vary according to the service you want. If you go for high-end services like ongoing portfolio management, you'll likely be charged ongoing management fees. If you only have small money to invest, it may be difficult to find a full-service broker accepting you as client.

You can find a broker to buy or sell shares by phone or online. For full service broker you have to move beyond the phone and go through an elaborate contract. Both full-service and online discount brokers can offer you a range of online tools charting portfolio management, and access to live market data.

It is best to take a rational position in choosing a broker. Compare the benefits and costs associated with different brokers and go for the one who generates maximum expected net benefit based on plausible turns of events over a relatively longer period of time.

Read a broker's Financial Services Guide (FSG) before your first meeting. Services offered can vary widely. Most online brokers offer shares, options and warrant trading but many of them don't trade futures, margins or international shares. Work out what services you really need. Do not pay for a service that you never want like trading international shares.

Choose a broker who offers automatically updated data known as real-time/dynamic market data, or at least instant (but not automatically updated) data known as live data. Some only offer 20-minute delayed updates.

Some discount brokers will charge a fee to access extra services like interactive charting or independent research. Work out the maximum expected net benefit for exactly the services you need. This is the best way to choose your broker.

investments & trading by J. Foley

Tuesday, April 18, 2006

How To Be a Successful Day Trader

investments & trading
How to be a successful day trader? by J. Foley
For many people day trading is too intimidating a thing. That day trading is not everyone's cup of tea is true. But many just stay away from it due to the misconceptions they have regarding day trade. But if they had known better they might have considered investing more time and money on day trade. Because although the risks are high the rewards are also great. And the emotions you go through during a successful trade are rare. 
It is a fact that not everyone can be a day trader. One needs  to have a specific set of skills and a few character traits to be successful at this. One needs to have an analytical mind, he needs to be good at problem solving and should have the patience to learn from his mistakes. He should also know how to use  his profits wisely and how to bounce back after a serious loss. Following are few of these basic character traits that we discuss in detail. 
Confidence: If you plan to be a successful day trader you have to be confident. There are no two ways about it. Day trading means that you have to decide, and decide quickly. If you are not sure about your decisions, if you are plagued by self-doubt chances are you might miss out on the best trading opportunities of the day. You have to believe in your decisions and go ahead with them. And if you are generally an indecisive person it would be advisable for you to try out a different career.
 
Discipline: To be successful at day trading you need to have the discipline to make a plan for yourself and then stick to it. When you are dealing with stocks there is always the possibility that you may win big or lose big. But if you are a disciplined person you would know what your limits are and when you should stop. You would never let the emotions of greed and fear take control of you. Instead you should have the ability to leave the market as soon as you have reached your objective.
Decisiveness: People good at day trading never hesitate. They trade at the first opportunity they think is right. Being tentative would mean losing out on the best trading opportunities of the day.
 
Passion: Day trading generally involves a lot of analysis and understanding of the market. For which you have to closely follow the daily business news, you have to interpret various charts, crunch numbers and make sense of the quote screens. And you have to do all this in an extremely fast environment. So for someone who doesn't feel that passion for it, things can get extremely difficult.
 
Dealing with failures: When you start day trading you should get one thing clear in your mind – you can never expect to win every time here. You will lose from time to time. The only thing you have to make sure is that you win more than you lose over a period of time. If you are able to accept this fact then you can go ahead and be a day trader, but if you are terrified about losing then it's better for you not to venture in the markets.
 
Concentration: While you are at day trading you have to assimilate a lot of data which you have to analyze, arrive at decisions and then carry out them. And all this happens in real quick time. So you got to be able to concentrate and concentrate hard. You should have the stamina to do so throughout a day and if you are good at avoiding distractions you will make a good day trader.

investments & trading by J. Foley

Friday, April 14, 2006

Forex Trading Tips

investments & trading
Forex Trading Tips By J. Foley

Forex trading is buying and selling the foreign currencies of different countries. It has a similarity with stock trading in that the foreign currencies behave like shares of the currency institutions of the countries. Like stock prices, these also move up and down with time-dependent volatility.

It is possible to buy a currency low, buy long and sell short another high currency. It needs meticulous pursuit of the exchange rates of currencies you want to trade. One needs to keep up a continuous scrutiny of the trajectory every particular currency vis-à-vis the other currencies, pair-wise.

It often has leverage enough to induce highly profitable arbitrage and hedging. Each internationally accepted currency has a market and the Forex market is the superset of all these markets taken together. Traders make their own basket or inventory of Forex and trade according to their anticipation of movements.

For example, the primary Forex statistics for the euro in relation to the German mark prior to 1999 reveals a lot of interesting features and profit potential of dollar or German Mark in relation the euro.
From the evidence it appears somewhat surprisingly that the euro lost ground against the US dollar in Forex spot trading, and in quite a few dimensions did not match the international transaction role of the German mark.

The euro changed the structure of the Forex market and increased market transparency through currency elimination. This exposed the dealers to higher inventory risks as their respective inventory imbalances became exposed easily to other dealers.

The increased inventory costs were recovered by the dealers in the euro markets through higher spreads. This made the euro a less attractive transaction medium than the German mark. This shows how trading in Forex involves both risk and profit potentials.

Earlier, the forex market was the trading ground of millionaires and billionaires only. Now with the introduction of online Forex trading, the average person is able to create amazingly large amounts of wealth from safe online investments in foreign currencies. Online forex trading is nothing but Forex trading transacted through internet links and email through a competent broker.

No technical know how, big "risk", or large investment, hard work is needed. Online forex trading investment lets you use your dollar to control an investment two hundred times as high, $1 to control an investment worth $200, $1000 to control $200,000 and so on and on worth of investment.

Through online forex trading, you are now able to invest your money to fetch more money for you like the millionaires and billionaires, instead of you laboring hard for your money.

Online Forex trading is real fun. It is often the most striking and profitable internet investing opportunity because you can do it from your PC or connected laptop from any place in any country in the world.
You don't need any stocks or big inventory in this trading. In online Forex trading, all you do is, just open an account with one of the brokers with as little as $300 or so. Of course, the larger your initial investment, the faster you stand to gain wealth.

Then you simply have to follow simple instructions to purchase and sell the currencies. You buy when the price of the currency is low. Within a few seconds or minutes, the price may go up, and you may sell it and make a profit. This way, by just buying, selling and trading these foreign currencies for about 3 or 4 hrs in a day, you can easily make $500-$1000!

Forex trading is easy money. Especially with the introduction of online trading, it is virtually a continuous upward money spiral for any alert person with a competent broker.

investments & trading by J. Foley

Sunday, April 09, 2006

Day trading strategies - What Works ?

investments & trading
Day Trading Strategies – What Works? By J. Foley

Day trading is a trading strategy where investors buy and sell a stock in the same trading day. That is, you will not hold a stock overnight because you are always in and out of positions within the day.

Day traders buy and sell stocks very fast over the day in the hope that their stocks will continue climbing or falling in value for the short duration during which they own the stock, enabling them to grab quick profits. Day traders usually work with borrowed money, with the expectation that they will reap higher profits through leverage, and at the same time they bear the risk of greater losses too.

To look for tips on what works, you have to look into the negatives and take precautions against them.

As day traders are usually the 'fast buck' type of guys, they often have a tendency to get swayed by tall talks from advertisers. This is where serious pitfalls keep looming. It is never a wise thing to believe in advertising claims that promise quick and sure profits from day trading.

Before starting day trading with a firm, you must gather hard statistics on how many clients have actually lost or made profits dealing with them. If the firm does not have this information, or refuses to give it to you, take a pause because you are in for extreme risks through ignorance.

Secondly, some websites claim to have earned good money from day traders by providing them hot tips and stock picks for a fee. Once again, don't take them at face value. Sounds that trumpet easy profits from day trading are often disastrously misleading. Check out these sources thoroughly before you take them on your side if you will.

It will be wise to check out day trading firms with your state securities regulator. As it is with all broker-dealers, day trading firms have to register with the SEC and the states in which they operate. Confirm the registration of the firms under your focus by calling your state securities regulator. Find out whether the firms have records of troubles with regulators or their customers.

Any day trader should be able to read ahead how much they need to make to cover expenses and break even. As this type of business is extremely risky, most investors often lack the time, wealth or the endurance necessary for making money along this line. Anybody intending to plunge in has to be prepared from the very beginning.

Day traders have to pay for the computer time and for the tips and advice from the day trading firms. The firms start earning the moment you enter but you are likely to end up losing unless you yourself watch out against the risks.

You may want to ride the momentum of the stock and get out of the stock before it changes course. But you do not know for certain how the stock will move. It is a freaky thing, and you have to be on continuous alert. It is often better to pick a mixed strategy of waiting till your earning increases by a certain multiple of your investment, and terminating whenever a reverse turn starts in the stock price.
To move out within seconds is another strategy you may follow, though even that short interval may generate huge amounts of money had you chosen the right stocks and the right length of interval. The best way to make it work is to work everything out for yourself in the painstaking old-fashioned way, instead of putting your sole trust in the day trading firms.

investments & trading by J. Foley

Saturday, April 08, 2006

Day Trading Benefits - What Are They ?

investments & Training
Day Trading Benefits – What are they? By J. Foley
Although previously considered to be the exclusive domain of floor traders only, day trading is now an option for anyone speculating on the market. With the advent of improved communication technology, affordable computers, the lure of large intra-day price swings and competitive commissions, day trading is gaining in popularity by leaps and bounds. 
Day trading has often been vilified. There have been many pros who have openly condemned day trading. Even responsible institutions have at times raised serious doubts against day trading. But fact is, with real-time quotes available, improved computer technology, and next to nothing commission rates, day trading at his point of time makes ample sense. 
There are definite benefits when it comes to day trading. 
You don't have to be concerned about overnight news
This is a big plus with day trading. Since you are completing your trading within the span of a single day, it doesn't matter if something big happens overnight which you cant deal with the next morning when the markets already start in a bearish note. With day trade you know what you have made at the end of the day, whether you win or lose. 
You don't run the risk of riding losses
Since you finish off with your trading within a day you may lose but you avoid losing more the next day as you don't hold on to your stocks. So if any stock of yours suffers significant losses over a few days you are not affected to a great extent. 
You can capture large price swings
If you are into day trading it means you are always on the ball. So nothing that happens in the market escapes you. If any news or event results in large price swing of any particular stock you are there to capture it. A constant monitoring of the market is needed for this. You have to have the patience to wait for the event to happen. When the event nears you have to anticipate it through your analysis and instinct. And when it actually happens you have to grab the opportunity as quickly as possible. 
You get instant feedback
With day trading you don't have to worry long as to what will happen to your money. You are buying and selling the same shares in a single day. So by the end of the day you know how much you have made that day. You may have made a profit or you may have lost. But whatever has happened the results are right there in front of you in the evening. 
But, if you are thinking about being a serious day trader you should also be aware of the risks you are about to take. 
You encounter significant intra-day volatility
At times stock prices suffer significant swings within a single day, but the swings generally get corrected over a period of time. Being a day trader you cant wait for the correction to take place and you may end up losing big time.  
You need a sizeable investment
If you are seriously contemplating day trading you would be required to make a significant investment. You need to get yourself the best hardware around, the pretty expensive software platforms which are must-haves, you need to pay a sizeable amount to gain access to all the live quotes and news. So before you take the plunge, do some soul-searching and decide whether you are really that passionate about getting into this.

investments & trading by J. Foley

Friday, April 07, 2006

Basics Of Stock Trading

Investments & Trading
Basics of Stock Trading By J. Foley

To "trade" is to buy and sell, according to the terminology of the financial markets. Stock trading involves buying and selling of millions of shares all over the world. It is a mystery how this large a volume and value of trade is accommodated in the system of trading. These financial markets are marvels of technological capacity.

If you're looking to invest in stocks, it is necessary that you have at least a basic understanding of how the market works. You don't have to know all of the technicalities of buying and selling stocks. Explaining the technical aspects of the markets is possible by tracing the appropriate links available in the web. The first and foremost necessity is to know how the exchange floor works, no matter whether you trade through the floor or electronically.

On the exchange floor, when the market opens, hundreds of people are seen rushing about shouting and signaling to one another, watching monitors, and entering data into terminals, talking on cell-phones. It looks like a complete fiasco.

However as the day draws to its end, the markets have successfully worked out all trade and are prepared for the next day. Here is a step-by-step presentation of the execution of a simple trade on the exchange floor of any major stock exchange.

You ask your broker to buy certain number of shares of a company at market.
The broker's order department passes the order on to their floor clerk on the exchange.
The floor clerk transfers it to one of the firm's floor traders who finds another floor trader wanting to sell this many shares of the company you wanted. The floor trader knows which floor traders transact in particular stocks.
The two converge on a price and complete the deal. The notification process travels backward along the line and your broker gets back to you with the final price. A few days later, you will receive the confirmation notice in the mail.

In electronic markets vast computer networks often reduce the work of human brokers in matching buyers and sellers. It lacks the charged up scenes of the bustling floors of busy stock exchanges, but it is efficient and fast. Quite a few institutional traders, mutual funds, pension funds, and the likes, prefer this method of trading.

As an individual investor, you can get almost instant confirmations on your trades at very low costs. It also helps you keep a tab on online investing by taking you closer to the market by one step.

Yet, a broker is still needed to handle your trades – individuals don't have access to the electronic markets. Your broker accesses the exchange network and the system finds a buyer or seller depending on your order.

You then will need to infer the price behavior of stocks. Price is the immediate cost of a share. And this behavior is so uncertain that it keeps everybody in the game quite excited. This is what generates the profits or losses that are made by investing in this market.
Don't worry if you find it very difficult to infer the price, because it really is difficult. They frequently fluctuate all along the day. And there is no guarantee that in the morning a price will start at the point where it was at the end of the previous day, though it usually starts in the neighborhood.

Yet there are patterns to be figured out, and expectations often work. Depend on your intelligence and on a professional broker, and never stop short of understanding fully what caused a bad result when it occurs. Learn the practical lessons from your experience, record them in writing, and consult them whenever necessary.

investments & trading by J. Foley

Investments & Trading

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