Online Stock Trading: Gaming The Stock Market In A Down Economy

Trading stocks online has become the new way of doing business. Ordinary everyday citizens such as you and me can now trade stocks like the pros without paying the ridiculous broker fees that are often associated with trading on the stock market. This doesn’t mean there are no fees involved or that you won’t be discouraged from capriciously trading stocks. What it does mean is that you will be able to trade stocks, as you may have never been able to do before because the costs involved in trading were so high that only the wealthiest among us could really afford to work the market to any real advantage.

You will find quite a few companies that are going to compete for your business when it comes to empowering you to trade stocks online. It is best to go with a business that offers education and advice in addition to the ability to trade. There are many big names in the brokerage business that are getting in touch with the technology of today and offering full service brokers and financial advisors in addition to offering new online services that include Internet trading.

If you decide to go with some of the bigger names in the business you should understand that you will pay a little more than you would pay going with many of the lesser name firms and trading companies. The good news is that the bigger names have more to loose after working for decades to establish themselves and develop a good reputation among traders. This means that they are not going to be “fly by night” and are going to work to make sure you have the best possible service from them for your future in the stock market trade.

Many of these firms in addition to offering the ability to buy, sell, and trade online will also offer financial planning for retirement, future expenses, and advice on how to create a fixed income from your investments. They will offer many tips, hints, and advice free of charge on their website while also promoting the services they offer through discounts in hopes of gaining your business for some of the higher ticket transactions that really pay their bills.

Online investment services offer consumers the opportunity to invest with lower commissions and fees which means you bring more of the money home when all is said and done and spend far less on fees and expenses associated with investing. By saving these fees you may be doing yourself a huge service but keep in mind that the invaluable advice of a broker can often mean the difference between mild successes and wild successes. If you can manage the fees it is a good plan to at least consult with a broker or financial advisor or planner once or twice a year in order to get the most out of your investment money.

Online trading is great but you will find that it lacks the personal service you can expect from a financial advisor or a stockbroker. Very little has such a profound impact on your financial future than the ability to receive and follow expert advice. While there is much to read on the Internet by way of advice on investing in the stock market there is also a lot of conflicting information just as there is a great deal of misinformation. This is something that, when possible, is best left to the experts at least until you manage to learn the ropes and have a few successful trades under your belt.

If you have the heart of gambler however, then it is your money you are playing with and your future you are investing. If you are not spending more than you are willing to lose then there is no harm in trying your hand at investing through online brokerage services. You never know but there may be a nice pay out eventually.

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How to Know When to Sell Your Stocks

While quite a bit of time and research goes into selecting stocks, it is often hard to know when to pull out – especially for first time investors. The good news is that if you have chosen your stocks carefully, you won’t need to pull out for a very long time, such as when you are ready to retire. But there are specific instances when you will need to sell your stocks before you have reached your financial goals.

You may think that the time to sell is when the stock value is about to drop – and you may even be advised by your broker to do this. But this isn’t necessarily the right course of action.

Stocks go up and down all the time, depending on the economy…and of course the economy depends on the stock market as well. This is why it is so hard to determine whether you should sell your stock or not. Stocks go down, but they also tend to go back up.

You have to do more research, and you have to keep up with the stability of the companies that you invest in. Changes in corporations have a profound impact on the value of the stock. For instance, a new CEO can affect the value of stock. A plummet in the industry can affect a stock. Many things – all combined – affect the value of stock. But there are really only three good reasons to sell a stock.

The first reason is having reached your financial goals. Once you’ve reached retirement, you may wish to sell your stocks and put your money in safer financial vehicles, such as a savings account.

This is a common practice for those who have invested for the purpose of financing their retirement. The second reason to sell a stock is if there are major changes in the business you are investing in that cause, or will cause, the value of the stock to drop, with little or no possibility of the value rising again. Ideally, you would sell your stock in this situation before the value starts to drop.

If the value of the stock spikes, this is the third reason you may want to sell. If your stock is valued at $100 per share today, but drastically rises to $200 per share next week, it is a great time to sell – especially if the outlook is that the value will drop back down to $100 per share soon. You would sell when the stock was worth $200 per share.

As a beginner, you definitely want to consult with a broker or a financial advisor before buying or selling stocks. They will work with you to help you make the right decisions to reach your financial goals.

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Consumers feel better, and so does the stock market

12:29 PM, May 26, 2009

Consumers are feeling somewhat better, and that's making investors feel better too.

The stock market rose for the first time in a week today as unexpectedly strong consumer-confidence data sparked optimism that spending by Americans could support a hoped-for second-half economic recovery.

The Dow Jones industrial average is up about 175 points, bolstered by stocks of consumer-discretionary companies such as restaurant, hotel and clothing chains. Earlier in the day the blue-chip gauge was up by almost 220 points.

An index of consumer sentiment spurted this month to 54.9, its highest level since September, according to the Conference Board, a New York-based research group. That was up from a revised 40.8 last month and far outdistanced the 42.6 level anticipated on average by economists.

“While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us,” said Lynn Franco, who heads the organization’s consumer research center.

The increase, the third in a row since the index hit a low in February, partly reflected an improved perception of the employment market.

The so-called expectations index, a measure of the conditions consumers foresee in the coming months, surged to 72.3 from 51.

Investors hope that resilient consumers can help pull the economy out of recession later this year and pad badly bruised earnings at major retailers.

“Higher consumer confidence plus the boost to disposable income in Q2 from a tax cut and extra Social Security payments make it more likely that a 'breakout' number on retail sales will be recorded soon after the weak readings of the last several months,” economists at UBS wrote in a note to clients.

Consumer-discretionary stocks are up more than 3.5% today, the best performance among 10 major sectors tracked by Standard & Poor’s Corp.

Hotel chains are doing especially well. Starwood Hotels & Resorts Worldwide has climbed 8.8% today, Wyndham Worldwide is up 8.4% and Wynn Resorts is up 6.7%. In other sectors, Home Depot is 4.4% higher and JPMorgan Chase is up 5.6%.

But there is only so much that consumer confidence alone can help stocks. One reason consumers are feeling better is that their portfolios have rebounded sharply since stock indexes hit multiyear lows in early March. So today’s rally is relying on something akin to a perpetual energy machine.

Moreover, there are big questions as to whether consumers can come to the market’s rescue.

The most obvious is the continued free fall in housing prices, which was reinforced with new data released Monday.

The widely followed S&P/Case-Shiller index of home prices in 20 cities slumped 18.7% from March 2008 through March 2009. (Los Angeles was off 22.3%.)

More than that, the job market remains weak and consumers have boosted their saving and begun whittling their debt.

“The type of environment we’re in, and coming out of, is unlike anything we’ve seen in our lifetimes,” said Dan Greenhaus, market analyst at Miller Tabak & Co. in New York. “How consumers perform in a massive deleveraging phase remains to be seen.”

-- Walter Hamilton
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Stocks Finish Higher, Led by Techs

The market posted its fourth straight weekly gain despite more gloomy news on the labor market and a decline in service-sector sentiment

U.S. stocks closed higher Friday, sending the market upward for a fourth straight week. The advance was led by tech issues after Research in Motion (RIMM) posted robust fourth-quarter results.

On Friday, the 30-stock Dow Jones industrial average finished higher by 39.51 points, or 0.50%, at 8,017.59. The broad S&P 500 index moved up 8.12 points, or 0.97%, to 842.50. The tech-heavy Nasdaq composite index added 19.24 points, or 1.20%, to 1,621.87. On the New York Stock Exchange, 21 stocks were higher in price for every 10 that declined. Nasdaq breadth was 16-11 positive.

Treasuries plunged. The dollar index eased. Gold and crude oil futures fell.

The stock market's higher close followed earlier bouts of profit taking, as investors digested news of another hefty drop in nonfarm payrolls in March while preparing for next week's start of the first-quarter corporate earnings season. The gains extended rallies from earlier this week that drove all three major market indexes up more than 20% off their bear-market lows in early March.

Federal Reserve Chairman Ben Bernanke discussed the Fed's balance sheet, which has expanded in bid to help the economy work out of recession.

In a speech Friday, Federal Reserve Chairman Ben Bernanke said the Fed has used its balance sheet "prudently," in conjunction with a multiplicity of new programs. He also cited the drop to record lows in mortgage rates as a sign that the Fed's actions are having their intended effect.

Bernanke also indicated the Fed has taken care to design its programs so that they will be unwound as markets and the economy revive. The speech detailed the various Fed programs as it essentially retooled its balance sheet to meet the needs of the credit markets.

In economic news Friday, the U.S. ISM nonmanufacturing index slipped to 40.8 in March from February's 41.6. The index is up from its all-time low of 37.4 in November 2008, but is well off its 49.6 print a year ago. However, the business activity index improved to 44.1 versus 40.2 (it was 52.2 in March 2008). New orders fell to 38.8 from 40.7. The employment index slid to 32.3 from 37.3. New export orders dipped to 39.0 from 40.0. Prices paid fell to 39.1 from 48.1. The composite manufacturing and nonmanufacturing edged down to 40.3 from 40.9.

"The data disappointed expectations for modest improvement and that should give Treasuries a little boost at the expense of stocks," says Action Economics.

U.S. nonfarm payrolls lost 663,000 jobs in March, and a bit stronger than the 650,000 expected. The unemployment rate rose to 8.5% from 8.1% the month before, though about as expected. While February's 651,000 decline was not revised, January was revised down to -741,000 (previously 655,000), with job losses averaging 685,000 in the first quarter. Average hourly earnings rose 0.2%. Average weekly hours dipped to 33.2 from 33.3. Total goods-producing sector lost 305,000 jobs, with a 161,000 decline in manufacturing, and an 126,000 drop in construction. Business services lost 133,000 jobs. Only health care added jobs, about 8,000.

"The headline data were about in line with forecasts. While the data indicates the job weakness continues, the report failed to realize the worst fears of a greater than 700,000 drop in jobs," says Standard & Poor's senior economist Beth Ann Bovino.

The persistent rally of stock market

The stock market
enjoyed an unusually strong week with the BSE Sensitive Index finishing 12.06% or 1,081.81 points higher, and the Nifty ending
10.74% up. The CNX Midcap Index underperformed the main indices with a relatively modest gain of 5.77%.

Tata Steel was the biggest winner among the index stocks with a 26.9% gain. The other index stocks to go up included ICICI Bank, HDFC Bank, Sterlite Industries and State Bank with gains falling between 19.3% and 18.0%. None of the index stocks declined last week.

Unitech was the biggest winner among the more heavily traded non-index stocks with a 33.2% gain. The other non-index stocks to go up included PNB, Aban Offshore, Lanco Infratech, Axis Bank, Sesa Goa, JSW Steel and Yes Bank with gains falling between 32.4% and 23.6%.

Akruti City was the biggest loser among the more heavily traded non-index stocks with a 51.6% loss. The other non-index stocks to go down included Edserv Softsystems, MindTree, Crompton Greaves, Tulip Telecom, Everonn Systems , Firstsource Solutions and Gujarat NRE Coke with losses falling between 22.1% and 2.9%.

Intermediate Trend

The market remains in the intermediate uptrend which started on March 6 when the Sensitive Index made a bottom at 8,047. The levels below which the uptrend would end are now a considerable distance down at 8,867 for the Sensitive Index, 2,739 for the Nifty and 3,190 for the CNX Midcap Index.

These would be revised upwards to the level where the next minor decline bottoms out. Most global markets are in fairly strong intermediate uptrends, and are typically somewhere between their one-month and three-month highs.

Long-Term Trend

The market's long-term trend is down. The index has been in a 3,300-point range between 7,700 and 11,000 since the end of October, without any clear sequence of rising or falling tops and bottoms. It would therefore be best to take 11,000 as the level to cross for the Sensitive Index for a bull market confirmation. The corresponding level for the Nifty is 3,250, and that for the CNX Midcap Index is 4,000. (Figures have been rounded upwards).

Almost 25% of the market's heavily traded stocks are now at two-month highs or better, and over 15% are above their 200-day moving averages. These could be the first signs that the bear phase may have already ended. In any event, quite a few stocks may have already left the worst behind them.

Trading & Investing Strategies

The market is currently in an intermediate uptrend, and long-term investing should be put on hold until the next intermediate downtrend develops and has run for a week or two. It will be a good idea to hold on to past and recent investments, and not get out of them as this rally progresses. This portfolio building exercise suggested over the last few months is simply to buy stocks at low levels, and not in anticipation of an early end to the bear market - even though this now looks like a distinct possibility.

Global Perspective

The major trends of all global markets remain down, but the intermediate trends of almost all the markets are up. The Dow would enter a bull market (major uptrend) if it were to climb above 9,500. The Shanghai Index has crossed its 200-day moving average, and a global bull phase will become a real possibility if other indices follow suit.

The BSE Sensitive Index had lost 37.5% in the twelve months that ended on Thursday, keeping it at the 21st place among 35 wellknown global indices considered for the study. Chile continues to head the list, but with a 11.6% loss. New Zealand, South Korea, Israel and Spain follow. The Dow Jones Industrial Average has lost 35.6% and the NASDAQ Composite has lost 30.4% over the same period. (These rankings do not take exchange rate effects into consideration).

(The author is an independent technicals analyst)

Making Sense of the Stock Market's Wild Ride

Fortunes are won and lost from day to day in a volatile market that shows no signs of settling down soon

By Ben Steverman

Once again, the wild stock market has made fools of those who would try to predict its direction.

Amid buckets of bad news and a gloomy mood on Wall Street, stocks took a violent swing to the upside. In just three days, the broad Standard & Poor's 500-stock index advanced 10.7%, which is more than what stocks rose in four of the last five years.

That followed a scary descent for the S&P 500 to the lowest levels in more than 12 years. From Jan. 6 to a low on Mar. 6, the S&P 500 dropped 29%.

All this volatility makes stock market investors look like they can't make up their minds. If stocks prices change so much from Monday to Thursday, investors apparently don't know what U.S. companies are really worth.There are two common ways of explaining the market's recent rally, and both underscore investors' extreme uncertainty and skittishness.
Citigroup Memo

The first explanation is based on theories about how markets work. For one thing, stocks rarely fall day after day without a break. Stocks "were more oversold than [they've] been in my 13 years on Wall Street," says Dave Rovelli, managing director of equity trading at Canaccord Adams. "We were due for a rally."

Stocks seemed to react to a Mar. 9 letter from Citigroup (C) Chief Executive Vikram Pandit, touting his troubled bank's performance in the first couple months of 2009. But to Rovelli, that was just a trigger to a rally that would have started eventually anyway. The S&P 500 had declined in 13 of 16 trading sessions from Feb. 13 to Mar. 9.

Richard Sparks of Schaeffer's Investment Research agrees. "The market was ripe for a rally," he says.
Shift in Market Psychology?

The rebound was driven not by long-term investors but by traders with a very short attention spans. "It's driven by big money, momentum players," Sparks says. "It's such a tough market to trade," that these market participants focus on "very short-term time periods." Traders jump on market trends, but those moves don't last long and can turn on a dime.

The volatility is most striking in the financial sector. From Mar. 10 to 12, one measure of the financial sector, Financial Select Sector SPDR (XLF) rocketed 30% higher. The same index had lost half its value from the beginning of the year to Mar. 9. Professional traders are no doubt making—and also losing—a lot of money on these rapid moves. Successful traders must be "nimble enough and right enough," Sparks says.

Some wonder, though, if the past week marked a significant shift in market psychology. Dan Genter, president of RNC Capital Management, says the recent rally doesn't just reflect the moves by short-term traders but also by long-term investors who are beginning to put money into the market.
Pricing In Worst-Case Scenarios

Stocks—particularly bank stocks—were trading at absurd prices. "All these companies are not going out of business," he says. By falling to 1996 levels, stocks priced in a worst-case scenario for both the economy and for earnings prospects. At those levels, "unless you think the world is coming to an end, it's difficult not to be bullish long-term," says Uri Landesman of ING Investment Management (ING).

Few in the market believe the world has solved its economic and financial problems—quite the opposite. But, Genter says, "it's not just in freefall anymore." He hopes that, by dropping to an extreme low this month, stocks now have a new low below which they're unlikely to fall again.

Landesman says the market needs to see a strong rally from these levels. Or, he worries, stocks will lose their momentum and fall back again. Rovelli also warns of more volatility ahead, particularly in the next couple weeks as bullish and bearish traders battle over the direction of the market.
Long-Term Volatility?

The wild ride could last much longer than that. Scott Jacobson, an expert on volatility and chief investment strategist at Capstone Sales Advisors, says high volatility in the stock market tends to last for two to four years during and after a recession. "I'm sure we have two years of volatility at least," he says.

The problem with a volatile stock market is that it doesn't just reflect investor uncertainty. Wild swings also cause uncertainty and confusion among the investing public, who see their retirement nest eggs grow or shrink erratically from day to day.

Market observers often say the stock market is supposed to move higher six months before the economy does. But, from this standpoint, it's impossible to know whether the market's newfound optimism is a harbinger of things to come, or simply a temporary rest stop on the market's trip ever lower.

Steverman is a reporter for BusinessWeek's Investing channel.

Despite grim news, market has best week of the year

COMBINED NEWS REPORTS
February 8, 2009

More jobs were lost in January than in any month since December 1974. The unemployment rate is the highest since September 1992. President Barack Obama said the economic downturn "could not be more serious." Wall Street's reaction? Let's party.

Despite the grim economic news, the Dow and the S&P 500 index had their best week in more than a month. The Nasdaq composite index had its biggest weekly gain since November.

The Labor Department said the nation lost 598,000 jobs last month and the unemployment rate climbed to 7.6 percent. If part-time employees, discouraged workers and others are factored in, the unemployment rate would have been 13.9 percent in January, highest on record.

"People are thinking ahead to what are these numbers going to look like in June," said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. "Main Street is in free fall, which is where Wall Street was in September and October. Wall Street since mid-October has been flat, and that's what Main Street might look like by spring or early summer."

The Dow Jones industrial average closed Friday at 8,280.59, a gain of 3.5 percent for the week. The Nasdaq composite index finished at 1,591.71, up 7.8 percent. The S&P 500 index ended at 868.60, a rise of 5.2 percent.

Much of the last week's big rally was attributed to hope that a bank-rescue plan, scheduled to be unveiled Monday by Treasury Secretary Timothy Geithner, will lift the economy from recession.

"All focus right now is now is really on Washington," said Dan Cook, senior market analyst at IG Markets

Stick to your plan in a volatile market

Posted: Dec. 27, 2008 7:33 p.m.

Fourth quarter 401(k) statements will be arriving soon like a lump of coal in everyone's stocking.

Falling home prices have kept investors nervous since the fourth quarter of 2007. But when Lehman Brothers filed for bankruptcy protection in September, things went from bad to worse.

What made this stock market drop so painful is that, this time, there's been almost no safe place to put your money. Everything dropped simultaneously. Diversification, meant to lower portfolio volatility, was rendered completely ineffective by panic selling in all asset classes.

In terms of magnitude, it's the third-worst drop in stock market history (-51.9%), if we use Nov. 20 as the bottom. The other two drops that were bigger: Sept. 7, 1929, to June 1, 1932 (-86.2%), and March 6, 1937, to March 31, 1938 (-54.5%). This has driven many 401(k) portfolios down 30% to 40% for the year.

So what's a 401(k) investor to do?

Don't let emotions dictate your investment decisions. Fear is a powerful motivator, but bailing out of the market now is not the answer. Today, stocks and corporate bonds are 30% cheaper, on average, than they were six months ago. Foreign stocks and bonds are even more depressed. While prices may still go lower, it's hard to see how selling long-term assets at some of the most depressed prices in the past 120 years will turn out to be a good idea.

Don't try to time this market. Sure, there's a chance that the market will drop more in 2009, but there's no way of knowing if that will happen or how far it might drop. What we do know is that historically, after a bear market bottom is reached, the bounce back is usually swift and significant. In fact, after 20 bear market bottoms that date back to 1903, the market rebounded an average of 46% over the next twelve months.

Develop a plan. 2008 will be, from this point on, the year financial planners use to illustrate the importance of having a proper saving and investing strategy for retirement. Those who started too late, saved too little or invested too aggressively as they neared retirement now face the reality of having to work longer or accept a lower standard of living.

Stick to your plan. Keep investing during lousy market periods, even if it feels unnatural. While your current asset-allocation strategy was probably no help avoiding a collapse in the value of your 401(k) account, that's not a good reason to abandon it now. It's impossible to know which fund category will bounce back first, so a diversified strategy is still your best approach to recover from this bear market.

Rebalance your portfolio back to your original target allocation between stock and bond funds. Say you had adopted an investment strategy that allocated 80% of your savings to a diversified portfolio of stock funds, and 20% to bond and stable value funds. Because of the beating stock funds have taken this year, your portfolio is probably now closer to 60% stock funds and 40% bond and stable value funds.

Because I believe we're close to the bottom, consider selling some of your bond and stable value funds now and purchasing more shares of stock funds to reallocate your holdings back toward your original target allocation of 80/20. Rebalancing gradually over the next six months will lessen the importance of the timing.

How you respond to this sharp drop in the markets could have a profound effect on how financially secure you are in retirement. History suggests that we are now looking at one of the most opportune times to invest that we've seen in a long time.

Michael J. Francis is president and senior investment consultant of Francis Investment Counsel LLC, a registered investment adviser based in Pewaukee. He can be reached at michael.francis@francisinvco.com.
The information in this article is for informational purposes only. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Francis Investment Counsel does not offer personal tax or legal advice.

Why The Smaller Investor Has Advantages Over Huge Multinational Funds When It Comes To Scooping Up Higher Investment Returns

Investments & Trading

Why The Smaller Investor Has Advantages Over Huge Multinational Funds When It Comes To Scooping Up Higher Investment Returns By J. Foley



You would be forgiven in thinking that with all the professional managers, funds and resources.at their disposal that investment funds would win head over heels against the smaller investor like you and I. In fact this is not at all the case – smaller investors have several advantages over the big funds and have every chance of beating their returns on investments. Here’s why:

The individual investor does not have to invest millions and so they can invest in small caps (tiny growth companies) that have the potential to grow many times over. These stocks are typically far too illiquid for funds to enter.
The smaller investor can get in and out of a stock with the simple click of a mouse or a phone call (and get roughly the same sale price per share). The larger funds have to gradually sell their holdings in a company (they may have millions of shares to offload – not an easy or quick thing to achieve).
Individual investors can effectively trade positions for small gains – something that larger funds simply do not have the ability to do.

On top of this, the internet has more or less facilitated the smaller investor to have access to the same information at the same time as the big city fund managers. Arguably, the individual investor also has the added advantage of speed – a fund manager may have to get approval in order to buy into a company (not a case for the individual investor) and cannot take advantage of special situations (such as buying on breaking news and so on).

Remember however, if you really want to become a “professional investor” – one who is savvy enough to beat the market and essentially make a living from investments then you need to learn as much as you can about how the market works, how to analyse companies, the part psychology plays in driving markets and how to create an investment/trading system that’s right for you. Even the masters of investing such as Warren Buffet and Jim Slater all started from scratch. Warren Buffet once did not know what the PE of a company meant. Jim Slater once did now know how to read the balance sheet of a company. They educated themselves and discovered how to pick stocks that have excellent potential – you could be doing the same. The first step to investment is to invest in yourself and your education. To offer an overused yet apt phrase – KNOWLEDGE IS POWER!

Article Written By J. Foley