investments & trading
Determine Your Risk Tolerance By J. Foley
Each individual has a risk tolerance that should not be ignored. Any good stock broker or financial planner knows this, and they should make the effort to help you determine what your risk tolerance is. Then, they should work with you to find investments that do not exceed your risk tolerance.
Determining one’s risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.
For instance, if you plan to retire in ten years, and you’ve not saved a single penny towards that end, you need to have a high risk tolerance – because you will need to do some aggressive – risky – investing in order to reach your financial goal.
On the other side of the coin, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.
Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there is a lot in determining your tolerance.
For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?
Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would want to sell out… if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!
Again, a good financial planner or stock broker should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.
Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.
investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments
Thursday, July 27, 2006
Friday, July 21, 2006
Swing Trade : How To Profit From Swing Trading ?
investments & trading
Swing Trading – How to Profit from Swing Trading? By J. Foley
Swing trading is a trading strategy where you hold stock positions for a short duration of time, but longer than a day trade. Swing trade positions can last anywhere from 2 to 30 days, and generally try to take advantage of short and mid-term movements in stock prices.
This is also quite risky though may seem to be less so than day trading. Since it is not even mid-term and you don't wait for long a time, it is possible that that stock falls as you wait and as you come to the pre-fixed end of your target holding period, you have to sell at a trough. It is also possible that the stock makes a turnaround immediately after you exit, and you either narrowly miss a huge profit or avoid a withering loss.
Before going in for swing trading, one needs to understand the difference between swings and stock market cycles.
A cycle is longer than a swing. A cycle is made of many short swings, up and down. There are swing trading firms making lucrative promises and publishing tall advertisements. Watch out or you may get into some disastrous mistake.
The general principle for winning is the same for all stock market entrants: sell the losers and let the winners ride! Longer term investors make profits by selling their appreciated investments, but they hold on to stocks that have declined, hoping for a rebound. Swing traders often do not have that long a time to get into rebound. They have to infer accurately when it is time to give up a stock within their projected time range.
A personal policy to sell after a stock has increased by a certain pre-fixed multiple often pays off in swing trading. But that way it may never fully ride out a winner. Therefore it is wise to allow for some degree of flexibility within this swing trading period.
It is best not to underestimate a well performing stock by sticking to some rigid personal rule. If you don't have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting. Hence before entering this type of trading, do extensive research on the behavior of your selected sample of 'good' stocks.
On the other hand, it's equally important to be realistic about investments that are performing badly. That a stock will bounce back after a lingering decline can never be guaranteed. Hence the best time to sell has to be chosen wisely also, and the wisdom has to be carefully based on research. A standard strategy is to wait till the upswing goes on within the period you remain in the market, and then sell at the end of your chosen end time.
Being an active investor involves knowing the in-s and out-s of buying and selling stock. But for becoming a successful swing trader, there is no substitute to working hard watching and analyzing your personal portfolio. In order to obtain the gains and rewards from swing trading, you need to master the science of timing.
investments & trading
Article Written By J. Foley
Swing Trading – How to Profit from Swing Trading? By J. Foley
Swing trading is a trading strategy where you hold stock positions for a short duration of time, but longer than a day trade. Swing trade positions can last anywhere from 2 to 30 days, and generally try to take advantage of short and mid-term movements in stock prices.
This is also quite risky though may seem to be less so than day trading. Since it is not even mid-term and you don't wait for long a time, it is possible that that stock falls as you wait and as you come to the pre-fixed end of your target holding period, you have to sell at a trough. It is also possible that the stock makes a turnaround immediately after you exit, and you either narrowly miss a huge profit or avoid a withering loss.
Before going in for swing trading, one needs to understand the difference between swings and stock market cycles.
A cycle is longer than a swing. A cycle is made of many short swings, up and down. There are swing trading firms making lucrative promises and publishing tall advertisements. Watch out or you may get into some disastrous mistake.
The general principle for winning is the same for all stock market entrants: sell the losers and let the winners ride! Longer term investors make profits by selling their appreciated investments, but they hold on to stocks that have declined, hoping for a rebound. Swing traders often do not have that long a time to get into rebound. They have to infer accurately when it is time to give up a stock within their projected time range.
A personal policy to sell after a stock has increased by a certain pre-fixed multiple often pays off in swing trading. But that way it may never fully ride out a winner. Therefore it is wise to allow for some degree of flexibility within this swing trading period.
It is best not to underestimate a well performing stock by sticking to some rigid personal rule. If you don't have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting. Hence before entering this type of trading, do extensive research on the behavior of your selected sample of 'good' stocks.
On the other hand, it's equally important to be realistic about investments that are performing badly. That a stock will bounce back after a lingering decline can never be guaranteed. Hence the best time to sell has to be chosen wisely also, and the wisdom has to be carefully based on research. A standard strategy is to wait till the upswing goes on within the period you remain in the market, and then sell at the end of your chosen end time.
Being an active investor involves knowing the in-s and out-s of buying and selling stock. But for becoming a successful swing trader, there is no substitute to working hard watching and analyzing your personal portfolio. In order to obtain the gains and rewards from swing trading, you need to master the science of timing.
investments & trading
Article Written By J. Foley
Saturday, July 15, 2006
Tools You'll Need : Day Trading Must Haves
investments & trading
Tools you'll need: Day Trading Must Haves
Day trading previously had been only for the trading firms or the brokers who dealt in the physical market. But with the advent of the internet and a general advance of communication technology day trading has entered the homes of any interested individual who might have not visited the markets in person ever. But to be a successful day trader from your home you need to have the right gear. And by that we mean you need to have the proper hardware and software to build yourself a platform that could help you stay competitive against the market makers and other day traders. Following is a guide to the proper equipment you must have to do well.
Hardware
When you are trading online all you need is a good computer. You need to have only the basic items of hardware installed. But don't compromise on what you get yourself. Remember that while trading you would have to deal with a lot of numbers and figures and so you would require your computer to handle the data well. Get yourself a decent processor (anything above 1GHz) and plenty of memory. A 100GB hard disk drive is suggested as you would need to stack a lot of information. Higher memory also means better speed. Get yourself at least 1024MB of RAM as it would be necessary when you are crunching those numbers. You will of course need a modem to stay connected and a high quality video card would help you get the live feeds better.
As you would be dealing with a lot of data you should get yourself at least a 19" monitor. You can even go for split screen and use two monitors for a single screen shot.
Connection Speed
While you are day trading you are doing business real time. So you can't allow for any time lag. You would be placing your orders and quotes and you have to get them done on time or else you might miss out on good trading opportunities. So a dial-up connection isn't the best choice you have. To be a serious day trader it is always advisable to get a cable or DSL connection. That way you will get real-time data in your hand and can trade effectively.
Software
To make full use of the hardware you have got yourself you would also need the necessary software platforms to go with it. If you are in day trading you can go no where without the proper data in your hand. And even if you have the data you need to get the proper tools to store them well and have an easy access to them. The trading software platforms not only help you in getting the necessary data like the stock quotes, market indices, market stories and price alerts in real-time but they also store and present the data for you in an organized way so that it becomes much easier for you to make sense of it all when you read the spread sheets. You can buy these software platforms online or you can even get them from a few stores if you want to. You should however note that you may have to pay separately for access to the data that you need to download.
investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments
Tools you'll need: Day Trading Must Haves
Day trading previously had been only for the trading firms or the brokers who dealt in the physical market. But with the advent of the internet and a general advance of communication technology day trading has entered the homes of any interested individual who might have not visited the markets in person ever. But to be a successful day trader from your home you need to have the right gear. And by that we mean you need to have the proper hardware and software to build yourself a platform that could help you stay competitive against the market makers and other day traders. Following is a guide to the proper equipment you must have to do well.
Hardware
When you are trading online all you need is a good computer. You need to have only the basic items of hardware installed. But don't compromise on what you get yourself. Remember that while trading you would have to deal with a lot of numbers and figures and so you would require your computer to handle the data well. Get yourself a decent processor (anything above 1GHz) and plenty of memory. A 100GB hard disk drive is suggested as you would need to stack a lot of information. Higher memory also means better speed. Get yourself at least 1024MB of RAM as it would be necessary when you are crunching those numbers. You will of course need a modem to stay connected and a high quality video card would help you get the live feeds better.
As you would be dealing with a lot of data you should get yourself at least a 19" monitor. You can even go for split screen and use two monitors for a single screen shot.
Connection Speed
While you are day trading you are doing business real time. So you can't allow for any time lag. You would be placing your orders and quotes and you have to get them done on time or else you might miss out on good trading opportunities. So a dial-up connection isn't the best choice you have. To be a serious day trader it is always advisable to get a cable or DSL connection. That way you will get real-time data in your hand and can trade effectively.
Software
To make full use of the hardware you have got yourself you would also need the necessary software platforms to go with it. If you are in day trading you can go no where without the proper data in your hand. And even if you have the data you need to get the proper tools to store them well and have an easy access to them. The trading software platforms not only help you in getting the necessary data like the stock quotes, market indices, market stories and price alerts in real-time but they also store and present the data for you in an organized way so that it becomes much easier for you to make sense of it all when you read the spread sheets. You can buy these software platforms online or you can even get them from a few stores if you want to. You should however note that you may have to pay separately for access to the data that you need to download.
investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments
Thursday, July 06, 2006
Training Basics For The Beginners
ivestments & trading
Trading basics for the beginners by J. Foley
The Share market immediately conjures up stories of fortunes made and lost. A share makes the holder a partial owner of the company and different types of shares have different rights associated with them. If you are able to sell off your share at a price higher than your buying price, you make a profit but you also run the risk of incurring a loss if the share price falls. The business you invested in makes profit and they provide you part of it as dividend.
In the share market you are an anonymous player and many have made a reasonable profit. There is no unique formula to ensure consistent gain but before you venture into this market you should know the basics of stock trading.
What does trading stocks mean?
Buying and selling of stocks is referred to as trading in the financial market.
You have to approach a broker in order to trade. You can trade either electronically or on the exchange floor. Exchange floor scene must be familiar to you; the NYSE has been on television as part of news coverage innumerable times. It is here that your broker arranges for your shares to be ordered. . The floor clerk locates the floor trader from whom the shares can be bought. Once the price is agreed upon, the deal is finalized.
Electronic transaction is very common today. It is an efficient and fast method of stock trading. Here too you require a broker but you receive confirmations almost immediately .In online investing your broker will connect to the exchange network and search for a buyer or seller according to your order.
How are the stock prices determined?
The stock prices cannot be predicted, they depend on various factors like political unrest, if there is a huge demand for a particular share at a given time, prices can fluctuate, any event that could adversely affect the company will also cause the share prices to drop.
Before you decide on which stock to buy you must answer the following questions.
Do you know the company well enough?
What is the company's reputation in the market?
Have you gone through their annual report?
Do you have the confidence to invest in this company?
Is some negative news about the company circulating?
How are analysts predicting the future?
How is the management of the company?
What are their growth prospects?
Am I aware of the insider activity?
Is it an internationally renowned company?
How is their marketing strategy?
Have there been any changes in the management recently?
How consistent has been their performance?
Has there been a sudden shift in their production?
Whenever you invest you should be aware of your limits and remember not to exceed them. Share market involves a lot of risk , risk taking could either lead to fortunate gains or to bankruptcy.
You should avoid investing money more than you can actually afford.
Know about your investment well and do not blindly depend upon your broker.
Follow regular stock market quotes to keep yourself abreast of the market swings.
The share provides you with an earning power, gives you partial ownership of a company and the freedom to buy or sell at any moment. But if you are a novice in stock trading you need to play safe and equip yourself with a lot of information. Unless you are a seasoned player you should invest only after surveying all the alternatives and never go beyond your risk tolerance.
ivestments & trading
Article Written By J. Foley
Trading basics for the beginners by J. Foley
The Share market immediately conjures up stories of fortunes made and lost. A share makes the holder a partial owner of the company and different types of shares have different rights associated with them. If you are able to sell off your share at a price higher than your buying price, you make a profit but you also run the risk of incurring a loss if the share price falls. The business you invested in makes profit and they provide you part of it as dividend.
In the share market you are an anonymous player and many have made a reasonable profit. There is no unique formula to ensure consistent gain but before you venture into this market you should know the basics of stock trading.
What does trading stocks mean?
Buying and selling of stocks is referred to as trading in the financial market.
You have to approach a broker in order to trade. You can trade either electronically or on the exchange floor. Exchange floor scene must be familiar to you; the NYSE has been on television as part of news coverage innumerable times. It is here that your broker arranges for your shares to be ordered. . The floor clerk locates the floor trader from whom the shares can be bought. Once the price is agreed upon, the deal is finalized.
Electronic transaction is very common today. It is an efficient and fast method of stock trading. Here too you require a broker but you receive confirmations almost immediately .In online investing your broker will connect to the exchange network and search for a buyer or seller according to your order.
How are the stock prices determined?
The stock prices cannot be predicted, they depend on various factors like political unrest, if there is a huge demand for a particular share at a given time, prices can fluctuate, any event that could adversely affect the company will also cause the share prices to drop.
Before you decide on which stock to buy you must answer the following questions.
Do you know the company well enough?
What is the company's reputation in the market?
Have you gone through their annual report?
Do you have the confidence to invest in this company?
Is some negative news about the company circulating?
How are analysts predicting the future?
How is the management of the company?
What are their growth prospects?
Am I aware of the insider activity?
Is it an internationally renowned company?
How is their marketing strategy?
Have there been any changes in the management recently?
How consistent has been their performance?
Has there been a sudden shift in their production?
Whenever you invest you should be aware of your limits and remember not to exceed them. Share market involves a lot of risk , risk taking could either lead to fortunate gains or to bankruptcy.
You should avoid investing money more than you can actually afford.
Know about your investment well and do not blindly depend upon your broker.
Follow regular stock market quotes to keep yourself abreast of the market swings.
The share provides you with an earning power, gives you partial ownership of a company and the freedom to buy or sell at any moment. But if you are a novice in stock trading you need to play safe and equip yourself with a lot of information. Unless you are a seasoned player you should invest only after surveying all the alternatives and never go beyond your risk tolerance.
ivestments & trading
Article Written By J. Foley
Saturday, July 01, 2006
Know The Language : Trading Room Jargon
investments & trading
Know thelanguage: Trading room jargon by J. Foley
So you are considering taking the big plunge in to the trading market? You have done a lot of research on how to be successful in the market; what are the necessary hardware items and software platforms you have to have; what are the risks you are taking as you embark on the new profession. That's all good, but you can definitely do with a bit of knowledge about the regular trading room jargon that you will soon come across pretty regularly. And if you can't make sense of what you are hearing there is little chance you will go much further. So following is a list of terms that are regularly used in trading rooms which will help you to get at least initiated in the language.
Blue-chip stock
a reference to the blue chips used in the game of poker, such stocks are of established companies which have performed well regularly over a considerable period of time. Stocks of companies like IBM, GE are considered to be blue chip stocks.
Bottom fishing
to fish or buy stocks that have suffered significant decline in their prices or are continuing to do so.
going long
to buy and hold a stock for some length of time.
Going short
To sell stocks short, i.e., to borrow and sell stock which you do not want to own for the moment but intend to do so later on for a comparatively lesser price.
Uptick
Uptick means the next trade is at a price higher than the previous trade. However for certain transactions to be executed you have to do it on an uptick.
Downtick
Downtick means exactly the opposite of an uptick, i.e, the next trade is at a price lower than the previous trade.
Elves index
a much trusted index, Louis Rukeyser makes an index of the opinions on the general stock market for the coming 6 months. He polls 10 respected analysts every week (they are the same ones every week), to know what they assume the general trend will be, either bullish (+1), neutral (0), or bearish (-1). Obviously, the index range is -10 to +10.
Call money rate
Also known as the broker loan rate, this is the interest rate that banks lay on brokers to finance margin loans to investors. The broker in his turn charges the investor the call money rate plus a service charge. Investors who are willing to buy on margin will pay this rate.
Hope the above guide helps you in your future dealings with the stock market. It is always advisable to learn the language of the trade. The more comfortable you are the more easily would you be able to communicate, grasp and analyze what actually is going on in the market.
The above guide is only a sample and space here is too short to provide you with an extensive glossary. However there are other websites which are exclusively dealing on this matter which you can have a look at. But we would suggest you to keep a business dictionary near for ready reference as however much you know you can always come up against a new term which would make little sense to you.
investments & trading
http://travelguy.typepad.com/investments
Know thelanguage: Trading room jargon by J. Foley
So you are considering taking the big plunge in to the trading market? You have done a lot of research on how to be successful in the market; what are the necessary hardware items and software platforms you have to have; what are the risks you are taking as you embark on the new profession. That's all good, but you can definitely do with a bit of knowledge about the regular trading room jargon that you will soon come across pretty regularly. And if you can't make sense of what you are hearing there is little chance you will go much further. So following is a list of terms that are regularly used in trading rooms which will help you to get at least initiated in the language.
Blue-chip stock
a reference to the blue chips used in the game of poker, such stocks are of established companies which have performed well regularly over a considerable period of time. Stocks of companies like IBM, GE are considered to be blue chip stocks.
Bottom fishing
to fish or buy stocks that have suffered significant decline in their prices or are continuing to do so.
going long
to buy and hold a stock for some length of time.
Going short
To sell stocks short, i.e., to borrow and sell stock which you do not want to own for the moment but intend to do so later on for a comparatively lesser price.
Uptick
Uptick means the next trade is at a price higher than the previous trade. However for certain transactions to be executed you have to do it on an uptick.
Downtick
Downtick means exactly the opposite of an uptick, i.e, the next trade is at a price lower than the previous trade.
Elves index
a much trusted index, Louis Rukeyser makes an index of the opinions on the general stock market for the coming 6 months. He polls 10 respected analysts every week (they are the same ones every week), to know what they assume the general trend will be, either bullish (+1), neutral (0), or bearish (-1). Obviously, the index range is -10 to +10.
Call money rate
Also known as the broker loan rate, this is the interest rate that banks lay on brokers to finance margin loans to investors. The broker in his turn charges the investor the call money rate plus a service charge. Investors who are willing to buy on margin will pay this rate.
Hope the above guide helps you in your future dealings with the stock market. It is always advisable to learn the language of the trade. The more comfortable you are the more easily would you be able to communicate, grasp and analyze what actually is going on in the market.
The above guide is only a sample and space here is too short to provide you with an extensive glossary. However there are other websites which are exclusively dealing on this matter which you can have a look at. But we would suggest you to keep a business dictionary near for ready reference as however much you know you can always come up against a new term which would make little sense to you.
investments & trading
http://travelguy.typepad.com/investments
Friday, June 23, 2006
What Is EPS ?
investments & trading
What is EPS? Comprehensive information by J. Foley
EPS is the abbreviated form of 'Earnings per Share'. Of course there are other terms clipped as EPS: 'Extended Portfolio System' is one, for example. Those are not our concern here. In issues concerning the stock market, the direct concern is earnings from stocks. We take up EPS as Earning per Share and try to understand what it is.
In this sense, EPS is clearly a measure of average earning from shares transacted. Here's a simple formula for calculating EPS: divide the earnings available to common shareholders with the weighted average number of common shares outstanding during the year. The resulting quotient is called basic (or simple) EPS.
Often EPS is taken to be the single most important factor in the financial statement. Conventionally it is known as the "bottom line" indicator of financial performance. Other commonly used ratios such as P/E and dividend payout are also calculated on the basis of EPS numbers.
Basic EPS is shown in the income statement of a company when it has no outstanding securities convertible into common stock. When outstanding convertible securities are there, more complex rules are followed, which try to make EPS reflect the potential of such securities to dilute potential earnings of common shareholders.
The kind of importance popularly attached to EPS by users of financial statements is perhaps due to the fact that they are disclosed in the financial statements of public companies, and are liable to be scrutinized by auditors.
But then EPS is tedious and cumbersome to creators and scrutinizers of financial statements. Complex provisions of APB 15 and a host of amending pronouncements make it further complicated. The burden is worsened by SEC stipulation that 10-K reports include a supplementary schedule explaining the computation of EPS whenever it is not apparent in the financial statements.
A serious problem with ongoing standards is that basic EPS is subject to replacement on the income statement by two hypothetical EPS numbers: primary EPS, and fully diluted EPS.
Primary EPS is computed assuming that common stock equivalents were converted to common stock on the first day of the reporting period. The fully diluted EPS is computed assuming that all dilative securities, including the common stock equivalents, were converted.
When fully diluted EPS is less than 97% of basic EPS, these two EPS are the only per-share disclosures required under current accounting standards.
Concerns about the usefulness of dual EPS reporting are not limited to the relative merits of historical and proforma disclosure. Some of the specific rules governing the computation of primary and fully diluted EPS have also been questioned. The test used to identify common stock equivalent securities is among the most controversial of those rules.
Changing prevailing market conditions in relation to terms of particular securities are not considered in the computational rules for EPS. It implies that the appeal of a conversion feature relative to other security characteristics will vary, in different circumstances.
But then the meaning of common stock equivalent status and primary EPS remain confusing and questionable. There are other sophisticated methods that are also questionable, such as Options, Warrants, and the Treasury Stock Method.
So EPS is a popular method of measuring how things are going in the stock market, but the dependability of the measure is not too high because of the complicated procedures and unrealistic assumptions used for its derivation.
There are more comprehensive statistics and formulae that make life in the stock market simpler: the track of P/E ratio for example. Hence though as a primary indicator of performance one can use EPS to get an initial impression, you shouldn't depend much on it for a deep understanding of what's happening in the stock market.
investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments
What is EPS? Comprehensive information by J. Foley
EPS is the abbreviated form of 'Earnings per Share'. Of course there are other terms clipped as EPS: 'Extended Portfolio System' is one, for example. Those are not our concern here. In issues concerning the stock market, the direct concern is earnings from stocks. We take up EPS as Earning per Share and try to understand what it is.
In this sense, EPS is clearly a measure of average earning from shares transacted. Here's a simple formula for calculating EPS: divide the earnings available to common shareholders with the weighted average number of common shares outstanding during the year. The resulting quotient is called basic (or simple) EPS.
Often EPS is taken to be the single most important factor in the financial statement. Conventionally it is known as the "bottom line" indicator of financial performance. Other commonly used ratios such as P/E and dividend payout are also calculated on the basis of EPS numbers.
Basic EPS is shown in the income statement of a company when it has no outstanding securities convertible into common stock. When outstanding convertible securities are there, more complex rules are followed, which try to make EPS reflect the potential of such securities to dilute potential earnings of common shareholders.
The kind of importance popularly attached to EPS by users of financial statements is perhaps due to the fact that they are disclosed in the financial statements of public companies, and are liable to be scrutinized by auditors.
But then EPS is tedious and cumbersome to creators and scrutinizers of financial statements. Complex provisions of APB 15 and a host of amending pronouncements make it further complicated. The burden is worsened by SEC stipulation that 10-K reports include a supplementary schedule explaining the computation of EPS whenever it is not apparent in the financial statements.
A serious problem with ongoing standards is that basic EPS is subject to replacement on the income statement by two hypothetical EPS numbers: primary EPS, and fully diluted EPS.
Primary EPS is computed assuming that common stock equivalents were converted to common stock on the first day of the reporting period. The fully diluted EPS is computed assuming that all dilative securities, including the common stock equivalents, were converted.
When fully diluted EPS is less than 97% of basic EPS, these two EPS are the only per-share disclosures required under current accounting standards.
Concerns about the usefulness of dual EPS reporting are not limited to the relative merits of historical and proforma disclosure. Some of the specific rules governing the computation of primary and fully diluted EPS have also been questioned. The test used to identify common stock equivalent securities is among the most controversial of those rules.
Changing prevailing market conditions in relation to terms of particular securities are not considered in the computational rules for EPS. It implies that the appeal of a conversion feature relative to other security characteristics will vary, in different circumstances.
But then the meaning of common stock equivalent status and primary EPS remain confusing and questionable. There are other sophisticated methods that are also questionable, such as Options, Warrants, and the Treasury Stock Method.
So EPS is a popular method of measuring how things are going in the stock market, but the dependability of the measure is not too high because of the complicated procedures and unrealistic assumptions used for its derivation.
There are more comprehensive statistics and formulae that make life in the stock market simpler: the track of P/E ratio for example. Hence though as a primary indicator of performance one can use EPS to get an initial impression, you shouldn't depend much on it for a deep understanding of what's happening in the stock market.
investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments
Friday, June 09, 2006
Day Trading : Tools You'll Need
investments & trading
Day Trading : Tools you need by J. foley
Day trading previously had been only for the trading firms or the brokers who dealt in the physical market. But with the advent of the internet and a general advance of communication technology day trading has entered the homes of any interested individual who might have not visited the markets in person ever. But to be a successful day trader from your home you need to have the right gear. And by that we mean you need to have the proper hardware and software to build yourself a platform that could help you stay competitive against the market makers and other day traders. Following is a guide to the proper equipment you must have to do well.
Hardware
When you are trading online all you need is a good computer. You need to have only the basic items of hardware installed. But don't compromise on what you get yourself. Remember that while trading you would have to deal with a lot of numbers and figures and so you would require your computer to handle the data well. Get yourself a decent processor (anything above 1GHz) and plenty of memory. A 100GB hard disk drive is suggested as you would need to stack a lot of information. Higher memory also means better speed. Get yourself at least 1024MB of RAM as it would be necessary when you are crunching those numbers. You will of course need a modem to stay connected and a high quality video card would help you get the live feeds better.
As you would be dealing with a lot of data you should get yourself at least a 19" monitor. You can even go for split screen and use two monitors for a single screen shot.
Connection Speed
While you are day trading you are doing business real time. So you can't allow for any time lag. You would be placing your orders and quotes and you have to get them done on time or else you might miss out on good trading opportunities. So a dial-up connection isn't the best choice you have. To be a serious day trader it is always advisable to get a cable or DSL connection. That way you will get real-time data in your hand and can trade effectively.
Software
To make full use of the hardware you have got yourself you would also need the necessary software platforms to go with it. If you are in day trading you can go no where without the proper data in your hand. And even if you have the data you need to get the proper tools to store them well and have an easy access to them. The trading software platforms not only help you in getting the necessary data like the stock quotes, market indices, market stories and price alerts in real-time but they also store and present the data for you in an organized way so that it becomes much easier for you to make sense of it all when you read the spread sheets. You can buy these software platforms online or you can even get them from a few stores if you want to. You should however note that you may have to pay separately for access to the data that you need to download.
investments & trading
Article Written By J. Foley
Day Trading : Tools you need by J. foley
Day trading previously had been only for the trading firms or the brokers who dealt in the physical market. But with the advent of the internet and a general advance of communication technology day trading has entered the homes of any interested individual who might have not visited the markets in person ever. But to be a successful day trader from your home you need to have the right gear. And by that we mean you need to have the proper hardware and software to build yourself a platform that could help you stay competitive against the market makers and other day traders. Following is a guide to the proper equipment you must have to do well.
Hardware
When you are trading online all you need is a good computer. You need to have only the basic items of hardware installed. But don't compromise on what you get yourself. Remember that while trading you would have to deal with a lot of numbers and figures and so you would require your computer to handle the data well. Get yourself a decent processor (anything above 1GHz) and plenty of memory. A 100GB hard disk drive is suggested as you would need to stack a lot of information. Higher memory also means better speed. Get yourself at least 1024MB of RAM as it would be necessary when you are crunching those numbers. You will of course need a modem to stay connected and a high quality video card would help you get the live feeds better.
As you would be dealing with a lot of data you should get yourself at least a 19" monitor. You can even go for split screen and use two monitors for a single screen shot.
Connection Speed
While you are day trading you are doing business real time. So you can't allow for any time lag. You would be placing your orders and quotes and you have to get them done on time or else you might miss out on good trading opportunities. So a dial-up connection isn't the best choice you have. To be a serious day trader it is always advisable to get a cable or DSL connection. That way you will get real-time data in your hand and can trade effectively.
Software
To make full use of the hardware you have got yourself you would also need the necessary software platforms to go with it. If you are in day trading you can go no where without the proper data in your hand. And even if you have the data you need to get the proper tools to store them well and have an easy access to them. The trading software platforms not only help you in getting the necessary data like the stock quotes, market indices, market stories and price alerts in real-time but they also store and present the data for you in an organized way so that it becomes much easier for you to make sense of it all when you read the spread sheets. You can buy these software platforms online or you can even get them from a few stores if you want to. You should however note that you may have to pay separately for access to the data that you need to download.
investments & trading
Article Written By J. Foley
Monday, June 05, 2006
Small Cap Stocks
investments & trading
Smallcap Stocks By J. Foley
Small-cap stocks do not involve large amounts of money, and can avoid very high risk at initial stages. Even if you lose, you lose a small amount. Hence starting with small caps is not a bad idea.
Small-cap stocks are stocks with a relatively small market capitalization. Classifications such as 'large cap' or 'small cap' are only approximations that change over time. In fact, the definition of 'small cap' can vary among brokerages, but generally it involves a company with a market capitalization of between $300 million and $2 billion.
Below this, companies having a market capitalization between $50 million and $300 million, are called 'micro cap' stocks.
Even these aren't the smallest breeds. Nano-cap stocks are even smaller, and involve small public companies having a market capitalization of below $50 million. You may start with these also. But they escape the state regulatory oversight and there is no point in sticking to them.
The methods of learning the stock market apply to wider situations when you come out to penny cap, mid cap and large cap stocks. With rational research, dependable brokerage and your own attentive analysis, it is actually beyond the small cap stocks that you start exploring long-drawn high-return potentials.
One of the biggest advantages of initially investing in small-cap stocks lies in the opportunity to beat institutional investors. The institutional investors are not allowed below a certain minimum value quite high in relation to small cap stocks. Hence it is possible to avoid quite a few legal constraints while keeping up watchful learning of the pitfalls.
Secondly, it is good to initially trade in these stocks because you may want to put in small money in expectation of relatively high returns. If this is the case, case you must get to know the companies they represent thoroughly, before you take a single step.
The stocks that are traded at extremely low prices, sometimes even for under $1, may be considered small caps by nonstarters. In that sense even penny stocks are small cap stocks. But actually the term officially refers to low-capitalization companies ranging over a specified capitalization value.
And you have to be on the alert, small cap or not. Though traded at very low prices, they can be quite risky. Brokers and analysts often have cautioned about sudden unprecedented rises in the prices of small-cap stocks in recent times.
Most brokers dealing in this category do not have strong financial credentials. There are informal brokers also who come to help you. You get them in the neighborhood of the trading spot. They often look for you. Careful! As you are a beginner, you may easily be cheated. As these brokers do not have to abide by any authority control, frauds are rampant.
However, wise financial investors avoid them and their wares, though it is fully possible to make a profit in this market.
Another source of the high risk of this market is the wildly fluctuating prices. Hence the first tip is: try not to go on investing in these stocks for too long.
investments & trading
Article Written By J. Foley
Smallcap Stocks By J. Foley
Small-cap stocks do not involve large amounts of money, and can avoid very high risk at initial stages. Even if you lose, you lose a small amount. Hence starting with small caps is not a bad idea.
Small-cap stocks are stocks with a relatively small market capitalization. Classifications such as 'large cap' or 'small cap' are only approximations that change over time. In fact, the definition of 'small cap' can vary among brokerages, but generally it involves a company with a market capitalization of between $300 million and $2 billion.
Below this, companies having a market capitalization between $50 million and $300 million, are called 'micro cap' stocks.
Even these aren't the smallest breeds. Nano-cap stocks are even smaller, and involve small public companies having a market capitalization of below $50 million. You may start with these also. But they escape the state regulatory oversight and there is no point in sticking to them.
The methods of learning the stock market apply to wider situations when you come out to penny cap, mid cap and large cap stocks. With rational research, dependable brokerage and your own attentive analysis, it is actually beyond the small cap stocks that you start exploring long-drawn high-return potentials.
One of the biggest advantages of initially investing in small-cap stocks lies in the opportunity to beat institutional investors. The institutional investors are not allowed below a certain minimum value quite high in relation to small cap stocks. Hence it is possible to avoid quite a few legal constraints while keeping up watchful learning of the pitfalls.
Secondly, it is good to initially trade in these stocks because you may want to put in small money in expectation of relatively high returns. If this is the case, case you must get to know the companies they represent thoroughly, before you take a single step.
The stocks that are traded at extremely low prices, sometimes even for under $1, may be considered small caps by nonstarters. In that sense even penny stocks are small cap stocks. But actually the term officially refers to low-capitalization companies ranging over a specified capitalization value.
And you have to be on the alert, small cap or not. Though traded at very low prices, they can be quite risky. Brokers and analysts often have cautioned about sudden unprecedented rises in the prices of small-cap stocks in recent times.
Most brokers dealing in this category do not have strong financial credentials. There are informal brokers also who come to help you. You get them in the neighborhood of the trading spot. They often look for you. Careful! As you are a beginner, you may easily be cheated. As these brokers do not have to abide by any authority control, frauds are rampant.
However, wise financial investors avoid them and their wares, though it is fully possible to make a profit in this market.
Another source of the high risk of this market is the wildly fluctuating prices. Hence the first tip is: try not to go on investing in these stocks for too long.
investments & trading
Article Written By J. Foley
Wednesday, May 31, 2006
Protect Your Stock Market Investments
investments & trading
Protect Your Stock Market Investments By J. Foley
It is very easy to lose the entire stock market investment unless you have a rational approach to protecting them. Losing can be smooth and fast through misreadings and mistakes. Protecting your stock market portfolio is synonymous with being able to steer clear of these errors.
To protect your stock market investments, it is imperative that you limit the losses on adverse stocks. Accept that it is impossible to know for sure which way the stock is headed next. Hence a disciplined trading strategy is a must for limiting losses on stocks that don't go your way.
Taking a system of disciplined research for understanding your errors is necessary for protecting your stocks. Never indulge in too much risk taking. Investing is synonymous with taking risks; but the risks have to be calculated in relation to the potential returns. Every reasonable investor has a limit to his/her risk tolerance, and to be smart you have find out and respect your personal limit.
Straying past the tolerance limit can be disastrous. This may lead to bad decisions spiraling out of control, involving the pumping in of more and more money in stocks that don't even seem to be very good prospect.
Investors can avoid these problems if they will simply know where their level of risk tolerance is. It is easy to find. Just listen to your inner call for a caution.
Invest in anything unless you understand it thoroughly, will make your stock market investment insecure. There is nothing foolish in not understanding an investment prospect. If you don't understand it, call a pass. If you find you have made a wrong choice, accept that bad things happen and take a little loss rather than allowing it to become big by dragging it further.
Try to form an idea of the fair price and buy at that, and ignore market hysteria. Similarly, if nothing has fundamentally changed with the company you possess stocks of, except that the stock is dropping along with the market, good investors will not be frightened off a good price and prefer sitting tight to selling for a loss.
It is wise not to jump in or out reacting to any hot price signal. Experienced investors do that occasionally but that is likely to drag you to buy high and sell low, a position contrary to the collective wisdom on winning.
Everything that can lead to win-win spots in the stock market can protect your stock market investment. Buying low and selling high is, of course, a standard win-win proposition. To achieve that, one has to be serious, meticulously research-oriented and needs to document every move and the perceived reason behind it.
Avoid penny stocks, day trading and swing trading unless you are an expert in those areas. Analyze every wrong step you have ever taken, and figure out what would have been the best move, so that in similar future scenarios you are in a better position to take the right decision.
investments & trading
Article Written By J. Foley
Protect Your Stock Market Investments By J. Foley
It is very easy to lose the entire stock market investment unless you have a rational approach to protecting them. Losing can be smooth and fast through misreadings and mistakes. Protecting your stock market portfolio is synonymous with being able to steer clear of these errors.
To protect your stock market investments, it is imperative that you limit the losses on adverse stocks. Accept that it is impossible to know for sure which way the stock is headed next. Hence a disciplined trading strategy is a must for limiting losses on stocks that don't go your way.
Taking a system of disciplined research for understanding your errors is necessary for protecting your stocks. Never indulge in too much risk taking. Investing is synonymous with taking risks; but the risks have to be calculated in relation to the potential returns. Every reasonable investor has a limit to his/her risk tolerance, and to be smart you have find out and respect your personal limit.
Straying past the tolerance limit can be disastrous. This may lead to bad decisions spiraling out of control, involving the pumping in of more and more money in stocks that don't even seem to be very good prospect.
Investors can avoid these problems if they will simply know where their level of risk tolerance is. It is easy to find. Just listen to your inner call for a caution.
Invest in anything unless you understand it thoroughly, will make your stock market investment insecure. There is nothing foolish in not understanding an investment prospect. If you don't understand it, call a pass. If you find you have made a wrong choice, accept that bad things happen and take a little loss rather than allowing it to become big by dragging it further.
Try to form an idea of the fair price and buy at that, and ignore market hysteria. Similarly, if nothing has fundamentally changed with the company you possess stocks of, except that the stock is dropping along with the market, good investors will not be frightened off a good price and prefer sitting tight to selling for a loss.
It is wise not to jump in or out reacting to any hot price signal. Experienced investors do that occasionally but that is likely to drag you to buy high and sell low, a position contrary to the collective wisdom on winning.
Everything that can lead to win-win spots in the stock market can protect your stock market investment. Buying low and selling high is, of course, a standard win-win proposition. To achieve that, one has to be serious, meticulously research-oriented and needs to document every move and the perceived reason behind it.
Avoid penny stocks, day trading and swing trading unless you are an expert in those areas. Analyze every wrong step you have ever taken, and figure out what would have been the best move, so that in similar future scenarios you are in a better position to take the right decision.
investments & trading
Article Written By J. Foley
Tuesday, May 23, 2006
Option Trading Strategy That Works !
investments & trading
Option Trading Strategy That Works! BY J. Foley
An option is a contract conferring to the owner the right to buy or sell a specific stock at a specific price in the future.
'Call options' give the right to BUY the stock at a certain price, and 'put options' give the right to SELL the stock at a certain price. That particular price is called the 'strike price', and owner is allowed to buy or sell at that strike price at any time before the expiration date of the option.
Being an active investor in option trading requires knowing the in-s and out-s of buying and selling options. To win the gains and rewards from option trading, you will have to learn the basics of various trading methods. You need to get up to speed with various strategies and learn to use them efficiently, in order to survive in the options market. If you're averse to this kind of hard labor, you had better follow a mutual fund manager who will do this for you.
You should note that option stocks have some differences with share stocks or bonds. An option stock may consist of commodities or any marketable product. Option trading strategy involves taking contingent plans of action to buy and sell these options in a manner that entails maximum expected profit.
The profitability in this trade comes from the volatility (a measure of shift potential in prices) in the prices of these options. In general, when you experience very high option implied volatility (meaning downfall is highly imminent), selling should get priority over buying, because in these situations options become quite expensive.
What kind of strategy should you follow in options trading? Which stock do you invest in – should you just follow a tip, or quality, or analyze trends in the market to get the best deal?
For making profits in option trading, you must have a measure of volatility and your strike price at the right time. For beginners or those who have little time to spare, it is often wise to get a membership of agencies with expert trading advisers. They alert you when they see great trading opportunities, and also remain for you in their trading room to answer your questions. There are plenty of them these days.
Besides, there are good dependable software programs that analyze and measure volatility with acceptable accuracy. As for example, the OptionVue 5 options analysis software helps you survey all options according to specified criteria such as implied volatility and statistical volatility levels. It also helps to identify markets that might be tradable using a ratio writing strategy. Many different kinds of market are included in these programs, and trends are worked out on the basis of past six years' information.
'High implied volatility' is a situation when options are expensive in terms of historical average levels. Since option implied volatility eventually returns to its historical mean, it would make good sense to sell at this high volatility when it is at the extreme levels (say the 99th percentile).
Another strategy is to work out your contingent plan of action through your own analysis of volatility and the expected range of strike prices using software and detailed stock information.
By mixing and matching various options trading strategies cleverly, you can sometimes even profit from stocks that have little or no movement over time. This is not a very easy thing to achieve, though.
Sometimes even when there are consistent bull and bear debit spreads and high implied volatility, buying strategies are often very poorly priced. When it reaches a trough, the collapse in high-priced options right after a sharp drop in implied volatility takes out much of the profit potential.
So, as has been pointed out time and again, even if you are correct in timing a market bottom, there may be little to no gain from a big reversal move following a capitulation sell-off. There are strategies for avoiding this. One needs to learn these strategies from professionals or academics studying this sector, or from quality agencies. Option trading is a big money game, provided you play it right.
investments & trading
Article Written By J. Foley
Option Trading Strategy That Works! BY J. Foley
An option is a contract conferring to the owner the right to buy or sell a specific stock at a specific price in the future.
'Call options' give the right to BUY the stock at a certain price, and 'put options' give the right to SELL the stock at a certain price. That particular price is called the 'strike price', and owner is allowed to buy or sell at that strike price at any time before the expiration date of the option.
Being an active investor in option trading requires knowing the in-s and out-s of buying and selling options. To win the gains and rewards from option trading, you will have to learn the basics of various trading methods. You need to get up to speed with various strategies and learn to use them efficiently, in order to survive in the options market. If you're averse to this kind of hard labor, you had better follow a mutual fund manager who will do this for you.
You should note that option stocks have some differences with share stocks or bonds. An option stock may consist of commodities or any marketable product. Option trading strategy involves taking contingent plans of action to buy and sell these options in a manner that entails maximum expected profit.
The profitability in this trade comes from the volatility (a measure of shift potential in prices) in the prices of these options. In general, when you experience very high option implied volatility (meaning downfall is highly imminent), selling should get priority over buying, because in these situations options become quite expensive.
What kind of strategy should you follow in options trading? Which stock do you invest in – should you just follow a tip, or quality, or analyze trends in the market to get the best deal?
For making profits in option trading, you must have a measure of volatility and your strike price at the right time. For beginners or those who have little time to spare, it is often wise to get a membership of agencies with expert trading advisers. They alert you when they see great trading opportunities, and also remain for you in their trading room to answer your questions. There are plenty of them these days.
Besides, there are good dependable software programs that analyze and measure volatility with acceptable accuracy. As for example, the OptionVue 5 options analysis software helps you survey all options according to specified criteria such as implied volatility and statistical volatility levels. It also helps to identify markets that might be tradable using a ratio writing strategy. Many different kinds of market are included in these programs, and trends are worked out on the basis of past six years' information.
'High implied volatility' is a situation when options are expensive in terms of historical average levels. Since option implied volatility eventually returns to its historical mean, it would make good sense to sell at this high volatility when it is at the extreme levels (say the 99th percentile).
Another strategy is to work out your contingent plan of action through your own analysis of volatility and the expected range of strike prices using software and detailed stock information.
By mixing and matching various options trading strategies cleverly, you can sometimes even profit from stocks that have little or no movement over time. This is not a very easy thing to achieve, though.
Sometimes even when there are consistent bull and bear debit spreads and high implied volatility, buying strategies are often very poorly priced. When it reaches a trough, the collapse in high-priced options right after a sharp drop in implied volatility takes out much of the profit potential.
So, as has been pointed out time and again, even if you are correct in timing a market bottom, there may be little to no gain from a big reversal move following a capitulation sell-off. There are strategies for avoiding this. One needs to learn these strategies from professionals or academics studying this sector, or from quality agencies. Option trading is a big money game, provided you play it right.
investments & trading
Article Written By J. Foley
Saturday, May 20, 2006
Mutual Funds - Better Than Individual Stocks ?
investments & trading
Mutual Funds – Better than Individual Stocks? By J. Foley
Though it cannot be said in general that mutual funds are always better than individual stocks, it still cannot be denied that they usually involve lower risks, less money and generally yield lower but safe returns.
It all depends on the risk attitude of the investor. This is understood clearly by looking at the disclaimer attached with any mutual fund options that are nearly identical with that applicable to any other (kind of) stock. They have their advantages and loopholes like any other form of investment. And as in other forms of investment, one has to be fully aware of potential pitfalls and while driving high with mutual funds, has to be alert enough to avoid them.
Mutual funds are seemingly the easiest and least stressful way to invest in the stock market. Quite a large amount of new money has been put into mutual funds during the past few years.
Briefly put, a mutual fund is a pool of money contributed to by individual investors, companies, and other organizations. There will be a fund manager hired to invest this cash with a primary goal that depends upon the type of fund. The manger usually diversifies in a manner such that the net average earning is expected to be considerably positive. S/he may be a fixed-income fund manager. In that case s/he would work hard to provide the highest return at the lowest risk. On the other hand a long-term growth manager should try at least to beat the Dow Jones Industrial Average or the S&P 500 in a given fiscal year.
But that is what any successful investor attempts to do, and anyone with a similar approach can be expected to make the same earnings.
It all depends really on the overall investment climate and the sectors in which funds are flowing in. Diversification is definitely a good approach when it comes to successful investing by a reasonable investor. But with mutual funds, there is that the controllers may over-diversify.
Diversification minimizes the inherent risks of stock trading by spreading out the capital over many stocks. But over-diversification is again a bad thing.
First, an investor gets into many funds that have significant mutual implications, thereby losing out on the full benefits of risk stretching that diversification affords.
Secondly, over-diversification may decrease your overall return. By hitting too many poor through mediocre funds, the investor reduces the return by missing the potential of a few well-managed funds.
It is true that mutual funds play it safe. This is because mutual funds are actively organized by a professional money manager who keeps constant checks on the stocks and bonds in the fund's portfolio. As this is her/his primary occupation, s/he can devote much more time to choosing investments than an individual investor. This provides the investor with the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.
But on the negative side, a mutual fund, unless open-ended, must remain confined within a fixed portfolio. Even with open ended mutual funds, the range of potential is often low as compared to what is available to an investor free to choose any stock s/he likes.
Besides, mutual funds some times come as load funds in which the investor has to pay the sales commission on top of the net asset value of the fund's shares. Also, the dollar-cost averaging strategy is just the same with mutual funds as to any common stock.
Of course, fixing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.
Hence considering the stress, agony and risk that any stock may involve, mutual funds look a shade better than independent trading, if low but steady is ok for you.
investments & trading
Article written By J. Foley
Mutual Funds – Better than Individual Stocks? By J. Foley
Though it cannot be said in general that mutual funds are always better than individual stocks, it still cannot be denied that they usually involve lower risks, less money and generally yield lower but safe returns.
It all depends on the risk attitude of the investor. This is understood clearly by looking at the disclaimer attached with any mutual fund options that are nearly identical with that applicable to any other (kind of) stock. They have their advantages and loopholes like any other form of investment. And as in other forms of investment, one has to be fully aware of potential pitfalls and while driving high with mutual funds, has to be alert enough to avoid them.
Mutual funds are seemingly the easiest and least stressful way to invest in the stock market. Quite a large amount of new money has been put into mutual funds during the past few years.
Briefly put, a mutual fund is a pool of money contributed to by individual investors, companies, and other organizations. There will be a fund manager hired to invest this cash with a primary goal that depends upon the type of fund. The manger usually diversifies in a manner such that the net average earning is expected to be considerably positive. S/he may be a fixed-income fund manager. In that case s/he would work hard to provide the highest return at the lowest risk. On the other hand a long-term growth manager should try at least to beat the Dow Jones Industrial Average or the S&P 500 in a given fiscal year.
But that is what any successful investor attempts to do, and anyone with a similar approach can be expected to make the same earnings.
It all depends really on the overall investment climate and the sectors in which funds are flowing in. Diversification is definitely a good approach when it comes to successful investing by a reasonable investor. But with mutual funds, there is that the controllers may over-diversify.
Diversification minimizes the inherent risks of stock trading by spreading out the capital over many stocks. But over-diversification is again a bad thing.
First, an investor gets into many funds that have significant mutual implications, thereby losing out on the full benefits of risk stretching that diversification affords.
Secondly, over-diversification may decrease your overall return. By hitting too many poor through mediocre funds, the investor reduces the return by missing the potential of a few well-managed funds.
It is true that mutual funds play it safe. This is because mutual funds are actively organized by a professional money manager who keeps constant checks on the stocks and bonds in the fund's portfolio. As this is her/his primary occupation, s/he can devote much more time to choosing investments than an individual investor. This provides the investor with the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.
But on the negative side, a mutual fund, unless open-ended, must remain confined within a fixed portfolio. Even with open ended mutual funds, the range of potential is often low as compared to what is available to an investor free to choose any stock s/he likes.
Besides, mutual funds some times come as load funds in which the investor has to pay the sales commission on top of the net asset value of the fund's shares. Also, the dollar-cost averaging strategy is just the same with mutual funds as to any common stock.
Of course, fixing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.
Hence considering the stress, agony and risk that any stock may involve, mutual funds look a shade better than independent trading, if low but steady is ok for you.
investments & trading
Article written By J. Foley
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
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
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
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
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
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
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
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
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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