Stocks Mutual Funds

The process of stock trading has of course evolved a lot over the years as technology as developed. In the early part of the 20th century you had to visit a stock brokers office or trading room to buy and sell stocks.

When the postal mail became into common use you could then buy and sell stocks by mailing a letter to your broker, of course today nobody would dream of doing either of these.

Today the most used method of trading is either using the telephone or stock trading online. When using the telephone to trade stocks you can still do it by speaking to a broker and giving them your clear instructions, or you can do it all yourself by using some form of menu system using the digital key pad.

But by far the most common form of trading is done online, so what do you need to know about stock trading online?, more than you may think!

Here are some points that you may not have considered:

1. Virtually all brokers can do stock trading but what about options, Forex and futures?. While you may not be interested in trading either Forex or futures it is quite likely that at some time you will want to trade options online, even if it is just covered calls. Make sure that your broker allows you to trade all the markets that you want to.

2. Of course the fee’s charged by your online broker is an obvious point to check, the fee’s can vary a lot and if you are doing hundreds or thousands of trades a day it can add up to quite a lot of money. Did you know that you can just call up your online broker and ask for a reduced commission charge?, yes you can, I’ve done it. Of course they don’t advertise it but if you do a lot of trades they will want to keep your business.

3. Have you planned what you will do if you are in a trade and your internet connection goes down for any reason, it could be a power failure, problems with the internet or your PC crashing?. If you are in a day trade you will want to telephone your broker and manage your trade, probably you will just want to close it. How will your broker deal with your call, will they answer quickly, will they look at the charts for you and describe what is going on?. Make sure that your broker provides good telephone support.

4. Are your trading funds safe?, make sure that your broker is a member of SIPC, the Securities Investor Protection Corporation, which protects against losses caused by the financial failure of the broker-dealer, but not against losses resulting from depreciation in a security’s value. Usually trading accounts are protected by the Securities Investor Protection Corporation (SIPC), up to $500,000 (including up to $100,000 for cash claims).

Whatever you decide to do, before trading stocks, options or anything else make sure that you get a good trading education by reading the best trading books that you can.

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The most successful floor traders are those that have the most experiance, this is no coincidence at all and should be a pointer for those who aspire to become a good trader. Day trading can be likened to being a sportsman, such as a golf pro or tennis champion, you need to be trained and in good physical shape. Skills are needed which must be developed over time and practiced until they become 2nd nature. If you want to learn how to day trade you must be prepared to put in the effort. Here are a few of the key skills that you must develop as a trader.

1. Technical analysis can be used for futures as well as the more standard stocks, options and bonds that most people trade. This can give you an edge over other traders who have not taken the time to study the charts support and resistance areas, trendline and patterns. Learning technical analysis is really a must do if you want to trade futures successfully.

2. This is a very simple point but is very important, always have your trading plan prepared before you enter a trade, never try and create it on the fly, you will be much too emotional. Make sure that you have an entry and exit point in your plan.

3. Keep your losses small!, this is the one thing that every trader must do if they want to stay in the game for a long time. By doing this you will preserve your capital allowing you to trade another day. Your small wins will compensate your small losses allowing your big wins to give you an overall profit

4. Over trading is a big mistake that a lot of amateurs make. Professionals tend to be more patient and wait for the better opportunities to come along, this is called cherry picking and takes both patience and discipline. These are essential skills that you must develop.

5. This is a big day trading tip, it is important that you track all your trades and review them to see where you are making the mistakes. This is quite hard work, but this is what separates the professionals from the amateurs. Unless you do this you will keep on making the same mistakes. The best way to do this is to keep both a daily, weekly and monthly log.

6. Only trade when you are both physically and mentally prepared. This is sometimes overlooked but is very important. Do you think a tennis star can win a game when they are tired and mentally not focused?, it’s unlikely. Being prepared means getting a good nights sleep, having your trading station and charts well prepared before the market opens, taking the time each day to review your trading plan and rules. Finally it’s important to have the mental frame of mind and confidence that you are going to be successful today in your trading.

7. If you are new to trading futures take the time to paper trade until you are very confident that you are going to make money. You will know when you are ready because you will start to hate paper trading knowing that you could be making real cash profits on a consistent basis.

Remember that the markets only trend for about 20-35% of the time, the rest is either sideways or very choppy, if you want to do trend trading to win you must be fully prepared when the opportunities arise.

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The method in the exchange has traditionally been buy low sell high.  The strategy of hot or momentum stocks is buy high and sell higher.  The idea is to look out for stocks that a rising in worth, buy them and then sell when they stabilise or begin to decline in value.  By trading this way, you don’t have to keep hold of the stock as long.

Find out what hot stocks are worth buying today.

Rather than purchasing undervalued stocks and waiting weeks or months for them to rise in price, with the hot stocks approach, you purchase stocks that are rising in value.  Instead of holding the stocks, you wait only a short while and sell them when their value is higher than the price you paid.  You turn a fast profit. 

This investment plan is especially suited to day traders.  You have got to be conscious of the market trends and select stocks that are showing a noticeable steady increase.  Buy the stock and after it rises enough to offer you a profit, sell it.  Don’t feel tempted to hang onto it beyond making a good profit.  This is a strategy, not a get rich quick scheme.   

If you chose a hot stock that turns out not to be so hot, get rid of it right away even if you’ve got to sell unable.  Holding on to the stock after it starts to drop could bring an even bigger loss.  The stock market is a bet and occasionally you lose.  Minimize your losses.

In numerous cases, you may sell the stock only hours after you purchased it.  To use this idea effectively, you’ve got to consistently monitor your stock costs and keep a lid on of the market’s trends.  Hot stocks are a high risk gamble that occasionally does not pay off.  Learn from your losses and celebrate your gains.  If you may a profit on 2 stocks and lose on one, you are still ahead of the game.   

Anyone that is trading seriously in the market should use more than one methodology.  Hot stocks are great, but they’re regularly high risk.  Your portfolio should be diversified, with proved stocks from different business sectors.  This helps offset losses and protects your investments.  Hot stocks should only be part of your investment plan.

Hot stocks only work as a short term investment.  These are stocks which should be purchased and sold in less than a week.  If the stock continues to rise after you sell, that is’s OK, you made a profit.  The stock could just as easily drop in worth. 

Many speculators use a broker to buy and sell stocks.  Hot stock investing is not built to be used with a broker.  If you’ve got to pay a broker’s fee for every exchange, hot stocks could cost more than you are making from them.  Online services for buying and selling stocks are better suited to this investment system.  Look into ways to avoid brokerage costs if you intend to add hot stocks to your investments.   

The stockmarket is a good way to grow your investments.  Hot stocks is a method to make reasonable profits in a short period of time.  When investing your money always use more than one method and make sure that at least part of your money is in a safe, if low yield, finance instrument.  Never gamble on the market with money you are unable to afford to lose.  Remember the old Wall St.  Saying” often you eat the bear, and often the bear eats you.” Good luck!

Check out the best stock newsletter in 2008.

The main stock markets from around the world have had quite a good start to the year. I am finding it hard to see why the markets are performing so well as I believe that the Western world is still in a major financial mess. I am asked on a regular basis whether I think that the stock markets will continue to rise in the second half of 2009.

Now I have to say that I am more than happy that the main stock markets from around the world have been performing so well. I love to invest on the markets, or gamble as my family like to call it.

I should mention however at this stage that I am not a financial adviser and that I am merely a novice investor who is hoping that the “gamble” will pay off. Please therefore do not take any of what you read in this article as financial advice as I am not authorised to give advice etc. I actually work on various projects including offering a DVD duplication service, offering stuttering therapy and also assisting a business cost reduction specialist.

The professional investors are waiting for the markets to bottom out and are searching for any signs of a recovery in the current credit crisis. I have to say that I have not seen any green shoots thus far!

Over the last few months we have seen some dramatic gains on more of a hope that the recovery has started. So just how will the markets react when it sees some “real evidence” that the credit crunch is starting to ease? Well I would very much expect them to rally in a major way. With interest rates at historical lows people are seeking an investment which offers a much greater return than the measly three percent offered on the high street.

I personally believe that there are going to be some rocky roads ahead but that the bottom of the market may have been reached.

Unless you’re capable of developing an attitude that doesn’t allow for failure to be an option, you’re not going to be able to develop a trading edge and trading psychology.

No matter how many times I stress the importance of developing a trading plan, only you are able to convince yourself. However, I will go as far as saying that unless you do, you won’t develop an effective plan because you won’t be willing to sacrifice the amount of time and effort required.

Additionally, I also highlight the fact the majority of people who are new to trading, end up failing. This I feel helps traders to realize that unless they develop a trading edge, they too will become one of the masses who never experience success trading.

Practically anyone involved with presenting trading education, will at some point mention that the vast majority of traders end up failing. In fact, only about 20% of those who play the markets actually end up making money. When I say you need to separate yourself from the majority, I mean you need to separate yourself from the 80% who fail.

Is it simply a cliche, saying that only 20% of traders are successful while the remaining 80% fail? I certainly know that I for one am unable to back this up with solid evidence.

To the best of my knowledge there are simply no audited reports to back this up so the integrity of such a statement is questionable.

Just recently, after delivering a presentation, someone mentioned that I had included this so called “cliche” in my presentation but the interesting thing was, he also didn’t think the figures were 100% accurate.

After much discussion we concluded that the 80% group actually consists of two groups. The top 20% of traders become highly successful while the bottom 20% fails completely. In the middle we have the 60% who while they don’t fail, they also don’t make any significant gains. It is this group of 60% together with the bottom 20% which make up the 80% group I mentioned earlier.

That 60% group in the middle of the scale can’t really be classified as failing because they don’t fail as such. The question however is, what is it exactly that spurs others on to entering the top 20%?

Unfortunately, the majority of people I come into contact with tend to see failure in a negative light although it need not always be a negative experience. Likewise, the majority of people I deal with are so intimidated by failure, that they are simply unwilling to take any risks.

Contrary to what many believe, failure is in a sense, the very highway to success. It’s what makes success possible in the first place. Each time we encounter failure resulting from one or more errors we made, we’ll take significant steps in order to avoid repeating those same errors in the future. This is exactly why in the last paragraph; I mentioned that failure need not always be a bad thing.

“I have never failed but I have learnt of thousands of ways which don’t work”. These were the wise words once spoken by Thomas Edison and as we all know, in the end he succeeded in achieving his goal even though he encountered failures along the way.

Another interesting point made by Thomas Edison, is the fact that many people who throw in the towel as a result of fearing failure, do so at a point when they are just about to be successful in their trading business.

We’ve all heard the sayings regarding life being too short and just how precious time is and to be honest, I say these to myself everyday. Having said that, this usually happens just prior to me taking a slightly higher risk that normal and of course I then need to live my life without loosing sleep over my decisions.

Essentially, you need to discard your fears of failing if you really want to experience success although having said that, I am certainly in favor of exercising due caution. If you can apply some of what you’ve just read, to your trading experience, there’s every probability that you’ll soon manage to get into the 20% that experience great success.

Despite it still being a few months away serious investors are already starting to pick their stocks for 2010. Research into various companies, sectors and countries are all a part of this research. So where will be the places to invest for profit in 2010?

Before I continue I would like to make one thing quite clear; I am not a financial adviser therefore you should not see what I write as financial advice. I am just another run of the mill guy who likes to play the stock markets. For me it is a bit of a gamble and a bit of fun. By trade I am offer a web promotion advice service, a stuttering therapy service (I used to have a stutter myself) and I am also involved in company that offers a professional DVD duplication service.

I really like the companies that are looking to invest their way through this current crisis. This takes a bit of nerve and a lot of ready cash but is a move that is likely to prove very beneficial in the long run. This may just turn out to be the perfect time to buy a business. There are many small business owners seeking to sell up and this is where a bargain could be had.

The companies who do invest are the ones that are likely to make the most profits when the gloom and doom of this credit crisis lifts. When things improve, which they will, you want your company to be in the best place possible to benefit from the new found confidence.

As for regions, I am particularly attracted to the stock markets in Russia, in India and in China. A slightly riskier proposition is the Japanese stock market but is one that could easily shine next year.

For all you investors out there – good luck in 2010! Steve Hill from the UK, invester of the year 2094!

Analysis of financial statements of firms grants you  an insight on how the company is running its affairs. Financial statement analysis allows management to evaluate whether it needs to invest in a new project or continue with exisiting ones, along with that analysis of financial statements also shows how divisions of the business are performing – whether it is up to expectations are not, along with financial health of the firm. When the financial statement analysis is done to aid the management of the business to make proper financial decisions to maxmize companies shareholder value, you will see compononets such as capital budgeting and desired capital structured comprised in financial analysis. A financial analysis will allow owners to decide how the company might perform in the future, and evaluate the financial performance with those of the competitors.

The viability of the project is usually decided after a thorough financial analysis, which is usually done by financial analysts employed by the corporation. Management will use the recommendations of financial analysts in its payroll to decide the best probable project that would give it the maximum amount of returns. The expected returns one might expect from a project are provided by financial analysts. Whether it is correct to issue new stocks or bonds or if its best to just borrow money through loans, financial analysts will provide recommendations to the management that would best maximize company’s returns. The roles of performing capital budgeting and capital structuring will be taken on by financial analysts.

Financial Institutions will carry out a financial analysis of a company to see how strong its fundamentals are, and then use their findings to either make good investments for themselves, or pass on ther findings to their clients. Brokerage companies might use financial analysts to recommend stocks to their clients so that the clients can buy the stocks. Accurate analysis of financial statements are quite crucial as these are used by financial analysts to provide recommendations to their clients who would base their purchase on what the financial analyst would recommend. A financial analyst might advice his clients to sell the share of a business after financial management analysis, if he believes that the viability of the business is compromised. Such a implication would cause the price of the share to fall.

Why Mutual Funds Are Dangerous Investments

If you’re working with a top mutual fund company, they will know how to use your money to increase your profit margin as well as their own. They are able to make the most of every investment, which is exactly what you’re after. It never hurts if you know a little something about this type of funds, too, so that you can understand when you’re investing in the right fund. Investing in the wrong fund will only waste your investment capital, and you won’t see the return you should be seeing. Make sure you know exactly what you want from a fund before investing.

Mutual funds have become an industry favorite, because it doesn’t take a great deal of money to get started. A novice investor should spend some time educating himself about current market trends, though. When you purchase mutual funds, you’re buying shares in a company. As longtime investors say, your aim is to maximize your returns while minimizing your risks. Mutual funds certainly offer you the best option as far as being flexible, and they are very fast and easy to sell when that time comes.

In general, Small investors usually do not have the necessary expertise and the time to undertake any study that can facilitate informed decisions while investments. This is the predominant reason for the popularity of mutual funds. Apart from it, there are many other benefits that can be taken by investing in mutual funds.

If you’re new to investing, you will find a great deal of information on the internet that will teach you the best ways to buy and sell funds so that you can save money on your investments and earn maximum profit.

Apart from it, investors can save transaction cost by investing in mutual funds. Transactions of a mutual fund are generally very large. These large volumes attract lower brokerage commissions and other costs, as compared to the smaller volumes of the transactions entered into by individual investors. The brokers quote a lower rate of commission to fund houses. So, investors can get benefit.

Other benefits are also with mutual-funds. Mutual funds generally offer a number of schemes to suit the requirements of the investors. Thus the investors can choose between regular income schemes and growth schemes, between schemes that invest in the money market and those that invest in the stock market, etc. Some schemes provide some added advantages also.

Another valuable resource is to make use of the Lipper Leader Fund Ratings which use total return, tax efficiency, expense, preservation and consistent return as criteria for rankings. The information in these resources should never be taken at face value but they should be instead used as a guide.

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To avoid trading in the dark, you need to master the art of back test.  Your wife and kids will be proud of your trading, if you use the back test. You don’t want to be the one who invests more than he can afford, and then crashes and burns. Like I have said previously, one of my favorite aspects of trading is that you can test your plan or system without fronting any money, which is called back testing.

The back test as an area is not given much importance by most traders. The  important of  psychology and money management has been highlighted by many trading coaches.  All you have to do is look around on the World Wide Web to see the vast array of information. While there is a large amount of information available both online and offline, it is often overlooked. The additional attention has, however, been at the expense of the back test; consequently, the least appreciated and least understood area of trading is back testing.

Back tests have an influence in many areas, including both financial and psychological ones. It has a direct impact on a trader’s exits, entries, management of money and psychological impact in the following areas:

– When you do entries and exits use the information you have discovered by testing your systems performance to make the proper changes to get the end product you desire.

– Money management – back testing helps you to evaluate different money management schemes to know which one suits your system best.

– The Psychology Behind It – As per the book, psychology helps build your confidence by weighing the weaknesses and strengths; thereby, building your ability to effectively perform, in your trade.

No matter what technical method you use (volatility break outs, moving averages, or any different trading method) you will need to analyze it fully to be confident with the process.

Without the use of back testing, traders become suspicious and start questioning the working of their own trading systems. Due to problems in their trading system, many get lured to the bad decisions giving in to temptations of latest fad topics or doing rounds in the chat forums. As well, they will toss their system and replace it with the newest, biggest thing thinking its a shortcut to success.

Things which seem to good to be true will attract traders who are dissatisfied with their trading system for the only reason; the trader has not tested his system.  Therefore, confidence in the developed system is not what it be in order to lead to success.

Back testing allows a trader to verify their system’s effectiveness and shows where a person’s trading skill is at its best.

So, you’re searching for that illusive magical indicator that allows you to capture the markets; that indicator that let’s you know when it’s the best time to get in on a trade and the precise time that you should bail out? My advice to you is, “save your energy and give up the search”, because a perfect trading entry just doesn’t exist, and that’s the secret. We constantly see new traders spending all their energy searching for the perfect trade entry, believing they are missing something the professions know about. In fact, professional traders have long since known the secret, in that there’s no such thing as a perfect trading entry.

For your own sake, please believe me when I tell you, perfect indicators don’t exist in the real world.

So, why do people still believe there’s such a thing as a perfect trade entry?

When asked for his opinion as to why many traders, novices in particular, believe in such a thing as a perfect trade entry, dr van tharp makes the following suggestion: Novice traders have a tendency to believe that if they’re actually involved in the selection and entry into a trade, they have a certain amount of control over the way the markets behave. Likewise, this highly respected trading guru points out that these novice traders have something in common with all those people who choose lottery numbers which in some way are connected to their personal lives, be it their birth date, or be it an anniversary date.

Using numbers derived from all those meaningful occasions tends to give punters a sense of being in control. To the contrary, no matter how important they feel their numbers are, those numbers have the same chance of winning as do any amount of combinations. The only difference is, there’s an emotional connection between those punters and the numbers they choose and for that reason alone, they feel they have the upper hand. This is the same phenomenon experienced by so many traders with regards to a trade entry.

The only time a trader has any degree of control over a trade entry, is when they’re entering a trade. On the other hand, once you’re in a trade, you need to understand that you no longer have any control over the markets, or the way in which they behave. The bottom line is, once you enter into a trade, you need to let go.

Choosing when to exit a trade and how much you actually put into it will determine how much money you make from that trade. In other words, it’s not about when you buy your stock.

A good example of this is:

Two traders are interested in buying the same stock and both use identical trading systems, meaning they’ll both buy their stock at $10 per share and they’ll both sell when the shares hit $12 per share. The only difference is that while trader number one only has $1000, trader two has $5,000.
Trader number one will of course be able to buy 100 shares and providing he sells when they reach $12, he’ll make $200 profit.
Trader number two on the other hand is able to buy 500 shares and as a result, when he sells at $12 per share, his profit will be $1000

Now that we can clearly see that the amount you invest is the main factor influencing profits, it’s easy to see why this is an essential part of good money management.