Wednesday, April 11, 2012

Specifically Is Actually Show Marketplace?

A standard or perhaps a show largely ways some of the learn some of the control of the business, such as the investments or perhaps gains. The firm offers this type of control given that it demands cash to satisfy the expenses as well as to spread the company. Which funding might be credit funding (credit cash) or perhaps resources funding (offering stocks).

Credit funding might require business to repay the mortgage along with attention, while as part of resources funding there is virtually no attention as well as a odds of failing to pay your money back whatsoever! Furthermore, just in case of problems chance is actually dispensed amidst most stockholders.

Where might a business enterprise notice purchasing that would need it their investments? A standard marketplace. Information technology provides popular system for clients in investments. And exactly how truly a trader find the wished for investments when she may not be provide during the stock market, or perhaps doesn't understand that investments buying?

Online mostly advertising worries a few of the rescue, as well as a store representative often helps besides. A standard representative or perhaps an on-line show representative maintains him self up-to-date in the show marketplace which is familiar with marketing in investments.

She therefore instructions some of the trader about exactly where there is to spend, for stock broker charge.

Finding show representative is essential, while he are the definitely one selecting towards money of a trader. A steady show representative will act as a respectable mate for trader with his quest within the trading marketplace. She ought to be reliable and also able to find high comes back from instruments. The show representative or perhaps an on-line show brokerage ought to be giving you top quality service in order to the customers such as effective and also remind marketplace suggestions, effortless marketing equipment, and also most importantly an acceptable stock broker charge.

Stock values alter regularly, as well as an trader must choose provides for a song market consumers in a high price to obtain high comes back. Involving this, significant viewing of market exponent must stick to the shows of numerous service providers he's curious buying investments after. Stock index is an accomplished number of the top performing service providers on the individual market, and also whoever show symbolizes some of the show of the many service providers and as a result the general industry consumers are part of.

However a significant factor adding in the direction of store pricing is information. Household along with global problems such as panic, conflict, theft, scam, and others. weaken some of the stock values. Occurs once the doubt of circumstances produces many try to avoid exchanging, which impacts on the firms. The worry in losing cash causes along with show costs.

Thursday, March 22, 2012

4 Great Ways to Learn Stock Trading

Aspiring stock traders should have access to multiple source of learning. Just like learning to ride a motorcycle or swimming in a river is about making calculated moves, accepting mistakes and improvising errors - learning to trade stocks is not very different!

Read on to learn about the 4 great ways to learn stock trading!

1. Research online and find a good stock broker

First of all, you need to open an account with a trusted and reliable stock broker. Start playing with the layout of the interface provided by the stock broker. A large number of useful tools are provided to registered clients only. If possible, you should choose a broker who can provide you with a free simulator account. With these accounts, you can learn to trade stocks without risking real money. It is advisable to spend sufficient time practicing on these simulator accounts before you start investing your hard earned money.

2. Read good books on trading and investment

Online tutorials and video lessons on the internet are helpful. However, none of these resources can match the wealth of information that books provide. A good book can focus on one topic and make you really good at it. You can order two or three good books on stock trading in the beginning. Only when you are finished reading them, you should think of buying few more. As you continue to read books on market investments, fundamental analysis, technical analysis and other important topics, you'll also be in a better position to understand expert articles published on the internet.

3. Read online articles

You need to develop a habit of reading online articles on a regular basis. Instead of relying on one or two weekly financial magazines, you can go through multiple articles on famous publications online. Many online blogs and stock market journals provide complex information in a simple manner. You can even find articles that illustrate complex concepts in an easy way. It is one of the best ways to gather deeper knowledge on specific topics. For example, if you want to learn about day trading and its pros and cons, you can find all the information on the internet with great ease. Online articles may not provide comprehensive information like books but they do serve as easy and quick sources of information that you need immediately.

4. Find an expert who can guide you

If possible, you should try to find a mentor who can guide you. A mentor or teacher can be a friend, family member, office colleague or anyone else. Anyone who knows about fundamental trading concepts and has direct trading experience in the market can be a mentor. A good mentor is a person who can keep you in high spirits and teach you to make informed decisions under all circumstances. Nearly all successful investors have received some mentoring during their early days. A good mentor can really push you beyond limits that you've subconsciously created in your mind.

Tuesday, March 20, 2012

Learn Stock Trading Step by Step

Learning stock trading is not difficult if you are determined to work hard and learn every day. Below you will find a step by step guide to learn stock trading:

Step 1: Open a free simulator account

You can start learning stock trading by practicing on a simulator account in the beginning. A large number of brokers offer such accounts for free to their prospective customers. Without risking a single penny, you can test your trading fundamentals on these simulator accounts. The trading experience is not completely real until 'real money' is involved but it's still a good way to practice.

Step 2: Read books and articles

You need to learn trading fundamentals in order to become a successful investor. It is important that you learn to do fundamental as well as technical analysis on your own. Books and online articles can provide you with wealth of information on various topics related to stock market trading.

Step 3: Join forums where you can ask questions

A new investor should naturally feel an urge to ask dozens of fresh and new questions every day. Online forums are the best places where you can ask questions and get quick replies from both new and experienced investors. A large number of members on popular forums are willing to help novice investors.

Step 4: Find a guide

You need to find an experienced investor who can stand by your side. More than anything else, you need expert guidance from someone who has experienced stock trading. A guide can be a friend, professor, co-worker or even your family member.

Step 5: Keep up with the latest financial news

You need to start browsing popular financial news websites on a daily basis. It is important that you stay updated with all the latest news from around the globe. Google Finance and Yahoo Finance are two most popular portals that provide financial news. As you read financial news stories on these portals, you'll automatically begin to learn a large number of new terms and concepts.

Step 6: Get paid subscriptions

It is not bad idea to spend some money on important subscriptions. Paying few dollars every month for the much needed research and analysis is quite a good idea in fact. Many popular market-related publications can provide you with extremely useful information on current and past market trends. You'll not only learn from this expert information but also get useful tips on making fresh investments in the stock market. As you have to learn stock trading, you can always compare your trading decisions with expert opinions published in some esteemed publications.

Step 7: Watch Television

You need to develop a habit of watching financial news and related shows on the TV. This may sound like a crazy idea especially if you've been watching Discovery and Star Movies all the time. Since you want to be a successful investor, it is now time to watch CNBC for financial news every day. You do not have to start picking ideas from the day one. Just watch the TV and let commentators, interviews, journalists, experts etc. have their say on the television screen. Your mind will slowly begin to process the information on its own.

Friday, March 9, 2012

Everything You Need to Know About Stock Trading

Stock trading is an extremely lucrative field of investment. A lot of stock traders have earned substantial money with it. But what is it? This article will tell you all about the basics of stocks and share market.

It is actually the process of trading in stocks. If you are interested in it, hiring a stock broker to place and finish trades on your behalf is your best bet. A stock broker is someone who is going to trade for you, using your money.

Stock trading strategies

The stock market is a highly lucrative market with thousands of trades going on everyday. Different traders indulge in different types of strategies while trading stocks. Some of them are more effective than others. Some traders buy them at a cheap price and then wait for the prices to soar before selling them off, thereby gaining a profit. Other traders buy and sell them immediately without really bothering whether they are making any profits. Both strategies work at some level. For traders who wait for prices to soar after buying, face the risk of encountering losses as the prices may not rise but drop and stay that way for a long time. Traders who buy and sell within a short time period face the risk of not really profiting too much. It is up to you to choose a strategy you are comfortable with.

Basically there are two types of ways in which you can trade stock. One is floor trading and the other is electronic trading. Floor trading is the kind of trading in which there is a direct connection between the buyer and the seller. The later is the kind of trading in which everything is done electronically over the internet usually. The trading platform is responsible for linking the buyer and the seller.

Trading software

Stock trading software is an important part of the market. As the world goes increasingly digital, it is no doubt that the internet has made trading in this lucrative market easy. When you decide to trade in stocks and get a broker, you will be given trading software to trade with. There are many different types of trading software available in the market. Some of them are good and some of them are not so good. The great thing about the trading software available today is that they allow people to open a demo account where one can trade without using his own money. Such a demo account allows you to learn to trade effectively and understand the nuances of the stock market.

Tips to follow in the stock market

1. Choose the broker you will be working with after a good amount of consideration.

2. There is no point in not asking your broker about something you cannot understand. Feel free to ask questions.

3. In this kind of trading, it makes sense to start small. So don't put in too much of your money at the start.

4. Always ensure that you have a calm mind when you are trading.

Wednesday, March 7, 2012

Great Stock Tips for Everyone

Every day, thousands of new investors join various markets across the world. Some of these investors are trying to get rid of their boring jobs and few others are just trying to make some extra money. Only few people start investing in the stock market with a permanent goal of becoming a successful investor. Below you'll find a compilation of great stock trading and investment tips that come handy as you move forward -one step at a time:

1. A new investor should be mentally prepared to take some financial losses. When you begin to trade stocks in the market, there are no guarantees that you'll continue to make the right moves. Mental preparedness can help you to stay focused on the market and its indicators.

2. You need to learn about stop loss orders before you start investing your hard earned money in the stock market. You should be able to cut all your losses by not more than 8 percent below the price at which you purchased the shares under consideration.

3. Since you intend to become a successful stock market investor, you need to learn the art of persistence! Small failures on the way should come as lessons and not discouragements. In any case, you should continuously remind yourself of the fact that all successful big names in the stock market did not reach the zenith overnight. They've worked hard for years to reach that stage and you can do the same!

4. Do not let yourself assume that a single book or a month long stock trading training program will make you a great investor. You need have a humble opinion of yourself in the beginning. Aggression of any kind is not a great trait for an aspiring investor.

5. When take the first step, make sure you choose the right discount brokerage available or full service. A broker, if any, should be chosen with great care. Always choose a broker who has a proven track record. You can even speak with his or her past clients to be one hundred percent sure.

6. A novice stock market investor shouldn't open a margin account right in the beginning. Initially, you can get started with a cash account.

7. Don't assume that you need a big sum of money to learn stock trading. According to expert investors, you just need 500 or 1000 bucks to get started. Always remember the fact that experience is the biggest teacher and nothing else can beat that! What a novice investor needs is experience and not a big fat investment to start trading in the market.

8. A beginner in the market should stay clear of volatile investments of all kinds. Repeat failures in such volatile areas can lead to discouragement.

9. Getting emotionally involved with your stocks it the biggest blunder that you can make as an investor! It is important that you follow pre-determined buying and selling rules to avoid getting caught in your own waves of emotions.

Friday, March 2, 2012

A Quick Guide To Binary Options For Beginners

Most people have a general idea of what the word "investing" means, but it can often be confusing for beginners who are trying to learn more about different types of investing. It's not like you can just go to your local bank and say "hi, I want to invest." Well, you probably could, but that's probably not the best way to go about doing it, especially if your bank makes money on commissions.

When it comes to investing in the financial markets there are a few different options. The most common include:

Stocks - Stocks represent shares of ownership in a company. If the stock goes up after you buy it, you make money. If it goes down, you lose money.

Options - an option is a contract for the right and/or obligation, depending on the type of option, to buy or sell a certain amount of shares of a stock at a certain price at some point in the future.

Futures - a contract between two parties to buy or sell a specific asset in the future at a price agreed upon today.

Forex - trading one currency against another (for example, US dollars vs. British pounds, or Euros vs Japanese yen)

This article will take a look at a specific type of option: binary options.

Unlike standard options, binaries are much, much simpler.

Regular options involve complex formulas and values that change continually from the time you buy or sell the contract until the moment it expires. While it is possible to make a lot of money with options, it requires a lot of knowledge, strategy, and perhaps even a bit of luck.

Binaries, on the other hand, are much easier. A binary option is basically a bet that as of a specific time on a specific day, the price of the underlying stock will be either higher or lower than a certain price (called the "strike price"). If you bet correctly, you get paid. If not, you don't. The payout amount is determined beforehand.

With regular options, the value of the option will vary based on how high or low the price is above or below the strike price.

With binaries, you get paid the agreed upon amount whether price is $0.01 or $100 above the strike price.

So here's an example:

Say stock XYZ is trading at $49 per share and you think that by Friday it will be trading at over $50 per share, so you buy a binary option with a strike price of $50.
When Friday rolls around, stock XYZ is trading at $50.21 per share. You get paid whatever the agreed upon payment price was.

If, on the other hand, XYZ is trading at $49.99 or below on Friday, you do not get paid.

Monday, February 27, 2012

3 Financial Sector ETFs to Consider For Your Portfolio

The bankruptcies that led to the market collapse, which in turn led to bailouts - is known to all investors. Some believe that the sector is on mend but current statistics do not necessarily support this view. While the uncertainty to form a positive resolution to these several pending issues remain a drag on the sector, it is impossible to think of a growing economy without a firm financial sector. For that reason, it is always advised to maintain a decent exposure to the financial sector. In this article we suggest three financial sector exchange-traded funds (ETFs) that you may consider for investment.

PowerShares KBW High Dividend Yield Financial (KBWD) is based on the KBW Financial Sector Dividend Yield Index. Thereby the Fund generally invests at least 90% of its total assets in securities that comprise the Index. These securities are principally engaged in the business of providing financial services and products, including banking, insurance and diversified financial services. The Index is calculated using a divided yield weighted methodology that seeks to reflect the performance of approximately 24 to 40 of such publicly listed financial companies. As of June 11, 2012, the fund holds 36 securities, out of which 34 are from the financial sector, 1 from industrials sector and 1 investment company. The fund allocation is mainly towards small-cap value and mid-cap growth companies making for 59.14% and 32.49% of the fund respectively. In terms of yield, it is quite hard to beat KBWD. Charging 93 basis points a year in fees, it pays out an astounding 10.44% in trailing twelve-month yield, which is by far the highest in the category. However, the fund is mainly focused on U.S. securities and thereby it is not the most diversified from geographic viewpoint.

PowerShares Financial Preferred (PGF) is a fund based on the Wells Fargo Hybrid and Preferred Securities Financial Index (WHPSF Financial Index). The fund generally invests at least 90% of its total assets in preferred securities of the reference Index. As of June 11, 2012, the fund comprises of 50 such preferred securities - mainly large-cap value stocks. In terms of performance, it has a trailing twelve-month yield of 6.96% and has returned 12.00% on YTD basis. Designed to track the performance of American securities, the fund, like KBWD, is non-diversified from a geographic viewpoint. From an individual holding perspective, HSBC Holdings Plc Pfd, Bank of America Corp Pfd and ING Groep NV Pfd are the top three fund holders, combining to make up about 20.86% of the total assets in PGF.

iShares MSCI Emerging Markets Financials Sector Index Fund (EMFN) is based on the MSCI Emerging Market Financials Index. The exchange traded fund generally invests at least 90% of its assets in securities of the Index and in depositary receipts representing securities of the underlying index. As of 6/11/2012, the fund holds 99 securities. Banks, real estate, diversified financials and insurance companies form 73.97%, 8.59%, 8.49% and 7.92% of the fund respectively and thereby are the four main constituents. It charges investors 67 basis points a year for its service and has a noteworthy trailing twelve-month yield of 6.20%. The yield level should pacify those who are put-off by the fund's relatively high volatility and beta value. The fund allocation is mainly a blend of large-cap value and large cap growth securities, and thereby can be more volatile than the traditional financial EFTs. EMFN forms an attractive pick for investors seeking a high yield opportunity with room to grow over the years.

The list does not include the some of the ultra popular financial sector ETFs such as Financial Select Sector SPDR (XLF) or Dow Jones U.S. Financial Services Fund (IYG) or RevenueShares Financials Sector Fund (RWW), as they are still paying out paltry sums compared to ones mentioned above. Our goal is to help investors wade through the many competing ETF offering available and give them a more manageable list of issues from which to choose from. The article, thereby, underlines and presents three financial sector ETFs, those having strong growth prospects, for you to consider.

Friday, February 24, 2012

What Is a Penny Stock?

Many of us have heard of penny stocks, but what actually is one?

Well, there isn't actually a complete definition of what a penny stock is and the meaning differs by some individuals or organizations.

The Securities and Exchange Commission (SEC) defines the term to be stocks trading for less than $5 per share and regards them high-risk and speculative.

Some set the cut-off level at $3, while others consider only stocks that trade under $1 to be one. It all depends who you are dealing with!

So, lets take a look at a few elements of what some may determine as a one..

Price Per Share

Some consider stocks that trade below $5 per share to be a penny stock and some others consider stocks that trade below $1 to be one.

Exchange Stocks Trade Upon

Stocks trade on a variety of exchanges, such as NASDAQ, NYSE, AMEX, OTC (Over-the-Counter), and Pink Sheets.

Some consider stocks that trade only on the OTC (Over-the-Counter) or the Pink Sheets to be penny stocks. Despite the fact that most stocks might trade for under $1 per share on the OTC or the Pink Sheets, there are also some that trade higher than that. For example there are some that trade above $5 per share or more on the OTC or Pink Sheets markets.

Market Cap

Some consider any company beneath a certain market cap, such as a market cap under $50 million as a penny stock. But, a stock that has a market cap under $50 million may not be trading under $5 per share, some maybe trading much higher than that.

Sure, there are plenty of stocks that trade under $5 per share with a market cap under $50 million.

But, there might also be a stock that trades over $5 per share with a market cap under $50 million that maybe poised for massive growth. There might also be a stock with a market cap of $2 billion that trades for $.90 per share.

As you can see it is a bit difficult of putting an absolute definition of what a penny stock actually is.

For me I consider penny stocks to be shares that trade below $5 per share and must be under a certain market cap. But, that doesn't mean I just look for opportunities for stocks trading under $5 per share, I also look for stocks that may trade above that and are ready for massive growth.

I typically look for companies of the highest quality that are small or micro cap companies. These trade between 0.01 to $5 per share and trade on the NASDAQ, NYSE, AMEX, OTCBB (Over the Counter Bulletin Board), and Pink Sheets.

Visit my website for more information on penny stocks. Also, don't forget to signup for my FREE Penny Stock Newsletter to get my latest picks.

Tuesday, February 21, 2012

Why Is The Indian Rupee Depreciating Against The US Dollar?

India is not only the second largest country in the world, but also the second fastest growing economy. India has become the hub of many foreign and international brands, which set up their regional headquarters in India.

But despite the various transitions that the Indian economy is undergoing, the Indian rupee seems to be deflating in comparison to the US Dollar.

What is the actual reason behind this?

When the world experienced one of the greatest recessions, India bore the economic storm and stood robustly with a growth in all sectors that impressed its GDP.

As per the CIA Fact book, India had a GDP of 237 trillion US$ in 2008. An Achievement of 6.6% GDP growth.

The per capita income of India is estimated at 4,542 US $ in the context of Purchasing Power Parity.

The ministry of finance data shows Indian export growth by 7.3% in dollar terms during April-February 2008-2009. The unemployment rate stood at 6.8% in 2009 against the 7.2% in 2007 with an inflation rate of 7.8%.

Though the Indian economy has been stable and reliable in recent times, the last few years have experienced a positive upward growth trend which has consistently produced 8-9% annual growth rate which has been supported by a huge inflow of foreign funds.

The growing reserves in the foreign exchange sector, both an IT and real estate boom, a thriving capital market all have made their contribution to India's GDP growth.

Based on the statistics which were provided from the department of state, there is a huge and growing population of middle class Indians numbering more than 50 million. Indians with disposable income ranging from 200, 000 to 1000, 000 rupees per year increased when the US dollar weakened a little in the last two years.

The Indian Rupee grew steadily and appreciated vis-à-vis US dollar with 0.020837 USD equal to 1 Indian Rupee (

So, when the RBI started sucking out the excess liquidity flow from the system, which was caused due to huge capital dollar inflows, they are now compelled to reverse their stance and infuse liquidity back into the system. Therefore previously where the CRR was hiked, the RBI reduced the CRR, repo rate and decided to adopt an increase in the reverse repo rate. Since there is a shortage of money supply in the system, the credit has reduced in the market, thus devaluing the Indian rupee in comparison.

Thursday, February 16, 2012

The Top 3 Reasons to Open Your Stock Brokerage Account NOW!

We are approaching one of those pivotal moments in our nation's economic history where fortunes will be made by many people.

There are many great stories about famous stock traders. With few exceptions, most of them made their fortunes from recognizing the right time to buy!

We will soon see severe volatility in the stock markets. Historically, during periods of volatile stock prices, there have been extraordinary "buying opportunities." Buying at the right time can mean multiplying your cash by ten times or more.

Many who have been "thinking-about-it" for years, have procrastinated opening their stock brokerage account while watching opportunity after opportunity go by.

Don't let this opportunity pass you by.

When stock prices plummet, you have to be ready to act!

#1 A stock brokerage account gives you access to opportunities.

Access to opportunities simply means that you have everything in place to take advantage of a buying opportunity when it arrives. Without a stock brokerage account, you cannot buy stocks. By opening your account and depositing some cash, you will be ready to act when the time is right.

#2 You will gain a new perspective on the definition of "wealth" and a better understanding of money-management.

You will realize that most of us have accumulated many common misconceptions about money and finance. Most new stock traders soon understand that making money this way is a learned set of skill-sets. It's not rocket-science. It's easy to learn. Also, it's comforting to know that you can withdraw your cash balance at any time.

#3 You will both broaden and deepen your education.

In today's world, it is wise to focus our education on a specific area so that we can excel at a particular profession or corporate career.

A negative side-effect, however, is a lack of breadth and depth in other areas of our education. If money-management is one of those areas in which you are weak, you will strengthen your knowledge of economics and financial matters when you begin trading stocks.

With a stock brokerage account, you will immediately experience a desire to "pay attention" to the economy and the performance of companies that you now "own."

There are countless numbers of "stay-at-home-moms" who "play the market" each day and have developed acute business judgment because of their new-found interest in making money by stock trading.

If you own only a few shares of stock in Disney, for example, you're one of the owners. You will want to pay attention to their operations and profits. Your financial education and money-management skills will grow.

It will not be a "chore." It will be a purpose-driven interest. You will find it to be exciting!

Try to imagine how different your life will be if you successfully double or triple your savings in a matter of months. Better yet, be specific and picture turning $1,000 into 3 or 4 thousand in 6 months. Then, consider the results of doubling that each year. This really has happened to stock traders who buy at the right time.

Again, we are approaching the right time to buy!

Think of some of the obstacles that you have already overcome. How long did it take you to get around to cleaning out and organizing your closet or garage? Shop around for online discount brokerage firms and you will soon learn that opening your stock brokerage account is a step toward prosperity that is simpler and easier than either of those two chores.

Tuesday, February 14, 2012

What You Need to Know About Open Interest

The term open interest means an entire count of all option contracts that might be valid in the forms of stock, expiration, and even the strike price. The more open interests there are, the better. This means that there is more to the value and there are more liquid assets available to the said interest.

Sometimes a trade presents itself when a dividend increase has just been announced. Often that can be a good time to buy shares and then sell an in the money call option against those shares. The newly increased dividend will act as a floor on the stock most of the time, and it may take a few days for analysts to issue upgrades now that the stock pays a higher yield. In addition, if you set the expiration date of the option you sell to something after the ex-dividend date then you will receive the dividend in addition to the call premium.

The only gotcha here is early exercise. If the ex-dividend date is very near the option expiration date then when that day comes around it is possible the option holder will exercise in order to capture the dividend. This typically only happens when the amount of time premium remaining in the option is very small (or zero). The option holder will forfeit any remaining time premium when he exercises.

While this might all seem confusing, the one thing to keep in mind is that you don't want to put all of your eggs into one basket. You need to think outside the box, make sure that you know what all of your options are, and then choose which open interest opportunities you might want to take advantage of. Don't be shy because that will never get you anywhere. You are going to have to make some moves if you want them to pay off in the long run for you. Time is money and the time is now.

Finding a reliable option screener on the Internet can be a challenge too, but it is not impossible. This is extremely important to remember because you can't simply have given up on it all. Some people just feel so lucky because they came across some excellent resources that told them everything that they needed to know about the topic. Once this light was shed on them, they were then able to find better solutions such as an online option screener. Some still have problems finding investments they need once in a while, but for the most part being able to handle call covers is becoming easier as time goes on. There is no reason to worry about how you are going to go about getting the job done as long as you have the right resources on your side.

Tuesday, January 17, 2012

Bear Market Recovery and Replacing Stock Laggards

When the recovery begins after a bear market, try to identify lagging stocks. Replacing stock laggards is extremely important because there has likely been a paradigm shift in market "psychology." For one reason or another, you never sold when the sell signals were generated. You held your stocks throughout the bear market. When the market begins to recover, then, it would be to your advantage to screen for under-performers. Regardless of how wonderful a company is, the fundamental paradigm shift in market psychology that is common after a bear market can cause a stock to be ignored for an extremely long time. It is at times like this that we are often called upon to make uncomfortable decisions. For example, if we have a perfectly good stock that is going to be out of favor for three months, six months, or a year, do we hold on or do we switch while ours "takes a long nap?" The normal reaction to this question is "I'll hold on because I do not want to realize a loss." However, it's not as simple as that. Suppose the stock doesn't do much for a year, or even declines further, increasing your losses. The very best companies can have bad news, even after surviving a bear market. You could end up having to hold a stock for five years just to break even. The company may still be a great company, but its stock may not be particularly desirable in this market environment (after all, the market has just changed its psychology). Within the context of the new market psychology, another stock might be much more likely to recoup losses than the stock through which those losses occurred.

After a severe market decline, it takes time for the dust to settle and for indications to become apparent. Jumping prematurely one way or the other can be a very big mistake. With the passage of a few months, patterns begin to emerge. I think of it as analogous to a sea-storm. When the water is churning and being whipped by the wind, it is sometimes difficult to discern tides and currents. Once the storm subsides and the waters calm down, those tides and currents become more discernable. That is when it becomes possible to make use of those currents in plotting a course.

This is the time to watch sector recovery patterns. Each stock in your portfolio belongs to a sector or industry. Identify the sectors and industries represented by all your positions. For a comparative analysis, you can use sector ETFs or traditional sector mutual funds (we track a wide variety of ETFs, and Fidelity has a number of "Select" sector funds). Simply monitor the sectors and industries to which your stocks belong. Compare the charts of your stocks with those of their respective sectors. Look at the slope of the 50-day moving average for each position and sector. If the sectors to which your stocks belong are laggards relative to other sectors during the recovery after a bear market, then there has probably been a paradigm shift (assuming that your stocks were among the best performers before the bear market). Are any of your stocks moving sideways while their own sectors are rising? If so, those stocks are sell candidates. Is the angle of ascent of the 50-day moving average of any of your stock sectors less than that of the market's index? If so, the stocks you have in those lagging sectors will probably lag the market. Any stocks you have in lagging sectors are sell candidates, and they are especially so if the stocks are also lagging their own sector or industry.

For example, a paradigm shift in the psychology of the market may result in a change in perspective regarding value as opposed to growth. This can result in a lessening of buying demand for certain technology securities. Investors may become very cautious about buying stocks that have the relatively high PE-ratios so common with technology stocks. The exact nature of such a paradigm shift often does not become clear for a few months after the decline has taken place and it becomes evident where the strong areas are. We know of some traders who monitor an extensive list of ETFs (sectors, industries, investment styles, and indexes) and their strength rank relative to each other in order to keep on top of such paradigm shifts. However, they use a far more complex measurement of strength than the Relative Strength Index (RSI). They look for consistency in strength rather than a simple snapshot measurement based on 14 days. You could do something similar by taking three RSI measurements over three separate time periods and then combine the results. Then, you could rank the totals for all the stocks that you are monitoring.

Growth stocks often achieve a high PE-ratio relative to value stocks. The PE-ratio is the price of a share divided by the earnings per share, or the price investors are paying for each dollar of earnings generated by the company. Growth stocks may even continue to increase an already high PE-ratio over a period of several additional years. Thus, the fact that a growth stock has a PE-ratio of 50 does not mean it cannot go much higher. The PE-ratio goes up when the price of a share goes up. A stock with a PE-ratio of 50 could still double, resulting in a PE-ratio of 100.

When the PE-ratio of a stock keeps climbing, it may be because investors anticipate accelerated earnings far beyond present the level. That is, the PEG ratio may still be low even though the PE-ratio is high. However, other factors could also be in play. For example, it may be because investors think the price per sales or the price per sales growth rate is more important than earnings and these measurements far outstrip earnings or earnings growth. Alternatively, it may be because investors anticipate that a new product, service, or some technological breakthrough is going to change the way a stock is valued. That is, because investors may be looking at something other than present earnings, the price of a stock can go much higher than we might be able to justify on the basis of present earnings alone.

After the market "crashed" in March/April of 2000, a recovery period began in which investors, whether right or wrong, were reticent to invest in some of the stocks that were very popular (and moving up very strongly) just before the crash. There developed a new emphasis on buying stocks that were under-valued. That did not necessarily mean "value investing" was a better choice than "growth investing." However, it did mean that a portion of the money flow began to be diverted to alternative areas in the market rather than returning to where it was before the crash. Some of the strongest stocks before the crash did get the share of money flow one would expect, but some others did not. When investor sentiment changed, investment capital began to be dispersed somewhat differently than before the crash.

The objective, then, is to determine which of your investments are likely to be left behind in the new market environment. Ask yourself whether replacing any stocks with other stocks might improve portfolio performance. Ignore "iffy" alternatives, where the prospects for a replacement stock are just as vague as the prospects for a current position. However, prudence does dictate that you at least consider opportunities that could improve performance in the new environment.

Of course you would not sell a stock if it is simply below your purchase price but recovering faster than the market as a whole. You might even conceivably decide that the best course is to hold all positions. However, tactically, it would be an error to stay in a bad situation just because of the pain you would incur (realizing a loss) by extricating yourself from a losing position. In reviewing the methodologies of the greatest investors of the last 100 years, I have become aware of one trait that is an almost universal characteristic. They had the necessary grit to close out a position even though they believed in it and even though it meant taking a substantial loss. In doing so, they set the stage for recovering the loss and then moving ahead. Some of these top investors have even said that it wasn't until they learned to do this that they changed from being losers to being winners as investors.

Monday, January 16, 2012

Risk Control Through Selling and Diversification

It is better to sell with a small loss than with a big one. Diversification is one of the means by which an investor can minimize a losing position's negative impact on a portfolio. The inconvenience of tracking a diversified portfolio is preferable to watching a non-diversified portfolio's value melt away. A comprehensive risk control strategy is based on individual position size relative to the whole portfolio, limiting the amount of decline permitted, and maintaining a ready supply of candidate replacement stocks that are more likely to rise than decline. The last of these is important because weak stocks are riskier than strong stocks, and it is natural for an investor to have internal resistance to selling a weak stock at a loss. The availability of alternative stocks likely to rise soon eases that resistance, and selling weak or declining stocks is an important part of a good risk control strategy. Monitoring a watch list for promising setups can provide investment alternatives and make it easier to reduce risk exposure by replacing weak stocks with strong stocks.

When the market is volatile, "loss control" is vital. Suppose, for example, that a portfolio incurs a loss of 15%. To break even, it would have to gain about 17.5%. Such a gain may not be that difficult. However, a loss of 50% requires a gain of 100% to break even. It is okay to allow a stock to drop 20% before selling if the stock represents only a small part of a portfolio. However, when position size is large (when the stock represents a relatively large part of a portfolio), losses must be kept under much tighter control. An investor cannot know in advance the extent of any stock decline. He does know for sure, however, that he must act before the loss becomes too great. At some point, he must sell even if he believes in the stock and thinks it may reverse at any moment. That is the part of risk control that takes discipline.

Let's assume you have a profit and that the stock is no longer advancing (it's going sideways). You have a "watch list" and you notice that there are several stocks that have attractive "setups." By definition, a "setup" gives a much higher probability that a stock will move in an anticipated direction. Now the question becomes, "should you sell and buy a stock that has a good setup or should you stay put?" Why sell? The stock may be topping out and preparing to decline, it may continue sideways for months, or it may be consolidating in preparation for another ascent to higher price levels. You do not really know what it will do next. If there is a pattern of increasing volume when the stock rises and decreasing volume when it declines, you may infer that when it breaks out of its trading range it is more likely to do so on the upside. However, in the absence of such clues, the gain you have achieved is at greater risk than when the stock was climbing. If you don't sell, you may lose part or all of your profit. Alternatively, the stock could remain in a trading range for 6 months. Either way, your prospects would seem to be improved by a switch out of the position to something that is more promising. Having your money in a stock that is going up is preferable to having it in a stock that is going sideways or down. If, after you sell the stock, you see it break through the upper boundary of its trading range, that event would be a "trigger event" calling for a repurchase of that stock. Under those conditions, risk would be much less, and the stock would have signaled its "intent" to go higher.

Assume that instead of a gain you have a loss of 15%. For a relatively large position, it is unwise to let a stock drop much more than this before taking action. You can still be pretty confident that you will be able to gain back the loss and more. However, if the stock slips further, damage can increase to an almost unrecoverable level (it's a process of stealthy or "creeping" decline in which things look fine; then, before you know it, the stock is down another point). Eventually, a small loss becomes a major loss. It is possible to recover from a major loss, but it is not easy. It is better, by far, to limit loss in the first place rather than to have to repair damages incurred by ignoring an obvious need to act. This is where a "watch list" can be a big help and enable you to get a significant boost in performance. Expert traders always have a "watch list." You can profit by following their example. Monitoring such a list will make you aware of stocks that are in a "setup" configuration that promises a price surge soon. Thus, money could be shifted from a stock that is stalling to one of these when an appropriate "trigger event" occurs.

Another tool of use in controlling risk is diversification. Many people like to limit their portfolios to as few as 5 stocks. They just want to keep things simple. However, increasing diversification will reduce the significance of any future downturn in any single stock. For example, if a stock represents 40% of your portfolio and it drops 30%, your portfolio will lose 12% of its value. Though this might be a manageable loss, you could not tolerate many repeats. On the other hand, if the stock is only one of 15 equally weighted stocks (and therefore represents little more than 6% of your portfolio), the same drop will cost the portfolio less than 2%. Thus, you have more "wiggle room" when dealing with a declining stock. Of course, the "stops" described here are based on the assumption that there is an even distribution of assets among your different portfolio positions. If this is not the case, the amount of decline that can be tolerated for a stock will be determined by the amount of assets that are concentrated in that particular stock.

Also, even top portfolio managers who usually let stocks drop 10% to 20% will sometimes "pull the plug" after only a 7% loss or less. They do this at times when stock behavior patterns can be defined sharply enough that breakdowns are very evident. An investor can tolerate twice as many 7% losses as 15% losses. What does this mean? It means that when the market becomes very expensive and stocks are more likely to break down, professional managers will tend to tighten their stops. That is, they will tend to sell more quickly because waiting for a stock to recover from a major sell-off becomes increasingly risky under these conditions. Stocks can work their way down slowly (but sometimes quickly) 50% or more and then stay there for several years. If this happens, the opportunity loss, to say nothing of the drop in value, can be staggering. In short, investment style, time horizon (short-term traders vs. long-term investors), market conditions, portfolio weighting considerations, and the volatility of the particular stocks that are in the portfolio all can have a bearing on the amount of loss that can be tolerated.

The important point is the need for some discipline in maintaining damage control. The value of your portfolio must be protected when stocks are in decline. Letting money become relatively dormant for six months is not good stewardship either. The market has many opportunities for growth. It is far better to abandon non-performing positions to take advantage of such opportunities when they occur, than to leave assets in a state of dormancy or heightened risk. Increasing volatility also suggests the need for more diversification. Spreading assets among more positions enables you to weather greater declines in individual stocks with less damage to your portfolio.

Sunday, January 8, 2012

The Best Stock Trading Site

The best stock trading sites typically have a forum or community where usable techniques are shared. There, in these forums, you'll find leaders, mentors and experienced traders who are willing to share their experience with you. This is where you can establish relationships with real people who are interested in the same, or similar aspects of trading as you.

These sites are educational, and offer reviews of affordable courses that are relevant to where you're up to in your journey as a stock trader. You can leverage that community and ask them what courses they've attended, purchased or are currently doing. Gaining feedback on theses educational sources will be instrumental in your own, very personalized, trader education program.

The Best stock trading sites review not just programs, but software, books, tools and seminars, famous traders, current market events and some can keep you abreast of changes in the trading rules. Think of these sites as an active learning forum. They engage people just like you to bring together ideas, experiences, and solutions for people who are either starting out as traders, or are well established and need to take the next steps.

Studying graphs, trends, economic policies and conditions is what most authors for these sites do. That's their profession and some of the better writers have been analyzing markets for many years. The most important aspect to finding the best stock trading site for you is to ensure that the writers for the site are speaking your language. Make sure that the way they write is in a syntax and language you can understand. Many fall into the trap of "technical jargon" and tend to appeal to sophisticated or professional traders only. Find the one which talks to you. I personally recommend a free newsletter from an Australian publisher called "Morning Money".

Some newsletters and sites will charge you for their content simply because of their specialist expertise. Most of these will offer a free sample to try and get you hooked. If you find one that you feel is worth investing in, in addition to an online course,simply ensure you can pay by the month and cancel anytime if you start to feel it's not the right content for you. Remember, these subscriptions are in addition to an ongoing structured education in trading.

Many of the best stock trading sites are generalist in nature. The best sites probably won't provide "hot tips". Some will recommend certain stocks based on significant research and forecasting calculations, as presented by an expert author. Always remember that all recommendations from outside sources need to be assessed against your own goals, strategies, your risk profile and understanding of the trade itself. If you think what a newsletter or site is recommending is a good buy, always do your own research and ensure you run it past your mentor, then check it against what you've learned from your online course. No one can protect you from your own decisions.

Finding the best stock trading site is a personal journey. What's good for one person isn't necessarily good for another. No matter what site you choose, if you find it's of value to you beyond all the others you've seen, then that's probably the best one for you. Whilst the sites are interesting and most provide excellent content, none will replace the need for studying a structured, reputable course. Many sites will provide you with excellent resources, and excellent learning opportunities also. You'll gain significant value in joining a community and sharing your experiences. The more you learn, the more you have to apply in your trades, and the more successful you'll be.

If you've watched your retirement savings take a dive, your job "security" go out the window, and your way of life look as though it's threatened, then it's time you took some action.
Many of us are facing the same problems and struggling to make ends meet month after month.
The best investment you can make is in yourself. Only you can change this, and there's plenty of help to get you there. Learning how to trade shares is a sure fire way to generate a consistent income, no matter what the market conditions are.

Thursday, January 5, 2012

Should a Corporation Be Able to Claw Back Executive Compensation If the Stock Crashes Due to Market

Due to the political rhetoric of class warfare it seems as if the public doesn't want executives to earn big bonuses and high salaries. Many in Washington DC, especially the politicians that are socialist leaning want to curb these excess bonuses and payments to the boards of directors, and executive management. Still, most of those in the corporate world and investment world believe that it should be up to the shareholders to decide. Okay so let's talk about this shall we?

It is amazing when shareholders are asked to vote, they will often approve big bonuses, huge stock options, and higher salaries for executives that increase the stock price in any given quarter or year. The shareholders could be said to be greedy, but they own the company, and who is to debate that? They own the company, and they should decide how much the corporate executives are paid, not politicians in Washington DC, or the 99% who are occupying the park who don't actually own any stock in the company. You see my point?

Another interesting issue of contention is that often when the market is in full swing, in a bull market, many of these corporations make hand-over-fist in quarterly profits, and the stock price rises dramatically, even though the executives running the company had very little to do with it. During these periods the executives also get bonuses, often bonuses they do not deserve.

Incidentally, it is common for minority shareholders to file class-action lawsuits requesting to claw back the bonuses from executives after the market falls, the profits collapse, or the economy tanks. Should a Corporation be able to claw back executive compensation if the stock market crashes? It doesn't seem realistically fair to do so, but then again it isn't really fair to overpay and get huge bonuses to executives that had nothing to do with the increase of stock price during a bull market either.

Now then, whose fault is all this anyway? It seems to me that it's everyone's fault, but more so it is a snapshot of our society looking for short-term gain over long term value, profitability, and growth. Executives should not be rewarded for something they didn't do, nor penalized for something that isn't their fault. Nevertheless, they should see the road signs ahead, the writing on the wall, and position the company in a safer realm prior to the downturns, just as they should to make hay on the upswing.

Tuesday, January 3, 2012

Make Money With Dry Bulk Shipping Stocks

The Baltic Exchange's main Sea Freight Index, has recently been on the rise again. The Index in general, gauges the cost of commodities such as iron ore, coal, cement, fertilizer and grains, etc. Ships within the Sea Freight Index, are usually broken down into four different freight capacity sizes, Handysize, Supramax, Panamax and Capesize. With the Handysize having the smallest capacity freight size, and the Capesize having the largest.

Since the start of the economic crisis, the Dry Bulk Shipping Industry has been hard hit on all fronts. With the drop in worldwide demand for dry bulk goods, together with a glut of over-ordered ships from when times were better, the Dry Bulk Shipping Industry has been left out to sea without a paddle. Previous to the crisis, dry bulk freight rates were at all time highs, sharply dropping off when the crisis started, and hitting rock bottom about 12 months ago.

The value of these shipping companies has therefore plummeted to lows of where if their ships were sold for scrap, they would actually command a higher value than their present day stock valuations. Most of these companies stock valuations, are now floating around the 20% mark from where they were before the crisis started. Previous $16.00 dollar stocks can now be picked up for around $3.00 dollars each or less, making them considerably cheap in today's market.

However, now may be the right time to start thinking about investing in these beaten down shipping stocks, as the tide seems to be on the change once again. After several years of sluggish demand for dry bulk goods, demand from countries such as, China, India, Brazil and Vietnam, seems to be on the move once again. Considered future world economic growth leaders, this small group of countries may be just what the Dry Bulk Shipping Industry needs.

As demand for dry bulk goods rises again, the previous glut of unemployed ships will once again find active employment. This will in turn start to drive up dry bulk shipping freight rates, and help these loss making companies become profitable again. Once this happens, many shipping stocks that previously paid out dividends, and were forced to either cut them, or stop paying them out all together, will begin to reinstate them.

These sunken shipping stocks will become buoyant once again, as more and more investors become attracted to them. This in turn, will push up their stock values to near pre-crisis levels, making investing in Dry Shipping Stocks today, an excellent way of riding out the crisis, and shipping in a tidy little profit.