1. Buy low-sell high . As simple as this concept appears to be , the vast majority of investors do exact opposite of it . Your ability to consistently buy low and sell high , will determine the success , or failure , of your investments . Your rate of return is determined 100% by when you enter the stock market .
2. The stock market is always right and price is the only reality trading . If you want to make money in any market , you need to mirror what market is doing . If the market is going down and you are long , the market is right and you are wrong . If the stock market is going up and you are short , the market is right and you are wrong .
3. Every market or stock that goes up will go down and most market or stocks that have gone down , will go up . The more extreme the move up or down, the more extreme the movement in the opposite direction once the trend changes . This is also known as “ the trend always changes rule .”
4. If you are looking for “ reasons “ that stocks or markets make large directional moves , you will probably never known for certain . Since we are dealing with perception of markets not-necessarily reality , you are wasting your time looking for the many reasons markets move .
A huge mistake most investors make is assuming that stock markets are rational or that they are capable of ascertaining why markets do anything . To make a profit market trading , it is only necessary to know that markets are moving - –not why they are moving . Stock market winners only care about direction and duration , while market losers are obsessed with the whys .
5 Stock markets generally move in advance of news or supportive fundamentals – sometimes months in
Advance . If you wait to invest until it is totally clear to you why a stock or market is moving , you have to assume that others have done the same thing and you may be too late .
You need to get positioned before the largest directional trend moves takes place . The market reaction to good or bad news in a bull market will be positive more often than not . The market reaction to good or bad news in a bear market will be negative more often than not .
6. The trend is you friend . Since the trend is the basis of all your profits , we need long term trends to
make sizable money . The key is ti know when to get abroad a trend and stick with it for a long time
period to maximize your profits . Contrary to the short term perspective of most investors today, all the big money is made by catching large market moves – not by day trading or short term investing .
7. You must let your profits run and cut your losses quickly if you are to have any chance of being
successful . Trading discipline is not a sufficient condition to make money in the markets , but it is a
necessary condition . If you do not practice highly disciplined trading , you will not make money
over the long term . This is a stock trading “ system “ in itself .
8. The Efficient Market Hypothesis is fallacious and is actually a derivative of the perfect competition
Model of capitalism . The Efficient Market Hypothesis at root shares many of the same false premises as the perfect competition paradigm as described by a well known economist .
The perfect competition model is not based on anything that exists on this earth . Consistently profitable professional traders simply have better information – and they act on it . Most non professionals trade strictly on emotions , and lose much more money than they earn .
The combination of superior information for some investors and the usual panic as losses mount caused by buying high and selling low for others , creates inefficient markets.
9. Traditional technical and fundamental analysis alone may not enable you to consistently make money
In markets . Successful market timing is possible but not with the tools of analysis that most people employ .
If you eliminate optimization , data mining , subjectivism and other such statistical tricks and data manipulation , most trading ideas are losers .
10. Never trust the advice or ideas of the trading software vendors , stock trading system sellers , market commentators , financial analysts , brokers , newsletter publishers , trading authors , etc., unless they trade their own money and have traded successfully for years . Note those that have traded successfully over very long periods of time are very few in number . Keep in mind that Wall Street and other financial firms make money by selling you something – not instilling wisdom in you . You should make your own trading decisions based on a rational analysts of all the facts .
11. The worst thing an investor can do is take a large loss on their position or protfolio . Market timing can help advert this much too common experience . You can avoid making that huge mistake by avoiding buying things when they are high . It should be obvious that you should only buy when stocks are low and only sell when stocks are high . Since your starting point is critical in determining your total return , if you buy low , your long term investments results are irrefutably better than someone that bought high .
12. The most successful investing methods should take most individuals no more than four or five hours per week and , for the majority of us . only one or two hours per week with tittle to no stress involved
Hope these tips will prove helpful and you will make lot more in stock markets than you have already been making . The stock markets provide an excellent opportunity to diligent investors who are willing to spend time and effort on the stocks that they buy . Money is there to be made by people who are willing to spend time understanding the business model , risks faced and other nuances about the company that they are buying . Increasingly the investor is becoming more sophisticated and has stopped looking for hot tips and stories about stocks , which can double overnight .
Friday, January 30, 2009
Monday, January 26, 2009
Future Trading
The future trading is a business that gives you everything you have ever wanted from a business of your own . Many stock players label it as the world’s perfect business . It offers the potential for unlimited earnings and the real wealth . You could run at your own hours as well as continuing to do whatever you have been doing . You could operate the business entirely on your own , and could start with very little capital . You need not have any employees , so you seldom need the battery of attorneys , accountants or bookkeepers .It is interesting that you need not have problems of collection , for you seldom have any customers or any competition or advertisement fees . You do not need the office space , warehousing or a distribution system . All you need is a personal computer for transaction from anywhere in the world.
Futures Contract :
A futures contract is a standardized contract , traded on futures exchange to buy or sell a certain underlying instrument at a certain date in the future , at a specified rate . The future date is called delivery date or the final settlement date . The pre-set price is called as the futures price . The price of the underlying asset on the delivery date is called the settlement date .
A futures contract gives the holder the obligation to buy or sell , which differs from an option contract , giving the holder the right, but not the obligation . In other words , the owner of an options contract may or may not exercise the contract . The parties of a “ futures contract “ must fulfill the delivery on the settlement date .
The seller delivers the shares/commodity to the buyer , or , if it is a cash-settled future , as in case of stock futures . cash is transferred from the futures trader , who sustained a loss to the one who made a profit . To exit or close you position in an existing futures contract prior to the settlement date , the holder of the futures position has to offset his position either by selling a long position or buying back a short position , effectively closing out the futures position and its contract obligations . The futures contract is a standardized forward contract , which is an agreement between two parties to buy or sell an asset at a pre-agreed future point in time specified in the futures contract . Some key features of the futures contract are :
STANDARDIZATION :
A futures trading contract is highly standardized contract with the following details specified :
1. The underlying asset or instrument . This could be anything from a barrel of crude oil , a kilo of gold , or a specific stock or share .
2. The type of settlement , either cash settlement or the physical settlement . Most of stock futures are settled in the country by the cash .
3. The amount and the units of the underlying asset per contract . It could be the weight of a commodity like a kilo of gold , a fixed number of barrels of oil , units of foreign currency , quantity of shares , etc.
4. The currency in which the futures contact is quoted .
5. The grade of the deliverable . In this case of bonds , this specifies , which bonds could be delivered . This specifies not only the quality of the underlying goods but also the manner and the location of the delivery , in case of commodities .
How does the Future Trading work ?
There are two basic categories of futures participants : hedgers and speculators .
In general , hedgers use futures for protection against adverse future price movements in the underlying cash commodity . Take for instance , a major food processor , which cans corn . If corn prices go up , he must pay the farmer or the corn dealer more . For protection against higher corn prices , the processor could “ hedge “ his risk exposure by buying enough corn futures contracts to cover the amount of corn he expects to buy . Since cash and futures prices do tend to move in tandem , the futures position will be profit , if corn prices rise enough to offset cash corn losses .
Speculators are the second major group of futures players . These participants include the independent traders , and investors . For speculators , futures have important advantages over other investments :
If the trader’s judgement is good , he could make more money in the futures market faster , because futures prices tend , on an average , to change more quickly than the real estate or stock prices . On the other hand , bad trading judgement in the futures markets could cause greater losses than might be the case with the other investments .
Futures are highly leveraged investments . The trader puts up a small fraction of value of the underlying contract as margin , yet he could ride on the full value of the contract , as it moves up and down . The money he puts up is not a down payment on the underlying contract , but a performance bond . The actual value of the contract is only exchanged on those rate occasions when delivery takes place . Moreover, the futures investors is not charged interest on the difference between the margin and the full contract value .
Settling Futures Contract :
Futures contract are usually not settled with the physical delivery . The purchase or sale of an offsetting position could be used to settle an existing position , allowing the speculator or hedger to realize the profits or losses from the original contract . At this point , the margin balance is returned to the holder along with any additional gains , or the margin balance plus profit as a credit towards the holder’s loss . Cash settlement is used for contracts like stock or index futures that obviously cannot result in delivery .
The purpose of the delivery option to insure that the futures price and cash price of good coverage at the expiration date . If this were not true , the goods would be available at two different prices at the same time . Traders could then make a risk free profit by purchasing stocks in the market with the lower price and selling in the future market with higher price . That strategy is called arbitrage . It allows some traders to profit from very small differences in price at the time of expiration .
Risks of Futures Trading :
It is a good idea to take a long , sober look at the risks , before becoming excited about the substantial return possible from such trading . Reward and risks are always related . It is unrealistic to earn above-average investment returns without taking above-average risks as well . Most people are naturally risk averse . They dislike to big risks , especially financially risks . Perhaps you could relate to the point of view of humorist Will Rogers : “ I am not concerned about the return of my money as I am about the return of my money “ .
Futures trading had reputation of being highly risky endeavor . It is true that a high percentage of traders eventually lose money . Many people have lost substantial sums . However , its reputation is a highly risk-prone activity . Think of yourself walking in your favourite gambling casino . You decide to play roulette . The tble has a maximum of 5,000 limit on red , you should not be surprised if you immediately lost your 5,000 . On the other hand , if you made 5 bets , you could play for a long time and probably not lose very much at all
Futures trading resemble trade , where one who decides how to operate . He can make large bets or small ones too . One could trade futures carefully and risk as little as 1-2 percent of your trading capital on a single trade . You could trade a long time for this way and not lose your entire trading capital However , most people are not that much patient . The unfortunates who lose big are those who cannot control themselves . They take big risks and risk a large portion of their trading capital in an attempt to get rich quick .
Futures Contract :
A futures contract is a standardized contract , traded on futures exchange to buy or sell a certain underlying instrument at a certain date in the future , at a specified rate . The future date is called delivery date or the final settlement date . The pre-set price is called as the futures price . The price of the underlying asset on the delivery date is called the settlement date .
A futures contract gives the holder the obligation to buy or sell , which differs from an option contract , giving the holder the right, but not the obligation . In other words , the owner of an options contract may or may not exercise the contract . The parties of a “ futures contract “ must fulfill the delivery on the settlement date .
The seller delivers the shares/commodity to the buyer , or , if it is a cash-settled future , as in case of stock futures . cash is transferred from the futures trader , who sustained a loss to the one who made a profit . To exit or close you position in an existing futures contract prior to the settlement date , the holder of the futures position has to offset his position either by selling a long position or buying back a short position , effectively closing out the futures position and its contract obligations . The futures contract is a standardized forward contract , which is an agreement between two parties to buy or sell an asset at a pre-agreed future point in time specified in the futures contract . Some key features of the futures contract are :
STANDARDIZATION :
A futures trading contract is highly standardized contract with the following details specified :
1. The underlying asset or instrument . This could be anything from a barrel of crude oil , a kilo of gold , or a specific stock or share .
2. The type of settlement , either cash settlement or the physical settlement . Most of stock futures are settled in the country by the cash .
3. The amount and the units of the underlying asset per contract . It could be the weight of a commodity like a kilo of gold , a fixed number of barrels of oil , units of foreign currency , quantity of shares , etc.
4. The currency in which the futures contact is quoted .
5. The grade of the deliverable . In this case of bonds , this specifies , which bonds could be delivered . This specifies not only the quality of the underlying goods but also the manner and the location of the delivery , in case of commodities .
How does the Future Trading work ?
There are two basic categories of futures participants : hedgers and speculators .
In general , hedgers use futures for protection against adverse future price movements in the underlying cash commodity . Take for instance , a major food processor , which cans corn . If corn prices go up , he must pay the farmer or the corn dealer more . For protection against higher corn prices , the processor could “ hedge “ his risk exposure by buying enough corn futures contracts to cover the amount of corn he expects to buy . Since cash and futures prices do tend to move in tandem , the futures position will be profit , if corn prices rise enough to offset cash corn losses .
Speculators are the second major group of futures players . These participants include the independent traders , and investors . For speculators , futures have important advantages over other investments :
If the trader’s judgement is good , he could make more money in the futures market faster , because futures prices tend , on an average , to change more quickly than the real estate or stock prices . On the other hand , bad trading judgement in the futures markets could cause greater losses than might be the case with the other investments .
Futures are highly leveraged investments . The trader puts up a small fraction of value of the underlying contract as margin , yet he could ride on the full value of the contract , as it moves up and down . The money he puts up is not a down payment on the underlying contract , but a performance bond . The actual value of the contract is only exchanged on those rate occasions when delivery takes place . Moreover, the futures investors is not charged interest on the difference between the margin and the full contract value .
Settling Futures Contract :
Futures contract are usually not settled with the physical delivery . The purchase or sale of an offsetting position could be used to settle an existing position , allowing the speculator or hedger to realize the profits or losses from the original contract . At this point , the margin balance is returned to the holder along with any additional gains , or the margin balance plus profit as a credit towards the holder’s loss . Cash settlement is used for contracts like stock or index futures that obviously cannot result in delivery .
The purpose of the delivery option to insure that the futures price and cash price of good coverage at the expiration date . If this were not true , the goods would be available at two different prices at the same time . Traders could then make a risk free profit by purchasing stocks in the market with the lower price and selling in the future market with higher price . That strategy is called arbitrage . It allows some traders to profit from very small differences in price at the time of expiration .
Risks of Futures Trading :
It is a good idea to take a long , sober look at the risks , before becoming excited about the substantial return possible from such trading . Reward and risks are always related . It is unrealistic to earn above-average investment returns without taking above-average risks as well . Most people are naturally risk averse . They dislike to big risks , especially financially risks . Perhaps you could relate to the point of view of humorist Will Rogers : “ I am not concerned about the return of my money as I am about the return of my money “ .
Futures trading had reputation of being highly risky endeavor . It is true that a high percentage of traders eventually lose money . Many people have lost substantial sums . However , its reputation is a highly risk-prone activity . Think of yourself walking in your favourite gambling casino . You decide to play roulette . The tble has a maximum of 5,000 limit on red , you should not be surprised if you immediately lost your 5,000 . On the other hand , if you made 5 bets , you could play for a long time and probably not lose very much at all
Futures trading resemble trade , where one who decides how to operate . He can make large bets or small ones too . One could trade futures carefully and risk as little as 1-2 percent of your trading capital on a single trade . You could trade a long time for this way and not lose your entire trading capital However , most people are not that much patient . The unfortunates who lose big are those who cannot control themselves . They take big risks and risk a large portion of their trading capital in an attempt to get rich quick .
Wednesday, January 21, 2009
Day Trading
What is Day Trading ?
It is perfect for the short term intra-day trader , who would like to hold on to the position for a few minutes to a few hour with a view of square their position before the end of the day .
Day trading involves taking a position in the markets with a view of squaring that position before the end of that day .
A day trader typically trades several times a day looking for fractions of a point to a few points per trade , but who close out all their positions by day’s end .
The goal of a day trader is to capitalize on the price movement within one trading day .
Unlike investors , a day trader may hold positions for only a few seconds or minutes , and never overnight .
What Day Trading really means ?
The term “ day trading “ is a widely misused and misunderstood term . Real day trading means not holding on to your stock positions beyond the current trading day ; in other words , not holding any position overnight .. this is really the safest way to day trade , because you are not exposed to the potential losses that could occur , when the stock market is closed due to news that could affect the prices of your stocks . Unfortunately , many people who claim to be “ day trading “ hold stocks overnight because of fear or greed , thus setting themselves up for the catastrophic of their capital . With the fluctuation of trading currencies , the term “ day trading “ changes slightly . Since currencies could be traded 24-hours-a-day , there is no such thing as “ overnight “ trading . Thus you could have open positions for longer than a day with active stop losses that could be activated at any time .
Day trading could be subdivided into a number of styles , including :
Scalpers : This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes . The objectives is to earn a small profit share o0n each transaction while minimizing the risk .
Momentum Traders : This style of day trading involves identifying and trading stocks that are in a moving pattern during the day , in an attempt to buy such stocks at bottoms and sell at the tops .
Advantages of Day Trading
Zero Overnight Risk : Since positions are closed prior to the end of the trading day , new and events that effect next trading day’s opening prices do not effect your portfolio .
Increased Leverage : Day traders have a greater leverage on their trading capital because of the low margin requirements as their traders that are closed in the same market day . This increased leverage could increase your profits if used wisely .
Profit in any Market Direction : Day trading often will utilize short – selling trading to take advantage of declining stock prices . The ability to lock in profits even as market falls throughout the trading day is extremely useful during bear market conditions .
Day Trading Tips
Buy near Open Price : If possible try to buy shares below open price , or at the open price . Do not buy them if the price surges than open market price , wait for the price to come down near open price and then buy that stock .
Check Buying volumes : Before buying check out the buying and the selling quantity . The stock may go up if buying volume increases .
Check Derivative status : Check out the derivative of the stock that you wish to buy , if possible . If it if up with increasing buying volumes , you could immediately grab that share .Most of the time , it has been found that stock or share surges proportional to the derivative surge .
Wait for the target price to buy : For example , if buy is given at 150.5 , do not buy below this price , but at 150.5 price or slightly higher price . Share price may or may not go up above 150.5 for the given price , but not below the target price
Strictly maintain Stop loss : Maintain the given stop losses . This will help you to prevent from the huge loss . Suppose , for the moment , the stock what you bought falls drastically down , you may end up with the huge loss . So always maintain given stop loss .
Down wait for huge profit in single Stock : If you get some profit and notice its buoyancy then you have to sell your stock and come out of that trade . In this manner , you could earn small profit instead of loss then you could switch over to another trade and earn small profit . Likewise , if you keep earning couple of small profits in a single day , then your small profits will add up to huge profit amount in a single day . In day trading , you could forecast the move of the market using statistical tools . If you take a proper training on stock day trading , you could minimize the risk based on he mathematical analysis unlike the instincts working in any of the gambling games . Do not consider day trading as a tool to ‘get rich quick ‘ or ‘earn million overnight ‘ .
How to beat the Market Consistently ?
1. If you are new , always buy when market is up and sell when the market is down . You could do opposite but that is complicated . This had been the trading in the right decision .
2. You should consider it as business and ready to accept the loss . this means you should decide your selling price beforehand . If you achieve your desired profit , get out of the deal or if you make loss book the loss and prepare for the next step . Put control on your fear and greed .
3. Follow the age-old practice not to pull all the eggs in the same basket . Invest money in blue chip as well as mid cap with high momentum , this will reduce the heavy losses against high return .
4. Make an initial investment and always save some part of your profit as investment .
5. Loss is the part of any investment . Have a modest initial target to beat the market by 10 percent per annum . Try to be an average investor first .
It is perfect for the short term intra-day trader , who would like to hold on to the position for a few minutes to a few hour with a view of square their position before the end of the day .
Day trading involves taking a position in the markets with a view of squaring that position before the end of that day .
A day trader typically trades several times a day looking for fractions of a point to a few points per trade , but who close out all their positions by day’s end .
The goal of a day trader is to capitalize on the price movement within one trading day .
Unlike investors , a day trader may hold positions for only a few seconds or minutes , and never overnight .
What Day Trading really means ?
The term “ day trading “ is a widely misused and misunderstood term . Real day trading means not holding on to your stock positions beyond the current trading day ; in other words , not holding any position overnight .. this is really the safest way to day trade , because you are not exposed to the potential losses that could occur , when the stock market is closed due to news that could affect the prices of your stocks . Unfortunately , many people who claim to be “ day trading “ hold stocks overnight because of fear or greed , thus setting themselves up for the catastrophic of their capital . With the fluctuation of trading currencies , the term “ day trading “ changes slightly . Since currencies could be traded 24-hours-a-day , there is no such thing as “ overnight “ trading . Thus you could have open positions for longer than a day with active stop losses that could be activated at any time .
Day trading could be subdivided into a number of styles , including :
Scalpers : This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes . The objectives is to earn a small profit share o0n each transaction while minimizing the risk .
Momentum Traders : This style of day trading involves identifying and trading stocks that are in a moving pattern during the day , in an attempt to buy such stocks at bottoms and sell at the tops .
Advantages of Day Trading
Zero Overnight Risk : Since positions are closed prior to the end of the trading day , new and events that effect next trading day’s opening prices do not effect your portfolio .
Increased Leverage : Day traders have a greater leverage on their trading capital because of the low margin requirements as their traders that are closed in the same market day . This increased leverage could increase your profits if used wisely .
Profit in any Market Direction : Day trading often will utilize short – selling trading to take advantage of declining stock prices . The ability to lock in profits even as market falls throughout the trading day is extremely useful during bear market conditions .
Day Trading Tips
Buy near Open Price : If possible try to buy shares below open price , or at the open price . Do not buy them if the price surges than open market price , wait for the price to come down near open price and then buy that stock .
Check Buying volumes : Before buying check out the buying and the selling quantity . The stock may go up if buying volume increases .
Check Derivative status : Check out the derivative of the stock that you wish to buy , if possible . If it if up with increasing buying volumes , you could immediately grab that share .Most of the time , it has been found that stock or share surges proportional to the derivative surge .
Wait for the target price to buy : For example , if buy is given at 150.5 , do not buy below this price , but at 150.5 price or slightly higher price . Share price may or may not go up above 150.5 for the given price , but not below the target price
Strictly maintain Stop loss : Maintain the given stop losses . This will help you to prevent from the huge loss . Suppose , for the moment , the stock what you bought falls drastically down , you may end up with the huge loss . So always maintain given stop loss .
Down wait for huge profit in single Stock : If you get some profit and notice its buoyancy then you have to sell your stock and come out of that trade . In this manner , you could earn small profit instead of loss then you could switch over to another trade and earn small profit . Likewise , if you keep earning couple of small profits in a single day , then your small profits will add up to huge profit amount in a single day . In day trading , you could forecast the move of the market using statistical tools . If you take a proper training on stock day trading , you could minimize the risk based on he mathematical analysis unlike the instincts working in any of the gambling games . Do not consider day trading as a tool to ‘get rich quick ‘ or ‘earn million overnight ‘ .
How to beat the Market Consistently ?
1. If you are new , always buy when market is up and sell when the market is down . You could do opposite but that is complicated . This had been the trading in the right decision .
2. You should consider it as business and ready to accept the loss . this means you should decide your selling price beforehand . If you achieve your desired profit , get out of the deal or if you make loss book the loss and prepare for the next step . Put control on your fear and greed .
3. Follow the age-old practice not to pull all the eggs in the same basket . Invest money in blue chip as well as mid cap with high momentum , this will reduce the heavy losses against high return .
4. Make an initial investment and always save some part of your profit as investment .
5. Loss is the part of any investment . Have a modest initial target to beat the market by 10 percent per annum . Try to be an average investor first .
Sunday, January 18, 2009
Busines in Market
The stock market for beginners is a place to make some fast money . You sometimes hear how a stock went up two points , and say to yourself , if I had pulled the trigger on that one , I could have made a lot of money . Fast easy money can be made in the stock market . But slow and easy is the way to go , and if you start at an early age , a fast and easy retirement is a reality .
Beginners at the stock trading should learn all they can in order to succeed . You do not see a professional golfer pick up a club and become good at golf overnight . It takes time and knowledge to be good at anything in life . To start off , make sure you understand How the Stock Market Works . Start at the beginning and work your way up . You did not pick up a book one-day and start to read , first you learned the letters of the alphabet .
How you are going to Trade ? : Knowing this is going to let you know what you need to be reading to learn about it . Are you going to scalp , day trade , swing trade , or buy and hold for the long run . Scalping involves buying or selling a lot of shares in a stock , and you are just expecting a small move in the price . Day trading is close to scalping but you are expecting bigger moves in the price , and you do not hold the stock overnight . Swing trading is when you buy a stock and hold it for two days to two weeks looking for a big move in the price . Buy and hold is when you plan on holding to the stock for a long time . You believe the company is going to grow in value and the price is going to go much higher .
Next you will need to understand what fundamental analysis and technical analysis is :
Fundamental analysis relies economic information , such as the company’s financial situation , and quarterly earnings . This can take a lot of time regarding each company’s financial reports . Financial newspapers and magazines help you to sort out the problem . If you are going to be investing in the stock market , you should be reading this paper on a daily basis . Technical analysis is the study of the charts . The tool used for this is charting software . Charts show a stocks price movement , and with looking at the charts we can see everything we need to know about the stock , just by looking the chart .
Another important tool you are going to need is Stock Trading System . If you travel to place you have never been to before you do not just jump in the car and go . You look at the map , decide which way is going to be the best . The same is true with the stock market . Many beginners jump in without a plan of action , you have to have a plan , why and when you are going to make trade , when you are going to take your profits , and you must stay with your plan . Practice paper trading before you tart to trade to see how well you are doing . Once you are trading well on paper then it is time to open an account
Beginners at the stock trading should learn all they can in order to succeed . You do not see a professional golfer pick up a club and become good at golf overnight . It takes time and knowledge to be good at anything in life . To start off , make sure you understand How the Stock Market Works . Start at the beginning and work your way up . You did not pick up a book one-day and start to read , first you learned the letters of the alphabet .
How you are going to Trade ? : Knowing this is going to let you know what you need to be reading to learn about it . Are you going to scalp , day trade , swing trade , or buy and hold for the long run . Scalping involves buying or selling a lot of shares in a stock , and you are just expecting a small move in the price . Day trading is close to scalping but you are expecting bigger moves in the price , and you do not hold the stock overnight . Swing trading is when you buy a stock and hold it for two days to two weeks looking for a big move in the price . Buy and hold is when you plan on holding to the stock for a long time . You believe the company is going to grow in value and the price is going to go much higher .
Next you will need to understand what fundamental analysis and technical analysis is :
Fundamental analysis relies economic information , such as the company’s financial situation , and quarterly earnings . This can take a lot of time regarding each company’s financial reports . Financial newspapers and magazines help you to sort out the problem . If you are going to be investing in the stock market , you should be reading this paper on a daily basis . Technical analysis is the study of the charts . The tool used for this is charting software . Charts show a stocks price movement , and with looking at the charts we can see everything we need to know about the stock , just by looking the chart .
Another important tool you are going to need is Stock Trading System . If you travel to place you have never been to before you do not just jump in the car and go . You look at the map , decide which way is going to be the best . The same is true with the stock market . Many beginners jump in without a plan of action , you have to have a plan , why and when you are going to make trade , when you are going to take your profits , and you must stay with your plan . Practice paper trading before you tart to trade to see how well you are doing . Once you are trading well on paper then it is time to open an account
Saturday, January 17, 2009
Basic Rules - Future Trading
Follow the trends . This is probably some of the hardest advice for a trader to follow because the personality of the typical futures trader is not “ one of the crowd “ . The futures traders are highly individualistic ; the markets seem to attract those who are . Very simply , it takes a special kind of person , not “ one of the crowd “ to earn enough risk capital to get involved in the futures markets . So the typical trader and the typical broker must guard against their natural instincts to be highly individualistic . to buck the trend .
Know , why you are in the markets . To relieve boredom ? To hit it big ? When you could honestly reply , you may be on your way to successful futures trading .
Use a newsletter or system , and stick to it .
Apply money management techniques to your trading .
Do not overtrade .
Take a position only when you know where your target is where you go to get out if the market goes against you .
Trade with trends , rather than trying to pick the tops and the bottoms .
Avoiding trading in many markets with a little capital .
Avoid trading with volatile contracts .
Calculate the risk/reward ratio before putting a trade on , then guard against the risk of holding it too long .
Establish your trading plans before the market opening to eliminate the emotional reactions .
Decide on entry points , exit points , and objectives . Subject your decisions to only minor changes during the session . Profits are for those who act , not react . Do not change during the session , unless you have a very good reason .
Follow your plan . Once a position is established and stops are selected , do not get out unless the stop is reached , or the fundamental reason for taking the position changes .
Use technical signals to maintain discipline – the vast majority of traders are not emotionally equipped to say disciplined without some technical tools . Use discipline to eliminate impulse trading .
Have a disciplined , detailed trading plan for each trade ; i.e., entry , objective , exit , with no changes unless hard data changes . Disciplined money management means intelligent trading allocation and risk management . The overall objective is end-of-year bottom line , not each individual trade .
When you have successful a trade , fight the natural tendency to give some of it back .
Use a disciplined trade selection system … an organized , systematic process to eliminate impulse or emotional trading .
Trade with a plan – not with hope , greed , or fear . Plan where you will get in the market , plan how much you will risk on the trade , and plan where you will take the profits .
Cut losses short . Most importantly , cut your losses short , let your profits run . It sounds simple , but it is not . Let us look at the reasons that many traders have a hard time “ cutting losses short “. First , it is hard for any of us to admit that we have made a mistake . Let us say a position starts going against you , and all your “ good “ reasons for putting the position on are still here . You say to yourself , “ it is only a temporary set-back . After all the more the position goes against me , the better chance it has to come back – the odds will catch up . “ Also , the reasons for entering the trade are still there . By now you have lost quite a bit ; you sell yourself on giving it “ one more day “ . It is easy to convince yourself because on this time , you probably are not thinking very clearly about the position . Besides , you have lost so much already , what is a little more ? Panic sets in , and then comes the worst , the most devastating , the most fallacious reasoning of all , when you figure : “ That contract does not expire for a few months ; things are bound to turn around in the meantime . “
“ So it goes ; so cut the losses short . In fact , many experienced traders say if a position still goes against you on the second day in , get out . Cut those losses fast , before the losing position starts to infect you , before you “ fall in love “ with it . The easiest way is to inscribe across the front of your brain , “ Cut my losses fast .” Use stop loss orders , aim for a Rs . 5000 per contract loss limit … or whatever works for you , but do it .
Do not overstay a good market . If you do , you are bound to overstay a bad one also .
Take you lumps . Just be sure that they are little lumps . Very successful traders generally have more losing traders than winning traders . It is just that they don't leave any hang-ups about admitting that they are wrong , and have the ability to close out losing positions quickly .
Trade all positions in futures for a performance basis . The position must give a profit by the end of the second day after the position is taken , or else get out .
Program your mind to accept any small losses . Program your mind to “ sit still “ for a few large gains .
Learn to trade from the short side . Most people would rather own something than owe something . Markets can also be traded from the short side .
Watch for the divergences in the related markets – is one market making a new high and another not following ?
Recognize that fear , greed , ignorance , generosity , stupidity , impatience , self – delusion ,etc ., can cost you a lot more money than the market going against you , and that there is no fundamental method to recognize these factors .
Learn the basics of futures trading . It’s amazing how many people simply don’t know what they are doing . They are bound to lose , unless they have a strong broker to guide them and keep them out of trouble .
Standing a side is a position . Patience is important.
Be more careful if you are extra smart . Smart people very often put on a position a little too early . They see the potential for a price movement before it becomes actual . They become worn out or “ tapped out “ , and aren’t around when a big move finally gets under way . They were too busy trading to make money .
Never add to a losing position . Stay out of trouble , your first loss is your smallest loss .
Know , why you are in the markets . To relieve boredom ? To hit it big ? When you could honestly reply , you may be on your way to successful futures trading .
Use a newsletter or system , and stick to it .
Apply money management techniques to your trading .
Do not overtrade .
Take a position only when you know where your target is where you go to get out if the market goes against you .
Trade with trends , rather than trying to pick the tops and the bottoms .
Avoiding trading in many markets with a little capital .
Avoid trading with volatile contracts .
Calculate the risk/reward ratio before putting a trade on , then guard against the risk of holding it too long .
Establish your trading plans before the market opening to eliminate the emotional reactions .
Decide on entry points , exit points , and objectives . Subject your decisions to only minor changes during the session . Profits are for those who act , not react . Do not change during the session , unless you have a very good reason .
Follow your plan . Once a position is established and stops are selected , do not get out unless the stop is reached , or the fundamental reason for taking the position changes .
Use technical signals to maintain discipline – the vast majority of traders are not emotionally equipped to say disciplined without some technical tools . Use discipline to eliminate impulse trading .
Have a disciplined , detailed trading plan for each trade ; i.e., entry , objective , exit , with no changes unless hard data changes . Disciplined money management means intelligent trading allocation and risk management . The overall objective is end-of-year bottom line , not each individual trade .
When you have successful a trade , fight the natural tendency to give some of it back .
Use a disciplined trade selection system … an organized , systematic process to eliminate impulse or emotional trading .
Trade with a plan – not with hope , greed , or fear . Plan where you will get in the market , plan how much you will risk on the trade , and plan where you will take the profits .
Cut losses short . Most importantly , cut your losses short , let your profits run . It sounds simple , but it is not . Let us look at the reasons that many traders have a hard time “ cutting losses short “. First , it is hard for any of us to admit that we have made a mistake . Let us say a position starts going against you , and all your “ good “ reasons for putting the position on are still here . You say to yourself , “ it is only a temporary set-back . After all the more the position goes against me , the better chance it has to come back – the odds will catch up . “ Also , the reasons for entering the trade are still there . By now you have lost quite a bit ; you sell yourself on giving it “ one more day “ . It is easy to convince yourself because on this time , you probably are not thinking very clearly about the position . Besides , you have lost so much already , what is a little more ? Panic sets in , and then comes the worst , the most devastating , the most fallacious reasoning of all , when you figure : “ That contract does not expire for a few months ; things are bound to turn around in the meantime . “
“ So it goes ; so cut the losses short . In fact , many experienced traders say if a position still goes against you on the second day in , get out . Cut those losses fast , before the losing position starts to infect you , before you “ fall in love “ with it . The easiest way is to inscribe across the front of your brain , “ Cut my losses fast .” Use stop loss orders , aim for a Rs . 5000 per contract loss limit … or whatever works for you , but do it .
Do not overstay a good market . If you do , you are bound to overstay a bad one also .
Take you lumps . Just be sure that they are little lumps . Very successful traders generally have more losing traders than winning traders . It is just that they don't leave any hang-ups about admitting that they are wrong , and have the ability to close out losing positions quickly .
Trade all positions in futures for a performance basis . The position must give a profit by the end of the second day after the position is taken , or else get out .
Program your mind to accept any small losses . Program your mind to “ sit still “ for a few large gains .
Learn to trade from the short side . Most people would rather own something than owe something . Markets can also be traded from the short side .
Watch for the divergences in the related markets – is one market making a new high and another not following ?
Recognize that fear , greed , ignorance , generosity , stupidity , impatience , self – delusion ,etc ., can cost you a lot more money than the market going against you , and that there is no fundamental method to recognize these factors .
Learn the basics of futures trading . It’s amazing how many people simply don’t know what they are doing . They are bound to lose , unless they have a strong broker to guide them and keep them out of trouble .
Standing a side is a position . Patience is important.
Be more careful if you are extra smart . Smart people very often put on a position a little too early . They see the potential for a price movement before it becomes actual . They become worn out or “ tapped out “ , and aren’t around when a big move finally gets under way . They were too busy trading to make money .
Never add to a losing position . Stay out of trouble , your first loss is your smallest loss .
Wednesday, January 14, 2009
Concept of Mutual Funds
A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal ; investment may be in shares , debt securities , money market securities or a combination of these . Those securities are professionally managed on behalf of a the unit-holders , and each investor holds a pro-rata share of the portfolio that is entitled to any profit when the securities are sold , but subject to any loss in value as well .
The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them . Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified , professionally managed basket of securities at a relatively low cost .
A simplified market definition of a mutual fund is that it is just a collection of stocks or bonds . One can look at a mutual fund as a company that brings together a group of people interested in investing and pools their money in stocks , bonds and other securities . Mutual fund is a stock that gives small investors an access to a well diversified portfolio of equities , bonds and other securities . Each investing shareholder participates in the gain or the loss of the fund . Mutual funds portfolio’s are organized to meet the investing objective stated in prospectus . the net asset value of a mutual fund is calculated daily .
Parties interested in investing in some mutual funds can do so by contacting the fund companies directly . Other funds are sold in the market through brokers , banks , financial planners or insurance agents . Mutual funds were commonly sold by third party participants at a price of sales fee , also known as a load . Today , however , more and more funds can be purchased through no-transaction fee programs that offers funds of many companies . Sometimes referred to as a “ fund supermarket “ , this service lets you consolidate your holdings and record keeping , and it still allows you to buy funds without sales charges from many different companies . Some of big names in mutual funds include companies like Schwab’s One Source , or Fidelity’s Fund Network .
There are several key factors that make investing in the mutual fund market attractive to investors . For those individuals , who do not have time or experience of investing in the stock market , mutual fund offers professional management of their money . Furthermore , by owing shares in a mutual fund instead of owing individual stocks or bonds , your risk is spread out and our investment is less volatile . The concept is that by diversification , an investor’s loss in one stock is offset by gains in others . It would be very expensive for an individual to build his own portfolio of this kind . Just as with an individual stock , mutual funds are liquid and can be turned into cash anytime .
Mutual Fund is an instrument of investing money . Nowadays bank rates have fallen down and are generally below the inflation rate . Therefore , keeping large amounts of money in bank is not a wise option , as in real terms the value of money decreases over a period of time .
One of the options is to invest in the stock market . But a common investor is not informed and competent enough to understand the intricacies of stock market . This is where mutual funds come to the rescue .
A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds . Mutual funds are highly cost efficient and very easy to invest in . By pooling money together in a mutual fund , investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own . But the biggest advantage of mutual funds is the diversification .
Diversification means spreading out money across many different types of investments . When one investment is down another might be up . Diversification of investment holdings reduces the risk tremendously . On the basis of their structure and objective , mutual funds can be classified in to following major types :
1. Equity Mutual funds : They are also known as stock mutual funds . Equity mutual funds invest pooled amounts of money in the stocks of public companies . Stock represent part ownership , or equity , in companies , and the aim of stock ownership is to see the value of the companies increase over time . Stock are often categorized by their market capitalization , and can be classified into three basic sizes : small , medium and large . Many mutual funds invest primarily in companies of one of these sizes and are thus classified as large –cap , mid-cap or small-cap funds .
2. Growth Funds : These are those mutual funds that aim to achieve capital appreciation by investing in growth stocks . They focus on those companies that are experiencing significant earnings or revenue growth , rather than companies that pay out dividends .
Growth funds tend to look for the fastest growing companies in the market . Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with above-average earnings momentum or price appreciation . In general , growth funds are more volatile than other types of funds , rising more than other funds in the bull markets and falling more in the bear markets . Only aggressive investors , or those with enough time to make up for short term market losses , should buy these funds .
The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them . Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified , professionally managed basket of securities at a relatively low cost .
A simplified market definition of a mutual fund is that it is just a collection of stocks or bonds . One can look at a mutual fund as a company that brings together a group of people interested in investing and pools their money in stocks , bonds and other securities . Mutual fund is a stock that gives small investors an access to a well diversified portfolio of equities , bonds and other securities . Each investing shareholder participates in the gain or the loss of the fund . Mutual funds portfolio’s are organized to meet the investing objective stated in prospectus . the net asset value of a mutual fund is calculated daily .
Parties interested in investing in some mutual funds can do so by contacting the fund companies directly . Other funds are sold in the market through brokers , banks , financial planners or insurance agents . Mutual funds were commonly sold by third party participants at a price of sales fee , also known as a load . Today , however , more and more funds can be purchased through no-transaction fee programs that offers funds of many companies . Sometimes referred to as a “ fund supermarket “ , this service lets you consolidate your holdings and record keeping , and it still allows you to buy funds without sales charges from many different companies . Some of big names in mutual funds include companies like Schwab’s One Source , or Fidelity’s Fund Network .
There are several key factors that make investing in the mutual fund market attractive to investors . For those individuals , who do not have time or experience of investing in the stock market , mutual fund offers professional management of their money . Furthermore , by owing shares in a mutual fund instead of owing individual stocks or bonds , your risk is spread out and our investment is less volatile . The concept is that by diversification , an investor’s loss in one stock is offset by gains in others . It would be very expensive for an individual to build his own portfolio of this kind . Just as with an individual stock , mutual funds are liquid and can be turned into cash anytime .
Mutual Fund is an instrument of investing money . Nowadays bank rates have fallen down and are generally below the inflation rate . Therefore , keeping large amounts of money in bank is not a wise option , as in real terms the value of money decreases over a period of time .
One of the options is to invest in the stock market . But a common investor is not informed and competent enough to understand the intricacies of stock market . This is where mutual funds come to the rescue .
A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds . Mutual funds are highly cost efficient and very easy to invest in . By pooling money together in a mutual fund , investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own . But the biggest advantage of mutual funds is the diversification .
Diversification means spreading out money across many different types of investments . When one investment is down another might be up . Diversification of investment holdings reduces the risk tremendously . On the basis of their structure and objective , mutual funds can be classified in to following major types :
1. Equity Mutual funds : They are also known as stock mutual funds . Equity mutual funds invest pooled amounts of money in the stocks of public companies . Stock represent part ownership , or equity , in companies , and the aim of stock ownership is to see the value of the companies increase over time . Stock are often categorized by their market capitalization , and can be classified into three basic sizes : small , medium and large . Many mutual funds invest primarily in companies of one of these sizes and are thus classified as large –cap , mid-cap or small-cap funds .
2. Growth Funds : These are those mutual funds that aim to achieve capital appreciation by investing in growth stocks . They focus on those companies that are experiencing significant earnings or revenue growth , rather than companies that pay out dividends .
Growth funds tend to look for the fastest growing companies in the market . Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with above-average earnings momentum or price appreciation . In general , growth funds are more volatile than other types of funds , rising more than other funds in the bull markets and falling more in the bear markets . Only aggressive investors , or those with enough time to make up for short term market losses , should buy these funds .
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