When it comes to investment , each move and each portfolio according to the market conditions and risk bearing capability is stock investment . Buying stocks online is not a new concept . Every person can afford it . Profitable buy is the basic thing that the stock world actually depends on . Once the buy is well thought of , it is positively going to give better returns . Making the decision to buy certain stock is not easy ; however, the following steps may provide you a rough layout to be followed .
Research and Education : Day trading or stock investment is all about keeping alert on the news and having a clear mind , though few people knew about it . It is recommended to get you well educated about the twists and turns of the stock market . Studying past moves and historic analysis may definitely help . Experiences are also a great help . Once you go through thorough research work , brace yourself to get real investment plans .
Get a System work for you : The meaning of system here is to get yourself a broker or brokerage firm through which you can have access to stock exchange . Make a choice , with the amount of the brokerages you want to work with and the facilities you demand . Never count upon the cheapest service as they may not serve you the services that you are in need of . You must always evaluate the worth of services you are demanding .
Decide on the Rules : It is a fact that every market has its own set of rules and notions of trade . You have to work on the buying and selling rules of stock market , watch the market and go for paper trade . Paper trade is the theoretical buying and selling of the stocks that tends you prove your profitability skills before you actually enter to some dine. It gathers you better speculation skills and gets you experience , through theoretical .
Get through the Formalities of the Broker : There is some paperwork that you have to work on to get the real trade . Get yourself signed to the firm registered with one or more stock exchanges . Proceed with the initial deposits that are to be made for trading accounts and get the needed softwares installed to your PC for online trading .
Maintain a Balanced Portfolio : Be prepared for certain setbacks and losses . However , consistency and break-free moves get you to maintain a balanced portfolio that is beneficial in long run . Also , steady trading is considered to be more meaningful rather than flying in the air right from the start . Inexperienced flight may get you nowhere in the long run . Hence , balancing your trading speed you’re your portfolio is considered to be wise .
Seek for all the opportunities including Index Funds : Diversifying your investments is the best way to avoid the unbearable losses . It tends to integrate your risks and thus serves as a benefit . Also, index funds are a good option to invest in . They provide a balanced , low-cost way of investing and have consistent long-term gains . Hence , a wise selection of stock investment option is considered admirable and well thought decision while investing in stocks . Seeking all opportunities provides you a better range of choices .Online trading is gaining popularity at a rapid pace . Number of known and unknown companies , firms and financial institutions are providing online trading facilities , You only need to register yourself with one of it .
Is Trading through Internet Safe ?
The safety of transactions on internet depends on the encryption system used . The better this transaction system , the more difficult it is for any person to hack this site . Internationally , the best system available today is 128-bit encryption . Secondly, you too can ensure the safety of the transaction online . You normally get a secured user id and password , the secrecy of which is to entirely maintained by you . Thirdly , if the transaction system requires no manual intervention you further improve the safety in the transaction . Among Indians sites , very few are fully integrated online trading sites . This enables the elimination of the possibility of any manual intervention , which means orders are directly sent to the stock exchange ensuring that you get the best and the right price .
What about the Security of My Money , Demat Shares and Transaction Documents ?
In systems where the broking , banking and demat accounts are completely integrated , your money remains in your own bank account , and does not get transferred to the broker’s pool account. The experience of trading through Internet depends a great deal on the type of product offered by the site . Say for example , one of the issues bothering you may be getting tired of the paperwork involved after every trade , in writing cheques . You would open then seek a system that eliminates these processes . In online trading sites the greater the back-end integration of the system , the greater the amount of work the sites do for you , therefore greater the convenience available to you .
In big financial institutions your broking account , bank account and the Demat account are linkee electronically . So when you punch in a buy or a sell order , the system checks the funds / shares availability and automatically credits /debits the account once the order is executed by the exchange .
But I am not comfortable with Internet , or with Finance , how can Online Trading be easy for me ?
Contrary to common perceptions , trading through Internet does not require any expertise in working on the computer , or any special financial skills . You could try the demo of online trading sites to find out why others like you , with little or no knowledge about Internet or finance , have switched on to online trading . Or you could attend the demonstrations sessions held by such websites in your city .
Is Trading through Internet a costly affair ?
The convenience provided by online trading is even then worth the costs involved . And online trading sites are not that costly . For example , a trader can trade shares on margin at rates as low as 0.10% and if one wishes to trade in cash , then rates applicable are as low as 0.4% However , it is important to compare various online trading sites on brokerage rates , inclusive of all sub-charges .
Discount stockbrokers allow you the flexibility of creating your own portfolio , sharing your money between mutual funds , bonds, stocks options and exchange traded funds . Most of the companies that are into discount brokering . allow options of banking like checking and savings account , credit cards certificate of deposits and mortgages and money markets accounts . Such companies offer you options of the best online trading .
Saturday, February 21, 2009
Monday, February 16, 2009
Online And Offline
The introduction of the Internet has surprisingly changed our way of life as a society . It has defined the way we o business and the way we correspond . Internet has opened many opportunities for internet trading . The financial industry revolves around internet . Every thing is just a few clicks away . This makes online trading most convenient . But there are still investors who prefer the old fashion of offline trading and mainly prefer offline trading for security reasons .
Internet has introduced a way for consumers to manage their money online . Not to mention , internet has transformed the way investment companies operate their business and has made it easy for private investors to gain straight access to a range of different markets and online tools that were at one point reserved by the use of investment professionals . Consumer investing and online trading has dramatically changed over last decade . Online trading dynamically continues to be redefined . Services has expanded to include integrated management of additional financial accounts . Not to mention , it has subsequently expanded in conjunction with ground – breaking improvements to the traditional trading interface , such as telephone interface systems .
Of course , online trading has many pros . There are several wonderful reasons to invest online and consider online trading .
1. Money saving opportunities : The amount of money you save depends primarily on the online brokerage firm that you choose . No two firms are same . There may be different regulations , similar to bank regulations . There are minimum deposits required that must be maintained . As mentioned above , this will depend on th online brokerage firm .
2. Instant online access : You can gain instant access to your account , the value of your portfolio updates immediately before your eyes .
3. Enter online trades at anytime : You can enter online trades at any time from anywhere . This is very convenient if you live in a different time zone than the country you are trading in . Not to mention , it is especially fit for the investors with the busy schedules .
4. With online trading you are in charge : You are in control of your investments . No sales pitches and no haste . You decide where to invest your money .
Nevertheless , with all the convenience of online trading there are still investors who prefer the old fashion way of offline trading . Offline trading has lost some popularity but it is still the main form of investing . Offline trading offers many benefits as well .
1. The one benefit that an investor appreciates the most is that they are not alone when making investment decisions .
2. There are experienced and professional brokerage companies that handle their investments for them .
3. Investors are not faced with the challenge of making these vital investment decisions , especially if they do not have the experience necessary to make the appropriate investments .
4. Also , there is someone there to answer any questions that may cause concerns .
Not to mention , with offline trading mistakes are less likely to take place . No one wants to throw their money away or stand by and watch someone else thrown their money away . It may be wise to hire a professional to assist you in making the correct investment decisions if you feel you lack the knowledge necessary .
Internet has introduced a way for consumers to manage their money online . Not to mention , internet has transformed the way investment companies operate their business and has made it easy for private investors to gain straight access to a range of different markets and online tools that were at one point reserved by the use of investment professionals . Consumer investing and online trading has dramatically changed over last decade . Online trading dynamically continues to be redefined . Services has expanded to include integrated management of additional financial accounts . Not to mention , it has subsequently expanded in conjunction with ground – breaking improvements to the traditional trading interface , such as telephone interface systems .
Of course , online trading has many pros . There are several wonderful reasons to invest online and consider online trading .
1. Money saving opportunities : The amount of money you save depends primarily on the online brokerage firm that you choose . No two firms are same . There may be different regulations , similar to bank regulations . There are minimum deposits required that must be maintained . As mentioned above , this will depend on th online brokerage firm .
2. Instant online access : You can gain instant access to your account , the value of your portfolio updates immediately before your eyes .
3. Enter online trades at anytime : You can enter online trades at any time from anywhere . This is very convenient if you live in a different time zone than the country you are trading in . Not to mention , it is especially fit for the investors with the busy schedules .
4. With online trading you are in charge : You are in control of your investments . No sales pitches and no haste . You decide where to invest your money .
Nevertheless , with all the convenience of online trading there are still investors who prefer the old fashion way of offline trading . Offline trading has lost some popularity but it is still the main form of investing . Offline trading offers many benefits as well .
1. The one benefit that an investor appreciates the most is that they are not alone when making investment decisions .
2. There are experienced and professional brokerage companies that handle their investments for them .
3. Investors are not faced with the challenge of making these vital investment decisions , especially if they do not have the experience necessary to make the appropriate investments .
4. Also , there is someone there to answer any questions that may cause concerns .
Not to mention , with offline trading mistakes are less likely to take place . No one wants to throw their money away or stand by and watch someone else thrown their money away . It may be wise to hire a professional to assist you in making the correct investment decisions if you feel you lack the knowledge necessary .
Wednesday, February 11, 2009
Money From Your Fund
Examine Sector Weightings and the Fund’s Concentration : The funds that have large stakes in just one or two sectors are expected be more volatile than the evenly diversified funds . A concentrated portfolio may also get more successful if its stocks are performing better . You may add a concentrated fund in your portfolio but mostly the concentration should be in a diversified fund which is more predictable . Invest in a few funds and develop a plan : But it does not mean you should invest only in one fund . Even though the funds are diversified , many funds go though a few years of poor performance . When you invest only in one fund , you might lose heavily . On the other hand , investing in too many funds may lead to duplication of many securities and a portfolio with no focus . For long term financial goals , equities are the best option .
Keep it Simple :
To keep the selection of the funds simple , you should stick with well diversified and well established equity funds , an index fund for equity exposure and a floating rate bond fund for fixed income exposure . For long term perspective , equities are the best performing asset class. One should normally stay away from speciality and sector funds because they have a huge risk associated .
Know Your Portfolio & Ignore the hot stocks and funds:
Avoid going for impulsive purchase. It is wise to invest in a fund that invests in stocks that make up an index. This way , you will do no worse than the market. Since , in the long run , markets have a tendency to go up , even your investment will move the same way . But in case you are a little more active , you can go for established ‘value’ funds that invest in undervalued securities .
Invest Regularly :
Investing a little bit of more money every month is the surest way to reduce the risk of investing . Investing on a regular basis is the key to success . Irrespective of the fund you choose , the reality is that its value will keep going up and down . One can expect a reasonable price in long term by investing on a regular basis .
Diversification is suitable for many Investors :
It is generally true that stocks perform better than any other liquid investment . So, in case of long term horizon and if you are comfortable with the risks associated with the stock market , you can think of investing in the stock funds . But in case you are slightly conservative , you may think of investing in different asset classes such as stocks , bonds , etc. The key challenge is to chose the right fund .
Assess Performance Approximately :
Past performance is not necessarily a good indicator of future results and this fact should be kept in mind every time one considers investing in fund . Avoid investing in a concentrated fund and focusing on short term returns . Generally while choosing a fund , one should look for above average performance over a period of time .
Benefits of Investing in Mutual Funds :
Mutual funds offer several advantages to the investors :
Affordable : Almost everyone can buy mutual funds . Mutual Funds generally provide an opportunity to invest with less funds as compared to other avenues in the capita market . Even the ancillary fee which one has to pay in the form of brokerages , custodian , etc. is lower than other options and is directly linked to the performance of the scheme .
Keep it Simple :
To keep the selection of the funds simple , you should stick with well diversified and well established equity funds , an index fund for equity exposure and a floating rate bond fund for fixed income exposure . For long term perspective , equities are the best performing asset class. One should normally stay away from speciality and sector funds because they have a huge risk associated .
Know Your Portfolio & Ignore the hot stocks and funds:
Avoid going for impulsive purchase. It is wise to invest in a fund that invests in stocks that make up an index. This way , you will do no worse than the market. Since , in the long run , markets have a tendency to go up , even your investment will move the same way . But in case you are a little more active , you can go for established ‘value’ funds that invest in undervalued securities .
Invest Regularly :
Investing a little bit of more money every month is the surest way to reduce the risk of investing . Investing on a regular basis is the key to success . Irrespective of the fund you choose , the reality is that its value will keep going up and down . One can expect a reasonable price in long term by investing on a regular basis .
Diversification is suitable for many Investors :
It is generally true that stocks perform better than any other liquid investment . So, in case of long term horizon and if you are comfortable with the risks associated with the stock market , you can think of investing in the stock funds . But in case you are slightly conservative , you may think of investing in different asset classes such as stocks , bonds , etc. The key challenge is to chose the right fund .
Assess Performance Approximately :
Past performance is not necessarily a good indicator of future results and this fact should be kept in mind every time one considers investing in fund . Avoid investing in a concentrated fund and focusing on short term returns . Generally while choosing a fund , one should look for above average performance over a period of time .
Benefits of Investing in Mutual Funds :
Mutual funds offer several advantages to the investors :
Affordable : Almost everyone can buy mutual funds . Mutual Funds generally provide an opportunity to invest with less funds as compared to other avenues in the capita market . Even the ancillary fee which one has to pay in the form of brokerages , custodian , etc. is lower than other options and is directly linked to the performance of the scheme .
Monday, February 2, 2009
History Of Stock Market
IN THE USA : History of stock market trading in the United States can be traced back to over 200 years ago . Then , the colonial government decided to finance the war by selling bonds , government notes promising to pay out at profit at a later date . At around the same time , private banks began to raise money by issuing stocks , or shares of the company to raise their own money . This was a new market , and a new form of investing money , and a great scheme for the rich to get richer . A little further on the history timeline , more specifically in 1792 , a meeting of twenty four large merchants resulted into a creation of a market known as the New York Stock Exchange . At the meeting , the merchants agreed to meet daily on Wall Street to daily stocks and Bonds .
Further in history , in the mid 1800’s , the United States was experiencing rapid growth . Companies needed funds to assist in expansion required to meet the new demand . Companies also realized that investors would be interested in buying stock i.e., partial ownership in the company . History has shown that stocks have facilitated the expansion of the companies and the great potential of the recently founded stock market was becoming increasingly apparent to both the investors and the companies .
By 1900 , millions of dollars worth of stocks were traded on the street market . In 1921 , after twenty years of street trading , the stock market moved indoors . History brought us the Industrial Revolution , which also played a role in changing the face of the market . New form of investing began to emerge when people started to realize that profits could be made by re-selling the stock to others who saw a value in a company . This was a beginning of the secondary market , known before , because it was now fueled by highly subjective speculation about the company’s future .
This was the pretext for the appearance of such stock market giants as NYSE . History books tells us that the reason why NYSE is so highly regarded among stock markets is that they only trade in the very large and well-established companies . I acted as a more stable investment alternative for people interested in throwing their capital into the stock market arena . The smaller companies making up the stock market formed into what eventually became the American Stock Exchange . Contrary to the 80-year old history , today NYSE , AMEX and hundreds of other exchange markets make a significant contribution to the national and global economy .
The growth in the number of the market participants led the government to decide that more regulation of the stock market was needed to protect those investing in the stock . History was made in 1934 , when following the Great Crash , Congress passed the Securities and the Exchange Act . This act formed the securities and the Exchange Commission , just like SEBI in India , which through the act and succeeding amendments , regulates the American Stock market with the help of the exchanges . It also includes overseeing the requirements for a company to issue a stock shares to the public and ensures that the company offers relevant information to potential investors . SEC also oversees the daily actions of market exchanges and how they trade the securities offered .
Although historically , investing in the stocks was a “ hobby “ for the rich , an average person too soon came to realize the value of the investment as compared to traditional assets like land or a house .
IN INDIA : The working of the stock exchanges in India started in 1875 . BSE is the oldest stock market in India . The history of the Indian stock trading starts with 318 persons taking the membership in the Native Share and Stock Brokers Association , which we now know by the name of Bombay Stock Exchange , or BSE in short . In 1965 , BSE got permanent recognition from the Government of India . National Stock Exchange comes second to BSE in terms of popularity . BSE and NSE represent themselves as synonyms of Indian stock market . The history of Indian stock market is almost the same as the history of BSE .
Many foreign institutional investors are investing in Indian stock markets on a very large scale . The liberal economic policies pursued by successive Governments attracted foreign institutional investors in a large scale .
India , after United States hosts the largest number of listed companies . Global investors now ardently seek India as their preferred location for investment . Once viewed with skepticism stock market now appeals to middle class Indian also . Many Indians working in the foreign countries now divert their savings to stocks . This recent phenomena is the result of opening up of online trading and diminished interest rates from the banks . The stockbrokers based in India are opening offices in different countries mainly to cater the needs of Non-Resident Indians . The time factor also works for the NRIs . They can buy or sell a stock online after returning from their work places .
Further in history , in the mid 1800’s , the United States was experiencing rapid growth . Companies needed funds to assist in expansion required to meet the new demand . Companies also realized that investors would be interested in buying stock i.e., partial ownership in the company . History has shown that stocks have facilitated the expansion of the companies and the great potential of the recently founded stock market was becoming increasingly apparent to both the investors and the companies .
By 1900 , millions of dollars worth of stocks were traded on the street market . In 1921 , after twenty years of street trading , the stock market moved indoors . History brought us the Industrial Revolution , which also played a role in changing the face of the market . New form of investing began to emerge when people started to realize that profits could be made by re-selling the stock to others who saw a value in a company . This was a beginning of the secondary market , known before , because it was now fueled by highly subjective speculation about the company’s future .
This was the pretext for the appearance of such stock market giants as NYSE . History books tells us that the reason why NYSE is so highly regarded among stock markets is that they only trade in the very large and well-established companies . I acted as a more stable investment alternative for people interested in throwing their capital into the stock market arena . The smaller companies making up the stock market formed into what eventually became the American Stock Exchange . Contrary to the 80-year old history , today NYSE , AMEX and hundreds of other exchange markets make a significant contribution to the national and global economy .
The growth in the number of the market participants led the government to decide that more regulation of the stock market was needed to protect those investing in the stock . History was made in 1934 , when following the Great Crash , Congress passed the Securities and the Exchange Act . This act formed the securities and the Exchange Commission , just like SEBI in India , which through the act and succeeding amendments , regulates the American Stock market with the help of the exchanges . It also includes overseeing the requirements for a company to issue a stock shares to the public and ensures that the company offers relevant information to potential investors . SEC also oversees the daily actions of market exchanges and how they trade the securities offered .
Although historically , investing in the stocks was a “ hobby “ for the rich , an average person too soon came to realize the value of the investment as compared to traditional assets like land or a house .
IN INDIA : The working of the stock exchanges in India started in 1875 . BSE is the oldest stock market in India . The history of the Indian stock trading starts with 318 persons taking the membership in the Native Share and Stock Brokers Association , which we now know by the name of Bombay Stock Exchange , or BSE in short . In 1965 , BSE got permanent recognition from the Government of India . National Stock Exchange comes second to BSE in terms of popularity . BSE and NSE represent themselves as synonyms of Indian stock market . The history of Indian stock market is almost the same as the history of BSE .
Many foreign institutional investors are investing in Indian stock markets on a very large scale . The liberal economic policies pursued by successive Governments attracted foreign institutional investors in a large scale .
India , after United States hosts the largest number of listed companies . Global investors now ardently seek India as their preferred location for investment . Once viewed with skepticism stock market now appeals to middle class Indian also . Many Indians working in the foreign countries now divert their savings to stocks . This recent phenomena is the result of opening up of online trading and diminished interest rates from the banks . The stockbrokers based in India are opening offices in different countries mainly to cater the needs of Non-Resident Indians . The time factor also works for the NRIs . They can buy or sell a stock online after returning from their work places .
Friday, January 30, 2009
Golden Tips in Stock Market
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 .
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 .
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 .
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