Risks in Stock Market Trading

One general asserted truth is that profit is a goal for many of the men and women who populate this planet. Profit is the more desirable in the case of those who actually invest money because they want to extract even more financial benefits out of these particular investments. One popular way of giving a fertile employment to your money is making them circulate through stock market trading. Share owners can sell, hold their shares or even buy some more, if a series of rules (based either on well-established commonsense practices or on mere intuition) tell them the moment is just ripe for this or that strategy.

As a matter of fact, strategy is one of the terms often heard of in stock market trading. But can anyone talk about a strategy that never failed in this area? This is a frequently raised question, since it is widely acknowledged that the stock market can be tricky. The stock market may easily lead to a downfall in stock market trading. This process takes place, obviously, to the disadvantage of the investor. However, stock market trading doesn't always end with a loss. Should loss be a certainty, people would no longer invest in the stock market.

Whether we are talking about time-honored stock market trading - taking place within the ‘real' here and now, on the floors of stock exchange rooms - or about online stock market trading one of the regularly advised strategies is to stick to the trend. Online stock market trading has acquired, in its turn, a value over the past ten years so it can be taken into consideration also. Every stock market undergoes certain (longer) intervals of development manifest in the evolution of stock price. Terms like bull market or bear market are recurrent in stock market trading reflecting either the continuously rising stock prices or the reverse situation. Both online stock market trading as well as its longer-established relative go hand in hand with the progress of the national economy. One example at hand is provided by the extent of a bullish market during the 1990s, determined by the robust national economy of the USA - a genuine initiator of investment confidence. When the situation changed, at the beginning of the year 2000, the market turned bearish and stock prices began falling. In both situations, the advised approach was not to go against the tendency of the market.

Circumstances have long proven it is wise to be consistent with the general trend. Indeed, there is ‘fashion' within stock market trading as well. And if you don't want to be outdated - being outmoded in stock market trading may have damaging consequences - you go with the flow. Nevertheless, when someone trustworthy or when some reliable conditions offer you a ‘hot' suggestion, you may want to act in its direction. Nonetheless, caution, shrewdness and wisdom must be in your proximal reach. This means that you are not to instantly trust any ‘good old pal' who, out of good-will, provides you with a tip. You must be able to make your own research targeting the tip you received or else request the services of a stockbroker.

The latter may turn out to be a wise stratagem. Stockbrokers, even in online stock market trading, are generally certified and skilled authorities whom you can easily employ for you to take full advantage of your capital investing. Notice however that their expertise is not available free of charge. There is nothing ‘on the house' in stock market trading. Basically, brokers get involved in stock market trading for you, making use of their fuller comprehension of the stock market status quo so as to trigger gains that will proceed to your pocket or to some further investment. Should the commission basis on which the relationship between you and your broker is built (as a general rule) not be appropriate for you, there are other possibilities as well. In online stock market trading it is less costly to supervise your own deals.

Additionally, in online stock market trading, the useful, instructive material you may need is obtainable day-and-night. Moreover, in case you take particular content in looking into your private stocks, you cannot find a richer source of information than the Internet. Online stock market trading allows you to research websites designed by investment companies so the client and the virtual investor can be aware of previous operations. By accessing reports and descriptions offered even by the companies themselves, one may even notice the excellent performance of key institutions. Even more, online stock market trading sites offer the investor support in the shape of online stock market trading tools, services and instruments that allow the investor to place an order beforehand and, should the client not be present at the moment when the market reaches the condition opted for by him or her, enter the order automatically.

Certainly, both online stock market trading and its ‘next of kin' have their own advantages. Whereas online stock market trading provides more accessible assistance for dealing with stocks, what was the initial, fundamental stock market trading still goes on. Even if not following a time schedule as generous as that of online services, the traditional ways do not disappear. However, they both involve taking risks which is why prudence is the most often heard of strategy. In other words, it's better to "hold for a while the bird in the hand than quickly grab two in the bush".

Plan For Stock Market Success

To be a successful investor or trader, a written investment plan is a must! In fact, most broking firms will not allow its professional traders to trade money without a trading plan!

Each and every trader must submit their plan and have it approved to be able to start trading money on behalf of clients. The trader is then judged and compensated for how well he follows his own plan and how well he does financially. If he violates his own plan, he may be subject to immediate dismisssal!

So it’s crazy for us non-professionals traders to start trading without a plan, especially when things don’t go our way, and they won‘t always go our way, you can be assured of it!

Now, before we begin to write our plan, take just a moment to think about your true investment objective. What do you want to accomplish with this trading account? Simply saying “ I want to make money” is not an investment objective. You have to have a specific objective, like, “To outperform the All Ords by at least 10% annually”. That’s an objective.

Then you must decide what type of industry and sector of shares you are going to invest in. The energy sector, the housing sector or the retail sector are unlikely to outperform the All Ords. That means you might have to look at the more volatile, but more rewarding sectors, like the computer sector, telecommunications, etc. This will likely give you lots of volatility in your portfolio and you’ll have to accept it or don’t get involved in that sector in the first place.

There are 7 necessary ingredients in your investment plan:

Reasonable investment objective

What growth factor do I want to achieve? Be realistic. Are you actively trading or long-term investing?

Risk tolerance statement

What industries, sectors and types of shares will I invest in?

Diversification plan

How many different types of companies do we buy on average? Between 10 –20 should be a maximum.

Price range of the shares we buy
Do we buy $30 shares, or only the sub $10 shares? Do we invest only in Australia, or overseas too?

A defense strategy

How much price decline are we willing to accept? Be sure to use a Stop-Loss!

Contingency / Repair plan

What do we do in a potential large market correction? How do we prevent and/or repair large market losses?

Timeframe

How often do we, or will we, re-assess our investment strategy? It should be reviewed every 3-6 months and updated if and when the market conditions change.

To help tailor your investment strategy, try asking yourself these questions:

Do I usually average down in price, or do I take a small loss?
How many shares do I buy and sell everyday and do I diversify well?
What is the usual size of my trades? 500 shares, 1000 shares, or even more?
When do I take my profits? When I’m up 10%, 20% 50% or more?
If I have a profit in a stock, do I hold it overnight?

When you have considered all the above aspects, you will be well underway to finalising a very valuable and effective investment plan.

Buy to Cover Orders with Stock Trading

Within the buy to cover orders, there are 4 options in which to place onto your stock purchases. When you buy to cover on a market order, you are in agreement that you will purchase the stock at the current market price, however, because there is a lag between the time you agree to purchase the stock and the actual transaction, a price difference could occur. You could end up paying more than anticipated for each stock, or a considerably lower amount per stock, which is what you are hoping for. You can also buy to cover limit orders, in which guarantees that you will pay no more than the set limit price. However, if stock prices stay above the limit price, this type of buy to cover order will never be executed.

This type of transaction is typically used by investors who are trying to get into a certain market. You may also want to buy to cover stop orders in such case the stop orders become simple market orders as soon as the price is at or above the stop price. This type of order should be used to get you out of an unfavorable market so that you will not lose any profits. And, last, you may choose to buy to cover a limit order that converts to limit order only when the market price is at or above the stop price. You must become familiar with each of the buy to cover orders so that you can make educated decisions about your investments.

From one decision period to the next in the stock market game, the market moves up and down non-stop, meaning that prices of stocks are at a constant changing point. You may think about purchasing a certain stock at $65 per share, and in the next second, the price per share has risen to $165 per share.

This is where the gambling of the stock market comes into play. By learning the advantages of the buy to cover orders, you can increase your chances of earning money on the stock exchange instead of losing money. The most obvious advantage to all of the buy to cover options is that they are in place to make you money, when executed properly.

For example, you would not execute a stop loss on a stock that has steadily increased over a 4 month period. If you did this, you would force yourself to waste money to buy the stock in order to cover your mistake. You decide to buy 175 shares of stocks from Albertson 's , a grocery store chain, at $75 each, for a total investment of $13,125. Over a four month period, you notice that the stocks have gained in profit, and you would like to do something to ensure that you keep this earned profit.

Not knowing any better, you put a stop loss of $50 per stock without consulting your stockbroker. From that point forward, if your stock decreases to $50 per stock, you are forced to sell it, and any previous earned profit is null and void. The only chance you have in gaining back that profit, is if you are quick enough in the non-stop stock market game, to purchase the Albertson 's stocks before someone else does. However, even if you are able to do this, you have still suffered a great loss monetarily.

This is why you must educate yourself BEFORE playing the stock market game.

As with any game, there is some form of risk involved, however, when playing the stock market game, you can prevent a great deal of heartache by simple taking the time to gain knowledge about all types of order you are able to place on your stocks. If you need help learning about types of orders to place on your stocks, you should consult your well-trusted stockbroker in order to seek professional advice before taking matters into your own hands, inevitably forcing yourself to lose your invested money 's profit. Thus, it is absurd to invest your hard earned money into any program before you know all the facts necessary to make a well-informed, educated decision.

Strategies for Profitable Share Trading

Share trading, like any other investment, has its' inherent risks. No trader, or system, no matter how smart or well designed, can foretell the future. Natural disaster, human emotion, terrorism and globalization, among other things, manipulate the market. These things make it virtually impossible to invest in any market with 0% risk. That being said, there are 5 key strategies that professional, successful traders use to lower their trading risks and increase the likelihood of profitability. Savvy investors should always:

1.Create a Trading Plan: An effective trading plan will guide the trader in his/her decision making and make the difficult decisions easier because they have already created their own trading guidelines or guideposts. A trading plan should include the following components: (a) Investment and trade time frame guidelines, (b) A personal risk assessment. Determine how much risk you are willing to take, this will make your future trading decisions much easier, (c) Proper knowledge of the designated area of trade. Not knowing your market will more than likely doom your chances of trading profitably even before you start, and, (d) Predetermined entry and exit strategies and guidelines.

2.Have a Disciplined Approach: Once you have created a personalized, well thought out and researched trading plan, follow it. This is so vital because emotional decision making often ruins undisciplined investors.

3.Acquire Only Blue Chip Growth Stocks: Stocks with the greatest likelihood of profitability are appreciating liquid stocks. Investors that experience long term success don't take unnecessary risks by investing in junk stocks.

4.Research and Become an Expert in Their Market: Study the market like a college student studying for a final exam. Knowing your market will help you create a better trading plan. Your trading plan, as discussed above, will guide and predetermine nearly all your trading decisions. Therefore, by creating a strong foundation, you give yourself a greater opportunity for success.

5.You're Not a Goat, So Forget The Herd: If you have researched your market and have developed a smart plan that is proving to be consistently profitable, than stick to it. Don't develop a herd mentality and begin to follow anyone and everyone with a "bright" idea. The old adage proves wise; Plan your work and then work your plan.

Any type of investing has inherent risks. Lower your risks and increase your chances of profitability by creating a trading plan, adopting a disciplined approach, acquire only Blue Chip Growth Stocks, research and become an expert in your market and guard against developing a herd mentality.

Origin of the Stock Market Formula

The search for automatic investing techniques - schemes which would produce profits by giving investors advance indication of market swings, based on a mechanical interpretation of market data - has been going on for quite some time. One of the earliest methods was the "Dow Theory," a set of rules for interpreting market action drawn up by William Peter Hamilton about 40 years ago, which were roughly based on the writings of Charles H. Dow.

The search for mechanical market techniques accelerated after the 1929 crash which had revealed not only the treacheries of emotion but also the frequently appalling inadequacy of even the most reputable investment advisers. The well-known debacle of the closed-end investment companies during the period following the crash - including those managed by some of the best-known names in Wall Street - indicated to many observers the near-impossibility of reliably predicting the course of stock prices.

Stock market forecasters did not stop forecasting during this period, but their results were far from outstanding. A famous study by Alfred Cowles, covering the period from 1928 through 1943 and including 6,904 forecasts of the market as a whole made by 11 experts, showed a score, on average, of about two-tenths of one percent better than random guesswork.

Investors did not stop losing money, either. Results of an exhaustive research project conducted by Paul Francis Wendt covering the period 1933-38 (on balance, an upward period for the market), indicated that only 21.8 percent of a sample of typical customers came out with a profit.

Beginning in the thirties, large numbers of automatic investing techniques were developed, bringing into existence dozens of charts, tables, trend lines, moving averages, breadth and depth indicators, complicated mathematical computations, economic indexes, banking data curves, adaptations from the recondite areas of physics and chemistry, and plenty of others. By now, it seems that every available set of statistical data has been put to some use as a forecaster of stock market trends, no matter how tenuous the connection.

Some of these "timing devices" are intended to work automatically, and others are subject to considerable interpretation. Some are only sporadically successful, others are worthless, and a great many of them tend to be quite complicated. The principal difficulty with such methods is that they make no allowance for errors. As we have seen, one of the characteristics of formulas is that they do not aim for one hundred percent accuracy, and always make allowances for the probable, while hedging against the possible. A formula method can, however, be combined with a timing device.

Eventually, the idea of an automatic formula - which would not be designed to predict market swings with any accuracy, but would still dictate a reliable investment policy, prevent large losses and produce a steady profit over any market cycle - became increasingly attractive.

Originators of formula plans, therefore, eschewed "forecasting" as far as possible, and based their policies on the single assumption that the market would continue to fluctuate - in some cases specifying approximate limits, but without trying to predict their timing.

These earliest formulas, in the late thirties and early forties, were largely the handiwork of various institutions, primarily college endowment funds. An automatic formula was especially attractive to such investors. The investment committees, often composed of non-professionals and given to policy disputes, were more than anxious to rely on a formula which would allow them to agree on investment principles and also take them off the hook in case the institution's investments didn't fare too well.

Although the original impetus for formulas came from such large institutions, many of them have long since discarded the formula idea. On the other hand, a rising trend of popularity has been seen in the use of formulas by individuals, perhaps as a result of market experience in recent years, which has so often and so regrettably proved the experts wrong. A number of investment counselors, in fact, have adopted the policy of selling their services on the basis of formula investing techniques.

Stock Market Advice

With the stock market performing so poorly this year, many people who have no experience are getting interested in learning about stocks. They have probably heard that is good to buy stocks when they are low and sell them when they are high. With all the bad news of the stock market going down seemingly day after day, these beginners are now becoming interested in getting involved.

Once a beginner learns how to buy a stock, the next step is to try to figure out what stocks to buy. Where does one get that kind of information or opinion? You can get stock pics almost everywhere including magazines, TV shows, radio shows, The Internet and probably many other places as well. One thing is for sure, there is no shortage of opinions.

If you watch the financial TV shows, you will often see segments with the top analysts or "experts" where they give their stock tips. These experts might be asked to analyze certain stocks or to give their own stock pics. It seems to me that most of the time these so called stock market gurus are positive about most stocks. There are exeptions but rarely do you find an analyst come on and say that he would not be buying any stock and that now is not the time to invest.

These stock analysts are often the representatives for their company that the public sees and so they don't want to be negative. It is so much harder to drum up business with a negative outlook than it is if you have a positive rosy outlook. It seems to me that these analysts are told to go out there and paint the most positive picture you can about the market. For example, "the market might be bad right now but it will turn around and these are the stocks you want to own when it does".

Learning how to do some of your own research and not listen exclusively to the experts is perhaps the hardest part of investing. If you are going to do things right, you do need to learn how to form your own opinions and research stocks on your own. If you buy every stock a guru says is a winner, you will soon find that they aren't right much more than someone who picks stocks by throwing darts.

If you are a beginner looking to buy stocks and learn, it is wise advice to proceed slowly and not believe everything you hear. These stock analysts are professional salesman and can make the worst stock in the world look like a screaming buy. It is your money and not theirs so be careful with it.

Fascination in the Stock Market

The stock market has fascinated people all through the years. Many have made fortunes, others have lost them investing and trading on the stock market. But what constitutes the stock market and how does it work?

Many countries have their own stock exchanges where one can buy and sell shares for company stocks, options and bonds that trade in that particular market. The US stock market is the most volatile of them all, where traders and brokers perform millions of transactions every day. The most common exchanges in the US stock market are the New York Stock Exchange, Nasdaq and the American Stock Exchange.

The Price
The stock market is a place where people, either on behalf of their clients, their organizations, or themselves, bid to buy a number of shares of a particular stock at a specific price. On the other side, another set of people asking to sell the same stock for a different price. These are technically called the ‘bid' and the ‘ask' price. When a price from the bidding side agrees with a price from the asking price, a trade is performed. In heavy volume transaction stocks, the difference between the ‘bid' and the ‘ask' price is marginal.

Why does the stock market fluctuate?
The answer to this is the variation between the supply and demand of the stock in question. In simple terms, when a particular stock is demanded heavily and the supply is short, the share price for the stock goes up since people are ready to buy that stock with a higher price than the current price, and people who want to sell are ready to wait and sell at higher prices.
When the reverse happens, people want to get rid of the stock but there are not enough people ready to meet the selling volume on the other side. As a result of this, the price goes down since people are willing to sell the stock at lower prices than the current price, and people who want to buy are ready to wait for the stock to go lower. The volume and quantity by which this happens relies heavily on the number of shares demanded against the number of shares supplied and the level of aggressiveness buyers and sellers (also known as bulls and bears) are buying and selling their stocks.

Shares Ownership
Once a number of shares are owned, as a result of a stock market transaction, these shares can be kept for a specified amount of time. This time can be years, months, weeks, days or even minutes. This depends on whether the shares have been bought for a long term investment (years and months), short term investment (weeks and days), or as a trading scalp, which normally lasts for hours, minutes, and sometimes even just a few seconds.

When entering the stock market, the first question one needs to ask is whether he/she wants to be an investor or a trader. This depends on whether one is looking for a long-term commitment or a short one. While investing in the stock market can be controlled quite easily, requiring only limited amount of knowledge, trading, on the other hand, is quite a different ball game requiring much more knowledge and skill to perform and master.

Timing The Stock Market

Most individuals will lose money, over time, buying and selling stocks. A fundamental mistake most people make is the notion that the stock market will continually rise. Technically it will, but there are time restraints for most people in the simple fact that none of us live indefinitely and depending on when the stock market goes through one of its corrections can negatively impact our portfolio.

If you are under the age of 50 (as an example) and the market goes through a severe correction, more than likely you still have enough time for your portfolio to recover until retirement, assuming it never goes through another correction in your lifetime. How about if you are in your 60’s and the market corrects itself? Chances are you will never recoup the losses that you incur.

strategy. Probably more important than buying a stock is knowing when to sell a stock. I learned a long time ago to never fall in love with any stock because eventually it will break your heart.You may have done your due diligence in researching a stock, but there are forces at work that may limit the ability of a particular stock to move in a positive direction.

Some, but not all stocks are manipulated by Wall street. Many times a stock is over hyped by analysts and brokerage houses in an effort to get people to buy the stock and drive up the price. Once the stock reaches a certain price, the Wall street insiders then sell their shares and the rest of us are left with a stock that starts to decline. The problem for most people is that they generally get into a stock after its made it big climb only to then see the price drop. It is the old buy high-sell low mentality; a sure strategy for losing money in the stock market.

I have read in more than one source that 70 percent of stocks move in the direction that the overall market is moving, so if you have a stock with great fundamentals and the market is declining, guess what? Your great stock is probably declining as well. Additionally, 20 percent of the movement of a stock is based on the sector that it is in (eg: transportation, health care, banking, etc.), so if your sector is not doing well then chances are your stock will not as well.

Lastly, 10 percent of a stocks movement is based on the true fundamentals of a stock, but those fundamentals can be skewed by management of a given company as well as the brokerage houses and the analysts.Back in the mid 1990’s everyone was a stock picking genius. It seemed every stock you purchased did nothing but go up. Then in 2000-2002 reality set in. Most people who were in the stock market without an exit strategy suffered severe losses. At that point many people vowed to never play the stock market again. What happened in 2003? The market soared again, but of course those with a sour taste for stocks either did not get in or got in after the big run up to end up either making very little money or no money at all. Once again, the buy high-sell low strategy came into play.So, what are you supposed to do?

You could buy mutual funds where “supposedly” your money is professionally managed to avoid these corrections. The problem here is two-fold. One, these funds have managerial fees which take away from your profits and two, perhaps even more important, during the downturn from 2000-2002, mutual funds in general also performed poorly.

The problem we all face is that we are looking for a place to invest our money and after considering all options it would seem the stock market offers better opportunities than other investment vehicles. If you are going to invest in the stock market, as I said before, you must have an exit strategy to protect your assets.One option is timing the market. You will read every where that you cannot time the stock market. Truthfully, no one can predict which way the market will go on any given day. BUT, there are ways to see trends in the market, either up or down (and sometimes sideways). Once you are able to identify these trends you can have your money in the market when it is going up and have your money sitting safely on the sidelines when the market is going down.

Over the last ten years I have looked at a number of stock market timing systems. None of them will get you into the market at the exact bottom, nor will they get out at the top, but they will get you in and out somewhere in between so that you can walk away with a profit and most of them will have you out of the market when it is correcting itself.

Active trading like this gives the average investor a tremendous advantage over the person who buys a stock then “hopes for the best”.

My suggestion is to do an internet search for “stock market timing” and take a look at the various programs out there. Look at their track record, consider how many times they have you switching in and out of the market (you do not want to be jumping in and out every few days) and the cost for the service.Find one that meets your investing needs and give it a try. You will find that you are able to sleep much better at night.

Risk and Patience in Stock Market

You often hear the term “Risk Management” in tradings and stock markets. This article will not explaining the tenets of Risk Management, but together with the concept of patience, this paper will be showing you the potential role of risk and patience in evading stock market and trading problems.

In a scenario where the market comes to terms with a steep fall, some experts cannot help but analyze the situation. This is one article where Trade and Market experts expressed their valid opinions in such a scenario. First it is safe to identify that there were many factors including high leverage positions, lesser liquidity, rich valuations, FII selling, excesses in select market segments and rising global concerns among others that could lead to a steep fall in the domestic markets.

In a steep market fall, the following are some of the lessons that are learned. One of the obvious learnings for investors is to avoid leveraged positions vis-a-vis high exposure in the futures and options segment. Gul Teckchandani, an Investment Advisor, explains, "Avoid leverage. I've been saying that people who do F&O trading have a pathetic future."

Anoop Bhaskar, CIO, UTI Mutual Fund, adds, "Investors have to limit their expectations and cannot think of the markets as a 100-meter sprint. It is a marathon and you have to be patient." To state it simply, look at a longer term of over a year.

Vikas Khemani, Co-Head, institutional equities, Edelweiss Capital, says that “The other one deals with risks and rewards. Markets are driven by greed and fear. Markets rise, greed grows. When reward per unit of risk is high as is the case now, investors do not take risk. Investors are not looking at risk but are focusing only on returns. Risk factor should be borne in mind before investing. In markets like these, it is equally important to remember how much you can lose and not just focus on how much you can make."

One of the good considerations of investors, assuming that there may still be some downside left, is to examine the indices. If you are an investor and you see a fall in the popular indices or share prices across the board, you should not necessarily interpret that things have changed. It could just be an indication that the fall has corrected the excesses that existed in various pockets. But, more importantly, what it also tries to establish is that quality growth stocks can now be bought at reasonably fair valuations. In a wider angle, the price-to-earnings (PE) ratio of the market has fallen from 22 times to 17-18 times estimated FY09 earnings. And, given that corporate earnings are likely to rise between 18-25 per cent a year, over the next two years, the PEG (PE to growth) ratio at under one time spells comfort. A ratio of under one, to an extent and largely applicable to non-commodity stocks, indicates that valuations are not exorbitant.

But before investing in stocks and making deals with the sectors, it is important to note that the next three to six months or a bit more could be painful given that some uncertainties still exist. Hence, a long-term perspective of three to five years is most ideal.

With that in mind and also the macro environment, it's advisable to play safe by investing in companies with exposure to domestic consumption or investment plays. For example, companies functioning in the infrastructure and construction, banking and financial services, retail, telecom, entertainment, capital goods and engineering, and FMCG space, are better placed than sectors like information technology or textile exports, where companies derive a large chunk of their revenues from countries like the US. A firm financial status of a nation, uncertainty regarding IT budgets of US-based companies and cost pressures (rising wages) are among the factors that are weighing heavily on domestic IT stocks. The current situation suggests that good days are far from actualization.

As a contrarian strategy, investing in companies from the automobile industry can prove to be beneficial and perhaps capable of establishing a boost to overall returns. The reasons for the contrarian strategy anchors on the belief that sooner or later, given the rising interest rate differential between interest rates, the benign domestic inflation and subdued crude prices (under $90 a barrel), the RBI may be pushed to lower interest rates. Should that happen, it could translate to further growth for car companies.

Prudent stock picking can help achieve better returns. So, be disciplined, don't over leverage or take higher risks, maintain your asset allocation as per your long-term goals, be patient and be discreet in picking stocks, then you will reap benefits like never before!

dangers of online stock market trading

Online stock market trading has made it possible for millions of individuals, especially those who are not keen on investing in stock the traditional way, to play the stock market game. Almost anyone, can participate in online stock market trading.

Online stock market trading has made the business of trading easier, faster, and cheaper. An investor who does online stock market trading will not need to call his broker to conduct business. Stock market trading using online applications like the internet has made stock market trading more efficient, secure and manageable to a lot of retail stock market investors.

But online stock market trading has many dangers and if you are nit careful you could end up losing instead of earning lost of money. Needless to say, investing in stocks market trading is a risky business.

Online stock markets trading allow individuals to participate in the stock markets at greater speed. But because of this, it has also become easier to make investment mistakes. Therefore, the fundamentals of smart should still be applied in online stock market trading to avoid falling into traps.

New online stock market traders think that they could survive in online stock market trading without any investment skills and knowledge is because markets have been bullish recently. Like in traditional stock market trading, the first thing you have to do is to arm yourself with basic information about stock market trading and the company you’re investing into so as to avoid “gambling.”

What potential online stock market investors need to realize is that online stock market trading is really no different from traditional stock market trading. The web hasn't changed the fundamentals of smart investing it has only made it easier to invest. investors should still have a set of rules and guidelines to help them avoid the dangers of online stock market trading.

To avoid such risks, you must diversify your portfolio. Basically, it means buying a little bit of a lot of different types of stocks and bonds. It is a good idea to have some stocks in the technology sector, telecommunications, biomedical, and consumer corporations.

There are also companies that offer "safety stocks". It will be a sound decision to have several shares of companies such as this in your portfolio. This is because such stocks rarely fluctuate and most often offer a slow and steady growth, thus giving you an assurance in your investments.

These online stock market brokers or stock market websites, as they are called, also contains a lot of additional services in their websites. They can provide online stock market traders with stock market information, and other relevant insights.

Guide to stock market depressions

10 Worst Stock Market Crashes

10th Worst Stock Market Crash (1932 – 1933):
This crash required the longest recovery time of all the 10 crashes. The combination of the tech bubble bursting and the September 11th terrorist attack served a deadly blow to the stock market, but relative to markets past, this was a minor one.
Date Started: 1/15/2000
Date Ended: 10/9/2002

Total Days: 999
Starting DJIA: 11,792.98
Ending DJIA: 7,286.27
Total Loss: -37.8%


9th Worst Stock Market Crash (1916 – 1917):
This market suffered about a 40% loss.
Date Started: 11/21/1916
Date Ended: 12/19/1917
Total Days: 393
Starting DJIA: 110.15
Ending DJIA: 65.95
Total Loss: -40.1%

8th Worst Stock Market Crash (1939 to 1942):
It was one of the most grueling. It took nearly 3 years to recover from this crash! With the attack on Pearl Harbor, the markets had a very tough time.
Date Started: 9/12/1939
Date Ended: 4/28/1942

Total Days: 959
Starting DJIA: 155.92
Ending DJIA: 92.92
Total Loss: -40.4%

7th Worst Stock Market Crash (1973-1974):
Another long market crash -one that many people still remember (think Vietnam and the Watergate scandal). This crash lasted for 694 days before bottoming out.
Date Started: 1/11/1973
Date Ended: 12/06/1974
Total Days: 694
Starting DJIA: 1051.70
Ending DJIA: 577.60
Total Loss: -45.1%

6th Worst Stock Market Crash (1901 – 1903):
This is the oldest crash to make the list (DJIA records are not available before 1900).
Date Started: 6/17/1901
Date Ended: 11/9/1903
Total Days: 875
Starting DJIA: 57.33
Ending DJIA: 30.88
Total Loss: -46.1%

The 5th worst stock market Crash (1919 – 1921):
This crash followed a post war boom (Stock prices rose 51%). After the crash bottomed out in August of 1921, this decade saw tremendous growth in the stock market and the economy (often called the roaring twenties).
Date Started: 11/3/1919
Date Ended: 8/24/1921

Total Days: 660
Starting DJIA: 119.62
Ending DJIA: 63.9
Total Loss: -46.6%

The 4th worst stock market crash in U.S. History
Although this is the shortest market crash observed, it was a deadly one. Investors saw almost half their money disappear in just two months. This crash started the "Great Depression."
Date Started: 9/3/1929
Date Ended: 11/13/1929

Total Days: 71
Starting DJIA: 381.17
Ending DJIA: 198.69
Total Loss: -47.9%






3rd Worst Stock Market Crash (1906 – 1907):
This crash was called the "Panic of 1907." The U.S. Treasury department bought 36 million dollars worth of government bonds to offset the decline
Date Started: 1/19/1906
Date Ended: 11/15/1907

Total Days: 665
Starting DJIA: 75.45
Ending DJIA: 38.83
Total Loss: -48.5%

2nd Worst Stock Market Crash (1937 – 1938):
Just when investors thought the market was finally good again, following a recovery of almost half of the great depression losses, the market plunged again due to war scare and Wall street scandals.
Date Started: 3/10/1937
Date Ended: 3/31/1938

Total Days: 386
Starting DJIA: 194.40
Ending DJIA: 98.95
Total Loss: -49.1%

Worst Stock Market Crash Ever:
1932 Stock Market Crash:
Investors lost 86% of their money over this 813 day beast. This market crash combined with the 1929 crash, made up the great depression. The full recovery didn't take place until 1954.
Date Started: 4/17/1930
Date Ended: 7/8/1932

Total Days: 813
Starting DJIA: 294.07
Ending DJIA: 41.22
Total Loss: -86.0%

Stock Market Information

What do you generally need when you plan to invest in stocks? What you need is information. You don’t want to put your money in investment that will have high risk of losses and little amount of return. What you need is to learn if these risks of losses are high and that there are little potential of earning. When the information is available, you can now evaluate. Will the particular company worth your money? What are the potential returns if you buy shares of stock in the company? How much my stock is worth in the future? These and more questions need to be answered before you even buy the stocks at hand. Stock market information then is essential in stock trades and investment.

Stock market information can be taken in various resources. It could be in the television, newspapers, and Internet. The most used form of today is the Internet because it is not limited to news only. There are sites that provide stock market information in all angles. It could be about the company, the market, the industry, the events, and all others. You could even trade directly online with various online stock trades. But then again the initial step in all these is to be equipped with stock market information for all possibilities. If it seems that the condition is favorable, then you can invest in the stocks of the particular company you are eyeing.

Small Caps in Stock Market

Ironically, there are investors who target small caps in the stock market. Small cap stocks come from companies that have small market capitalization. By definition, market capitalization is the product of price of shares by the number of shares outstanding. In essence, the small caps are those shares that come from smaller companies. Big caps are labeled to large companies who correspondingly have big market capitalization. With these definitions, we understand that small cap have low valuation of shares but can have the potential to grow into big companies.

Small caps generally have limited volumes traders. This is because generally, a small company has the potential to lose easily unlike that of big companies. This goes to say that small cap have higher risks of losses than the large ones. However, this does not always follow. We all know that large companies are not faced with risks to close down. Likewise, small companies have the potential to grow into something big. Again what investors need to do is to get stock market information if small cap are his target investment. Those that have the potential to grow based on the given information can be a good investment.

However, because small cap have only few traders, it is not given too much attention in the stock market. There is little information that one can get about companies in small cap. But if you really want to invest in small cap you can get stock market information in the unlimited resources of the World Wide Web. Unlike before that information is limited to the television and newspapers, today you can already get access to information limitlessly.

To start with you can get small cap stock picks in the Featured Profiles. All best stock picks can be seen in this site. Resources can access in this starting point. And indeed, you will get the stock market information that you need from these resources.

Stock Screeners for Stock Market Success

Stock screeners allow traders to screen the entire market for stocks that conform to certain criteria to meet the needs of the trader. They are indispensable for modern stock traders, and can be either web-based or stand-alone tools. One of the benefits of web-based screeners is that upgrades tend to be automatically available.

If you consider how stock screening was carried out some years ago before the advent of the modern online stock screener, you will begin to understand the benefits that these systems have provided in enabling trading opportunities to be identified in seconds. Think of pouring over the stock exchange sections of newspapers, of trying to make sense of radio, real-time stock quote machines and of charting graphs by hand.

These manual procedures allowed very few stocks to be examined in a given timeframe, and you would be lucky to spot any stock to meet your criteria, let alone compile a useful Watch List. By allowing today’s traders to set criteria and automatically screen out all companies that do meet these criteria, today’s stock screeners can examine tens of thousands of stocks in a very short time. Results are virtually instant.

The filtering criteria used can detect stocks suitable for growth, for short or long-term earnings, or whose values will increase in a relatively short period of time. Using technical criteria to spot key reversals and breakouts can boost your stock earnings several-fold. If a trader feels a specific criterion to be important, then the stock screener will find a list of stocks that fit, and if several criteria are used in the same search, stocks with very specific properties can be identified.

There are two specific types of screening that can be carried out: by use of either fundamental or of technical criteria, and each can be made available either as end of day or real time intraday screening. Most normal stock screeners utilize fundamental criteria, although elements of technical analysis can also be included to fine tune the screening.

So how should these screeners be used? Let’s have a look at the technical criteria that can be used in filtering the stocks that you want on your Watch List. You could start by trying to find trending stocks, or those that will break out above or through resistance levels. The criteria to use in your filtration in order to screen for these could include:

• Stock trending up


• Rising on unusual volume


• Price crossed above resistance line


• Price has touched support line (It is likely to climb again)


• Price has reached new highs

Many of the fundamental screeners can be obtained free although if you want a real-time technical screener then you will likely have to pay a nominal fee. However, although it is normal for stock screeners to be predominantly one or the other, there are screeners available that can be used with both fundamental and technical criteria. This expands the type of screening available to you, and you should never buy a stock unless both the fundamental and technical criteria are both positive for the stock. You will achieve better results if you screen the stocks for both types of criteria, and for that you will need either a combined stock screener, or one of each type.

Stock screeners are essential for screening in today’s markets because most professionals actually underperform the market due to human influences. A machine-based model can filter out human weakness, such as believing press forecasts, and produce better results assuming that the criteria, or variables uses, are those that affect the direction of stock prices in the future.

Given that is so, stock screeners are a must for the modern investment professional and novice alike.

Stock Market Winners

Every new investor would like to enjoy the continuous winning spree, but such a dream remains short-lived. Remember you can never the boss the market, it will always boss you. Its collective strength is more than your individual strength. But if you follow proper rules of the game, it allows you to play with considerable freedom and you can score a few goals and may be awarded with some 'penalty corners' with the possibility of converting them into goals again. To the day traders, the stalwarts of the game, the area is both heaven and hell. The recent downward slide in the indices has blown off many speculators and day traders off their feet. Millions of dollars were lost within a week. The investors, who had enjoyed highly rewarding 6-7 months, were suddenly taken aback and majority of them lost good chunks of the gains made during that period. A careful investor, therefore, needs to device ways and means to protect oneself, from the abrupt swings of the index. One needs to plan the investments prudently, and the tried and tested rules of the game demand that it is better to keep the long-term interests in mind, than remain jubilant for a short time, through guess works.

Some of the options to remain safe with investments are:

The long-term perspective! You need to cultivate the habit to stay invested. Temptation is so strong; many investors just neglect this advice and pay the price. Such investors have daubed the color of speculation and gambling on the walls of the exchange. Much better, those who desperately seek wealth attend horse races and visit casinos.

The timing! You are in the serious business of finance. Do not ape the astrologer. Do not wait for the high tide or the low tide before deciding to take the bath! As a long-term investor, try to focus on the true worth of a share and then decide whether to invest or not in that particular company. Let the market swings not upset you. If at every swing you sacrifice a part of crop of hair on your head, soon you will be bald. Take early, proper decisions to invest.

Your own homework! You are the best researcher and analyst. Have confidence in your judgment. You need to know the fundamental value of the share that you are buying. The PE ratio is not the be all and end all of the investment. Low PE should not prompt you to make the investment, and the high PE rate is not an automatic choice to take an unfavorable investment decisions. Many important forces like, debt-equity ratio, interest coverage ratio, the quality of management and break-up value of the share merit due consideration.

Penny-wise and pound foolish! Do not be carried away by attractions. Penny stock is one such item. When the index is rising, this one looks good, sometimes very good as it rises faster. When the market falls, the investor stands nowhere. Invest in only those shares where the basics of a company are sound. Tips are no faultless aphorisms. These tips are sometimes planted deliberately

Do not panic! Avoid hassles off fast buying and selling. Go by the pre-decided target and stick to it. Do not be carried away by the opinions expressed in various journals, TV channels and research bulletins of the brokers. Rely on the fundamentals. You have with you a group of shares that are chosen by you for investment. Some appreciate fast, some are stationary and some depreciate. Sell the losers and let the winning share continue to enjoy its fortune. As for the losing one, never hesitate to sell it but before that make a detailed study of the company and try to identify the weaknesses whether it is of short-term nature or will have long tem implications. In the later case, get the share out of your kitty so that your losses are minimal. Find the suitable substitute to fill its place.

The wise old saying goes, "Go placidly amidst the noise and din." The sun never rises and sets in a hurry. He takes the predetermined time. Your investment decisions needs to be like that! The world salutes the winner.

Stock Market Forecasts

Rely on your well-studied conclusions and stick to them

A youth in deep love fell sick. How was he cured? The poet writes,

"Half the cure goes to the credit of knowledgeable doctor's medical research,
Half to her magical touch!

Similar is the case with the stock market forecasts. Your research, analytical abilities, deep knowledge about the history of the goings on in the exchange, your regular reading of the articles in periodicals, all these will add to your understanding of the issues, but will never provide accurate and reliable conclusions. When the ocean is calm, the swimmer is not afraid to take the plunge. But when it is turbulent, only the experts will have the courage to have a go at it. When the going is smooth, investors buy and sell with confidence. Panic prevails when the exchange is volatile. At this time, any forecast and the investments on the basis of such predictions are fraught with grave risks. Give credence to the realities, the permanent factors, not the variable ones, when to you decide upon investments. Some of the possible strategies to deal with the situation are:

You see speculators swarming the exchange, but the exchange does not belong to them. It is the realm of the practical people, those who believe in long term investing. When market crashes, the speculators bite the dust.

Have no tension about the price movements. You have decided to buy a share, you have decided about its limitations, you have pre-fixed the margin at which you have to sell it-that's all. Fear about the temporary fluctuations is futile. The day to day calculations that 'I have gained this much or I have lost this much,' are meaningless. You need to take care as and when a particular share is continuously on the slide. You need to go into the root cause, and if necessary take an ad-hoc decision about selling the share, from among the many on which your future hopes lay. With this decision, you minimize your losses.

Predictions based on research are differed from wild guesses made on whims and fancies. The creditability of the researched material is not to be relied upon completely, as more than one factor influence the share price. Wild guesses have no basis and the sale and purchase that you do on haunches is nothing but gambling. You may gain or lose. This approach is not meant for the ones who wish to make a permanent profitable career out of the dealings in the exchange. Stock market corrections are not to be confused with the predictions on the share prices. But keep a watch on the share, whether the price fall is due to corrections or due to degeneration. You need to study the current profile of the company and arrive at your own conclusions, in consultations with the experts on the subject.

When you stop trusting those experts who claim to make accurate predictions in shares, know that it is the beginning of knowledge for you. You can read such literature for the sake of enjoyment of their ignorance. If the predictions were to be accurate as per the claim, the person concerned would not have waited for the payment for the article published; he would have straightaway invested heavily in such shares to reap the benefit. Remember your broker is in the share business, and whether loss or gain, he gets his brokerage for each trade. Mailing literature to you regularly is part of his professional job, and business-promotion strategy. He is promoting the company while claiming to promote your interests.

Remember, the forecast could be a trap. Winning is a matter of your application and study. Your conclusions are your precious assets. Work on them and stick to them.

The Stock Market Drop

Imagine your friends laughing when you say you made a lot of money as the stock market dropped. Then imagine their faces when you show them your incredible gains. They won't laugh any more. They'll beg for help.

Everybody loves it when the stock market goes up. Many people panic when it falls. But they don't need to. An American market exists that allows traders to make money regardless of whether stocks are going up or down.

Professional investors know how to hedge their bet. They take precautions because they know the economy will move through various cycles. What goes up will eventually come down.

The common man and woman are different. They assume investing is difficult so they don't take time to learn simple methods that might benefit their lifelong effort to get ahead. They throw their money into mutual funds or a 401-K account and hope for the best. This may work when things are going well in the financial markets. In a crisis, this method will be the cause of many a sleepless night.

Every family could use some extra money each month. And it's not a pipe dream, if you are capable of taking simple direction and absorbing new information.

Here's how you to make money when the stock market falls: hedge your bet by trading the mini-sized Dow Jones futures market. I know what you're thinking. Futures?! Isn't that a great way to lose money? My answer: Have you ever lost money in the stock market?

Today's economic conditions should be a reminder that our money is always at risk. Yesterday's victories may be tomorrow's defeats. All the more reason to hedge - always - your most important investments.

The mini-sized Dow Jones electronic market is global and stays open for business throughout the night and into the next day. It closes briefly at the end of each business day, all day Saturday, then opens again late Sunday afternoon. Plenty of time to access and manage your online account.

One significant reason for learning this market is its simplicity. You can learn to trade the market up and down - and it's all legal. For people who have only traded stocks, it is sometimes difficult to understand how a futures trader can make money when a market drops. But it's true, it can be done, without breaking any laws.

This is not true of some "short selling" that takes place in the stock market. Some rogue brokerages break Securities and Exchange Commission rules and in the process rob good, honest investors. That is not what I'm suggesting. But that illegal practice is precisely why you would be wise to learn how to hedge your stock portfolio with the mini-sized Dow Jones futures market.

There are many tutorials to help you understand how to trade this market. Google "mini-sized Dow Jones" or "the mini-Dow" and you'll have plenty to choose from.

But don't fall for offers that ask you to pay big bucks for software and platforms you won't need. I'm not suggesting you day trade - not at first anyway. So choose a guidebook that is modestly priced and then learn as much as you can from it before buying your next book.

The Chicago Board of Trade and the CME Group Exchange websites offer good, free information to help you understand the basics of trading futures. Take full advantage.

Finally, be a specialist. Master the one market that can do you the most good. The mini-sized Dow Jones stock index will be enormously beneficial if you have long-term or short-term stock investments. You'll soon realize that by concentrating on one market you don't have to be Warren Buffet to make smart moves.

Profits From The Share Market

The stock market is a place, which creates a lot of speculation, dreams and much more. How many people really make their dream a into a reality? It is actually a matter of great concern. However, it is up to you how you perceive the market from your side and experience.

The main purpose of investing has always been the same, i.e., to build a future of financial stability. Investment options provide you the opportunity to earn maximum returns from your hard earned money. Invest now and earn profits in a small time period. Yes, the Internet based stock trading has changed the whole scenario. Now, you only need to click a few mouse buttons and you are done. With the advent of the Internet, the whole world has become small and interconnected. Therefore, even if you are present in any corner of the world, you can invest in the share market and can reap the benefits in the best possible way.

Though the stock market is as volatile as before, today with advanced market strategy and online tools, anyone can trade without facing any risks. Today, with more competition in the investment world, trading industries are offering impeccable services to attract more and more investors from the market. However, consumers are enjoying the benefits from the company. So, if you also want a future financial security then start investing in stocks now.

The procedure for online trading is very simple: investors need to open an account online. And for that, they are required to search major industry so as to avail more and more services at a very low commission rate. To find the best company, a comprehensive market survey is must. Browse some of the major stock company websites and then compare their services; choose the best company as per your need. Besides this, your online broker also plays a very crucial role in trading. Your stockbroker not only does all kinds of online transactions as per your command, he also provides latest market updates such as all major marker shares that are being launched in the market; how and when to buy and sell shares so as to gain maximum profits, etc.

Online stock trading provides a clear picture about the market scenario, because there is no middleman involved and traders can access all kinds of information from the company website. You can trade at any time and this is again an added advantage of Internet based trading. The advent of easy and effortless trading system combined with intuitive stock trading company websites -- things have become much easier than ever before.

However, the key to successful trading depends on your planning, market knowledge, decision-making capacity and above all your attitude towards the market. For all those who are investing for the first time, it is always beneficial to discuss with experienced traders. And if you have no contacts with traders who are already in this business, then don't worry - consult with online financial experts. These professionals can really help you in planning and investing money in the right direction.

Another important point is your market knowledge and gaining knowledge about the market. Try to understand the market mood and then trade accordingly. You can access open resources that are available on the net. Market analysis is a must before the buying and selling of stocks. Therefore, it is inevitable to learn first and then reap the benefits from the market. There are many investors, who with their positive attitude and knowledge are making profits from the same market. So, what are you waiting for? Invest now and live your whole life happily.

Stock Broker Listings

The rapport amongst stock exchanges like New York, London, Singapore, Hong Kong, Malaysia and over lapping of trading at all the stock exchanges all around the world has made investors aware of the importance of listings. The internet technology has made stock broker listing an essentiality which cannot be overlooked.

Stock brokers are an indispensable lot for those who have their hands on both the purse and the pulse of the stock market. They represent the parent investor and deal with the changes taking place in stock markets in such a way that investor is safe and sound as far as returns on investments is concerned. They maintain and sustain steady relationship with the investor family.

With the spread of stock market business, investors need to identify brokers in other parts of the world who would represent their clients as if operating from their native country. Also, the local and the resident stock broker could deal with affairs stock exchanges elsewhere in the world at par with local or national conditions.

Listings are essential for investors because it provides choice and independence. Internet has come truly handy with the appropriate stock broker and stock market search box becoming available. It is a "custom search engine" by Google and covers the very best of stock market websites.

The investors can have access to highly customized stock market search results. There would be no need to go through millions of unrelated pages. Stock brokerage listing serves as a tallow page in the directory the investor is free from unwanted hassles and is more organized.

Brokers have their individual skill sets and knack for controlling the stock market. Just as a person has different cooks, tailors, hair dressers, etc to suit individual requirements, an investor also need to seek advice of different stock brokers who have wisdom and experience in guiding investors.

But beware, usually it is not feasible to hire too many brokers to maintain diverse portfolio in different sectors. Thus it is a good idea to look up good stock broking firms from the broker listings available in the local yellow pages or on the internet.

Any stock broker listings and the information provided under it can be created, updated and retained till nine years. It can be refreshed and updated while confining it to a central source. This usually goes well with investors who might have stored brokers information at various sources. Thus keeping information in this manner becomes much unorganized. Moreover, it also poses a risk that the information could be stolen, tampered or affected adversely by any unknown or unexpected circumstances.
Stock broker listings at a centralized place are much safer and efficient manner. The centralized storage data centers are usually equipped with state-of-art technology.

In conclusion, these listings are constantly updated and new entrants are also constantly updated. Thus, if you look up stock brokers for any local area under these listings, you would find more update information rather than digging into your old databases.

Discount Stock Brokers

In the days before discount brokers, only the wealthy invested in stocks. After all, before discount stock brokers, commissions on trades were typically over $100.

In order to get your commission down to 1 percent, as recommended, you'd have to buy $10,000 worth of stock at a time.

The Father of All Discount Stock Brokers - Charles Schwab

Luckily, there came Charles Schwab, first of the discount brokers. His namesake company slashed commissions down to around $40 per trade, which made it more affordable for middle class people to invest.

As more discount brokers entered the field, Charles Schwab cut rates even further. Schwab was always looking for ways to streamline operations, cut costs, and pass the savings on to customers. These strategies are what made them the greatest of all discount stock brokers in the pre-internet age.

Dot-Com Boom - A Real Boom for Discount Stock Brokers

Without Charles Schwab, the person and company, stock trading probably would have forever remained the domain of the rich.

But as Schwab ushered in an entire crop of discount brokers, these new firms were always looking for ways to innovate. One of these up-start firms was E-Trade, the first of the internet-based discount brokers.

By not even having physical offices or human "brokers" sitting behind desks, E-Trade was able to cut costs even further. As other discount stock brokers went online, competition intensified and the cost of trades continued to go down.

Soon, everyone with an internet connection and a little extra money was checking out the online discount brokers, opening accounts, and making easy money during the fabled dot-com boom.

Now You Have Your Pick of Discount Stock Brokers

There are now dozens of online brokers to choose from. E-Trade, Ameritrade (now known as TD Ameritrade, after acquiring rival TD Waterhouse), and Charles Schwab have been joined by new brokers such as Options Xpress, Fidelity, FirstTrade, ScottTrade, and Sharebuilder.

Although the number of web-based brokers might seem staggering at first, the good news is that the crowded market place is great for the consumer. The price of trades with discount brokers has been pushed down to around $7.

A few discount stock brokers charge more than this, but in doing so, they offer extra perks. Competition has led many discount brokers to offer nearly full-service level features.

What About the Offline Discount Stock Brokers?

The bad news, if there is any, is that brick-and-mortar discount brokers have become pretty much a thing of the past. After all, it's extremely difficult to compete with the low prices of the online brokers when you have to maintain an office in the real world.

Most offline brokers are "full-service brokers," meaning you pay them to give you advice. For interested investors, this advice certainly isn't worth paying for. In fact, the average full-service broker knows a lot less about the market than you probably do if you're reading this.

Take Edward Jones, for example. It's advertising campaign is designed to send the message that "investing is hard" and that "only professionals should do it." Yet if you look online, you will see that Edward Jones aggressively markets its offices as franchise opportunities.

A kid right out of college with well-heeled parents could open an Edward Jones in your neighborhood - do you want to pay for his advice?

If you're uncomfortable making tough investment decisions, look into some diversified mutual funds. If you want to be in stocks, you probably don't need a full-service broker to hold your hand.

Investigate the different discount stock brokers and find the one that's right for you.

Role Of Online Stock Brokers

In this ever-fluctuating financial world, it is very difficult to know the best way to go about making your money work for you. For generations the stock exchange has given consumers the opportunity to invest their money into companies that they felt would perform solidly, thus increasing the worth of their stock. In essence, the stock market acts as a facilitator between buyers and sellers, as they exchange stock that they hold in companies.

These companies use the money they receive from their investors to further their business and increase profits; increased profit means a higher worth for the stock. And round and round it goes. Traditionally, those looking to invest went to a stock broker in any number of brokerage companies who would assist the investor in the buying and selling of stock and the building of their financial portfolio.

But in this age of the Internet, investors need only turn on their computer to be linked into the stock exchange. Subsequently, to keep pace with this changing economy, online stock brokers entered into this new world of finance in order to assist virtual customers in achieving their financial goals.

Online stock brokers work within investment companies that offer online resources as either their entire service or as part of their traditional brokerage service. Some of the more commonly used online stock brokers are Ameritrade, ETrade Financial, Fidelity, and Schwab. Such brokers operate much as traditional brokers - assessing the investor's financial situation, the financial plan they want to execute, and the stocks in which they are interested.

Working through these online stock brokers, investors create an account where they can access their financial information at the click of a mouse. Online brokerage houses offer an extensive amount of information in order for investors to make informed decisions regarding their trades; stock quotes are kept scrolling at all times on the website; historical performance on each stock can be accessed; and in-depth information regarding each company's history and financial status is available for investors to perform research prior to investing.

Investors turn to online trading and online stock brokers for a variety of benefits, not the least of which is low broker fees; online broker fees generally run between $7 and $10 per trade. There is also the control investors have to make decisions on behalf of their own portfolio.

Investors are able to choose what stocks they want to buy - regardless of what the stock broker prefers. Online stock brokers - unlike traditional stock brokers - do not exert much control over the stocks of the investor. Online trading offers investors a whole new level of independence.

The world of investment has changed; no longer are investors required to physically visit their stock brokers in order to examine their portfolio, set financial goals, and buy and sell commodities. Today's savvy investors work from their computers along with online stock brokers in order to be hands-on participants in their own financial future.

Stock Market Wisdom

Once upon a time, there was a young hare, a hotshot rabbit investor who would always brag to anyone that would listen and that he was the smartest, fastest, best performing investor in the world. He would constantly tease the old tortoise about his slow, solid investment style.

Then, one day, the annoyed tortoise answered back: "There is no denying that you are very aggressive in your investment strategy. You take very high risks and get high returns. But even you can be beaten."

The young hare squealed with laughter. "Beaten? By whom? Surely not by you. I bet there's nobody in the world that can win against me, because I'm so good. If you think that you can beat me, why don't you try?"

Provoked by such bragging, the tortoise accepted the challenge. Each of them put an equal amount of money into a new account and the race was on. The hare yawned sleepily as the meek tortoise trudged slowly off.

As might be expected, the tortoise invested in high quality blue chips, companies with household names.

The hare, as anticipated, invested his money in dotcom stocks and options.

You know the story. The aggressive hare jumped out to a big early lead. In a rising market, the highest risk stocks perform the best. This is called momentum investing. Money flows into the investments that are performing the best.

The hare, having jumped out to such a large early lead, stopped paying attention to the market environment. Basically, he fell asleep. He thought to himself, "I'll have 40 winks and still remain way ahead of that stupid old turtle."

The hare awoke from his sleep and gazed around looking for the tortoise, who was nowhere in sight. Unfortunately, while he was sleeping, dreaming about what he would do with his winnings, the market turned against him.

His very high-risk portfolio had taken a terrible beating and was now practically worthless.

The tortoise, a Warren Buffett style investor, had passed the sleeping rabbit long ago. He had been plodding forward, steadily, since the beginning of the contest. The Tortoise never for a moment stopped, but went on with a slow but steady pace straight to the end of the course.

The hare realized that the tortoise was way ahead of him, and away he dashed. He leaped and bounded while gasping for breath, but it was too late. The tortoise had beaten him.

There are two very important lessons to be learned here.

First – slow and steady wins the race.

Second – never confuse your own intelligence with a bull market.

Stock Market Investing - Top 10 List

The 10 dumbest things investors say to advisors.

1} When my investment gets back up to what I paid, get me out.

This is surely a big mistake. That stock has absolutely no idea that you're waiting for it to go up so that you can sell.

2}The stock is selling at $3.00 a share. How much can I lose?

$3 multiplied by the number of shares.
Oh yeah, don’t forget to add in commission.

3} I want to buy shares of XYZ Company. Three years ago, they were selling at $60; now the stock selling at $5.

You can actually make a lot of money investing in good companies when their stocks are out of favor (go to dictionary – look up: “Warren Buffett”). You cannot make money buying junk just because it’s cheap. (Same dictionary – lookup “cheap junk”). If this creates confusion – please see item 2.

4} The stock is up 10 % this past month.

It’s too high, I can’t buy it now. Have you ever heard of a long-term uptrend? Just because you missed the bottom doesn’t mean you missed the boat. I’ve heard that the shortest time measurable by man is the time between when it’s too soon to buy a stock and when it’s too late.

5} I paid $60 for that stock 3 years ago. Today it’s selling at $4.

I can’t afford to sell. I don’t want to lose so much. I’m just guessing here, but did you say the same thing at $30? $20?

6} I bought the stock at $10 and now it’s $35. I have too much profit.

I can’t sell here. I don’t want to pay so much in taxes. My wish for everybody is that next year you have more than twice the profits and that you have to pay twice as much in taxes.

7} I never sell an investment at a loss. I’m a long-term investor. Eventually, they always come back.

Ever heard of ENRON? Pan American Airlines? Polaroid? Penn Central Railroad? If I were to be your advisor for the next 20 years, I GUARANTEE you that you will have losses. Losses are a very important part of a successful investment program. Since the perfect human hasn’t been created yet, the perfect advisor hasn’t been created yet. Expect to have some losses and plan accordingly.

8} Sell my utilities; buy DOTCOMS.

Stock brokers heard this, a lot, just a few short years ago. Every up cycle investment advisors are instructed to sell safe, but dull investments and buy something with sex appeal that’s moving. The worst possible thing has happened – one of the clients' friends or acquaintances is making more money than they are. It’s the CINDERELLA story. They’ll look great for a short time. Then, the clock strikes “OVER” and their limo turns back into a pumpkin.

9} I know as much about the stock market as any broker.

What would you think of me if I came to your place of business and told you that I know as much about your business as you do? Can you outperform a professional in the short run? Absolutely. You would never say this to your doctor, lawyer or accountant. You wouldn’t even say that to your butcher or your barber. Stock market investing is the only profession where the amateurs think they know as much as the professionals because they might have picked a winner at one time.

10} That total stranger made the investment sound like such a great idea.

Of course he did. That’s his job. Do you remember your mother telling you “Don’t talk to strangers.”? When was the last time you ran with scissors? If you develop the practice of giving your money to strangers, sooner or later, you will come to harm. Or, as Al Capone used to say “Anybody found sleeping in the trunk of a car, deserves to be shot.”

Mastering Your Mind For Stock Market Profit

The stock market is made up solely of buyers and sellers. These buyers and sellers may be super-huge, billion dollar institutions trading enormous amounts of money everyday or private individuals trading just one or two parcels of shares each year. Regardless, at its core, the market is made up 100% of people. People with emotions just like you and me.

You’ve no doubt heard the phrase, “History repeats itself”. Well, despite all of our technological achievements, we have still not mastered our emotions. History in the stock market always repeats itself because the markets are driven by two of the strongest human emotions, FEAR and GREED.

Markets boom and bust with cyclical regularity because of human nature. We are creatures of habit. For those who can accept this and learn to control their emotions, the rewards are outstanding. By recognising emotion in the markets, we can time our entry and exit strategies and profit from history repeating itself time and time again.

Investors like Warren Buffet recognise that investing is 80% psychological and only 20% mechanical. It doesn’t matter how good your system or strategy is. Unless you are mentally focused and as emotionless as possible, you will fail. This is much easier said than done, of course. Why? Because we spend our entire lives developing our psychological feelings towards money. These feelings are often referred to as Comfort Zones.

Comfort Zones

One of the most basic human needs is the feeling of Certainty. When we are certain of our surroundings we can rest easy and enjoy our lives. Uncertainty brings risk and makes us feel anxious and very uncomfortable. Since we were little children we have developed our comfort zones and we all have different comfort zones when it comes to money. Some of us feel that we must work very hard to make money. Others feel that they will never have money, or they don’t deserve to have money.

If you look at the wealthiest people in the world, very few live within these comfort zones. Their money comfort zones see them having an abundance of money. They believe that there is an enormous amount of money, more than enough for everyone to enjoy. They know that there are trillions of dollars circulating the world everyday looking for a home. They know how to make money and that making it is ridiculously simple.

Our emotion of certainty dictates our comfort zones. If we are certain that money is hard to make, then it will be, and we will be certain in our comfort zone. We would probably not be rich, but in our minds, we would be right. Alternatively, if we are certain that money is easy to make, and we just have to know how, than it will be easy to make, and we will be certain in our comfort zone.

Obviously, if your comfort zone has you believing that money is difficult to make, or some other negative feeling, then you will have to break out your comfort zone and climb into another one. When you do this, you will feel very uncertain. This can be very scary and is the reason why, despite all of the opportunities available, 95% of people end up broke or financially dependent when they reach 65 years of age.

The Future Of The Stock Market

You have no doubt heard of the “Baby Boomers”, those individuals born between 1943 and 1963. Following World War II, Australia’s population grew at record levels. Australia was not alone in this phenomenon. The United States, New Zealand and Canada all experienced Baby Booms at a similar time.

The Baby Boomers are an important phenomenon to understand. They have had dramatic effects on society and will substantially impact the way the stock market performs over the next 20 years. For this reason, it is important to understand some of the background on this interesting group of people.

As mentioned, the Baby Boom was experienced in various countries around the world. Part of the reason for the “Boom” was that these countries were immigrant receivers and immigrants tend to be in their 20’s, the prime childbearing years. At its peak in 1957, the US boom hit 3.7 children per family. Canada hit its peak in 1959 with Canadian women averaging 4 offspring each; that was over 479,000 new births that year alone! Australia’s boom was not quite as big as the Canadian or US booms; however, we still have a disproportionate number of people who are today in their 40’s and 50’s. Following the Baby Boom, we had a Baby Bust. Far fewer children were born during the late sixties, leaving Australia with an asymmetrical population graph.

The Baby Bust group, born between 1964 and 1976 are a much smaller group than their predecessors and are commonly referred to as Generation X.

Baby Boomers are a very significant and important group. It is not that, individually, they are any different than any other group who preceded them, it’s just that there are so many of them. Due to their large numbers, Baby Boomers have had a significant impact on our society, making substantial changes as they grew. They have changed the economy, driven housing and other markets and transformed social attitudes and lifestyles.

In Australia and North America today, the fastest growing industries, apart from technology, are financial management, leisure activities and health care. It is very easy to see why. Boomers have been working all their adult lives, usually for someone else. They have raised their children and are now focusing on their retirement. They have had a magnificent time. They have not endured wars, or a depression like their parents and grandparents. They have enjoyed fantastic luxuries such as cars, world holidays and computers. They have been at the forefront of the age of discovery.

Unfortunately, the majority have not prepared themselves financially for their retirements, believing instead that like their parents, they would enjoy a comfortable pension from their employers and/or government. The stark realities are now coming to light. Everybody, especially the Boomers, must take responsibility for their financial futures. Our government will simply not be in a position to provide adequate pension incomes for a growing number of retirees. Today, for every person who is retired, there are four people working, providing income to the government. By 2025, there will be only 2 people working for every retiree. What’s more, the Boomers, as they start to retire, will live longer than any group before them, well into their 70’s and 80’s on average. As a result, it is up to each of us as individuals to take responsibility of our own personal financial planning.

The Australian government has made substantial improvements and preparations for the growing populations. They have introduced a compulsory superannuation scheme which all employers and employees must participate in and which is gradually rising in required contributions, but it will be too little, too late. The key to investment growth is time, a luxury many Boomers no longer possess.

Consider this fact, that at a return of 8% per annum, net of tax, an investment of $30,000 would require over 15 years to triple in value, not even considering the effects of inflation. Most investment strategies commonly promoted to the public boast returns of 4% to 10% per annum. We often see managed funds, superannuation schemes, bank term deposits and property investments offering such results. Many people consider these returns appropriate and even good! Unfortunately, many members of the public require a much greater return on their investments to adequately improve their financial positions before they retire (if they can ever afford to!).

In future issues we will explore ways of generating high returns and how to self manage your own super.