Stock Market - How to Use Fundamental Analysis to Make Trading Decisions

Secured Loans Find great deals on secured loans with Accepted.co.uk's loans search engine! www.accepted.co.uk

Stock Analyzing

Investors come in many shapes and forms, so to speak, but there are two basic types. First and most common is the more conservative type, who will choose a stock by viewing and researching the basic value of a company. This belief is based on the assumption that so long as a company is run well and continues turning a profit, the stock price will rise. These investors try to buy growth stocks, those that appear most likely to continue growing for a longer term.

The second but less common type of investor attempts to estimate how the market may behave based purely on the psychology of the market's people and other similar market factors. The second type of investor is more commonly called a "Quant." This investor assumes that the price of a stock will soar as buyers keep bidding back and forth (often regardless of the stock's value), much like an auction. They often take much higher risks with higher potential returns-but with much higher potential for higher losses if they fail.

Fundamentalists

To find the stock's inherent value, investors must consider many factors. When a stock's price is consistent with its value, it will have reached the target goal of an "efficient" market.
The efficient market theory states that stocks are always correctly priced since everything publicly known about the stock is reflected in its market price. This theory also implies that analyzing stocks is pointless since all information known is currently reflected in the current price. To put it simply:

• The stock market sets the prices.
• Analysts weigh known information about a company and thereby determine value.
• The price does not have to equal the value. The efficient market theory is as the name implies, a theory. If it were law, prices would instantly adapt to information as it became available. Since it is a theory instead of law, this is not the case. Stock prices move above and below company values for both rational and irrational reasons.

Fundamental Analysis endeavors to ascertain the future value of a stock by means of analyzing current and/or past financial strength of a particular company. Analysts attempt to determine if the stock price is above or below value and what that means to the future of that stock. There are a multitude of factors used for this purpose. Basic terminology that helps the investor understand the analysts determination include:

• "Value Stocks" are those that are below market value, and include the bargain stocks listed at 50 cents per dollar of value.
• "Growth Stocks" are those with earnings growth as the primary consideration.
• "Income Stocks" are investments providing a steady income source. This is primarily through dividends, but bonds are also common investment tools used to generate income.
• "Momentum Stocks" are growth companies currently coming into the market picture. Their share prices are increasing rapidly.

To make sound fundamental decisions, all of the following factors must be considered. The previous terminology will be the underlying determining factor in how each will be used, based upon investor bias. 1. As usual, the earnings of a particular company are the main deciding factor. Company earnings are the profits after taxes and expenses. The stock and bond markets are mainly driven by two powerful dynamisms: earnings and interest rates. Harsh competition often accompanies the flow of money into these markets, moving into bonds when interest rates go up and into stocks when earnings go up. More than any other factor, a company's earnings create value, although other admonitions must be considered with this idea. 2. EPS (Earnings Per Share) is defined as the amount of reported income, per share, that the company has on hand at any given time to pay dividends to common stockholders or to reinvest in itself. This indicator of a company's condition is a very powerful way to forecast the future of a stock's price. Earnings Per Share is arguably one of the most widely used fundamental ratios. 3. Fair price of a stock is also determined by the P/E (price/earnings) ratio. For example, if a particular company's stock is trading at $60 and its EPS is $6 per share, it has a P/E of 10, meaning that investors can expect a 10% cash flow return. Equation: $6/$60 = 1/10 = 1/(PE) = 0.10 = 10% Along these same lines, if it's making $3 a share, it has a multiple of 20. In this case, an investor may receive a 5% return, as long as current conditions remain the same in the future. Example: $3/$60 = 1/20 = 1/(P/E) = 0.05 = 5% Certain industries have different P/E ratios. For instance, banks have low P/E's, normally in the range of 5 to 12. High tech companies have higher P/E ratios on the other hand, generally around 15 to 30. On the other hand, in the not too distance past, triple-digit P/E ratios for internet-stocks were seen. These were stocks with no earnings but high P/E ratios, defying market efficiency theories. A low P/E is not a true indication of exact value. Price volatility, range, direction, and noteworthy news regarding the stock must be considered first. The investor must also consider why any given P/E is low. P/E is best used to compare industry-similar companies. The Beardstown Ladies suggests that any P/E lower than 5 and/or above 35 be examined closely for errors, since the market average is between 5 and 20 historically. Peter Lynch suggests a comparison of the P/E ratio with the company growth rate. Lynch considers the stock fairly priced only if they are about equal. If it is less than the growth rate, it could be a stock bargain. To put it into perspective, the basic belief is that a P/E ratio half the growth rate is very positive, and one that is twice the growth rate is very negative. Other studies suggest that a stock's P/E ration has little effect on the decision to buy or sell stock (William J. O'Neal, founder of the Investors Business Daily, in his studies of successful stock moves). He says the stock's current earnings record and annual earnings increases, however, are vital. It is necessary to mention that the value as represented by the P/E and/or Earnings per Share are useless to investors prior to stock purchase. Money is made after stock is bought, not before. Therefore, it is the future that will pay, both in dividends and growth. This means that investors need to pay as much attention to future earnings estimates as to the historical record. 4. Basic PSR (Price/Sales Ratio) is similar to P/E ratio, except that the stock price is divided by sales per share as opposed to earnings per share.
• For many analysts, the PSR is a better value indicator than the P/E. This is because earnings often fluctuate wildly, while sales tend to follow more dependable trends.
• PSR may be also be a more accurate measure of value because sales are more difficult to manipulate than earnings. The credibility of financial institutions have suffered through the Enron/Global Crossing/WorldCom, et al, debacle, and investors have learned how manipulation does go on within large financial institutions.
• The PSR by itself is not very effective. It is effectively used only in conjunction with other measures. James O'Shaughnessy, in his book What Works on Wall Street, found that, when the PSR is used with a measure of relative strength, it becomes "the King of value factors."

5. Debt Ratio shows the percentage of debt a company has as compared to shareholder equity. In other words, how much a company's operation is being financed by debt.

• Remember, under 30% is positive, over 50% is negative.
• A successful operation with ascending profitability and a well marketed product can be destroyed by the company's debt load, because the earnings are sacrificed to offset the debt.

6. ROE (Equity Returns) is found by dividing net income (after taxes) by the owner's equity.


• ROE is often considered to be the most important financial ration (for stockholders) and the best measure of a company's management abilities. ROE gives stockholders the confidence they need to know that their money is well-managed.
• ROE should always increase on a yearly basis.

7. Price/Book Value Ratio (a.k.a. Market/Book Ratio) compares the market price to the stock's book value per share. This ratio relates what the investors believe a company (stock) is worth to what that company's accountants say it is worth per recognized accounting principles. For example, a low ratio would suggest that the investors believe that the company's assets have been overvalued based on its financial statements.

While investors would like the stocks to be trading at the same point as book value, in reality, most stocks trade either at a value above book value or at a discount.

Stocks trading at 1.5 to 2 times book value are about the limit when searching for value stocks. Growth stocks justify higher ratios, because they grant the anticipation of higher earnings. The ideal would be stocks below book value, at wholesale prices, but this rarely happens. Companies with low book value are often targets of a takeover, and are normally avoided by investors (at least until the takeover is complete and the process begins anew).

Book value was more important in a time when most industrial companies had actual hard assets, such as factories, to back up their stock. Sadly, the value of this measure has waned as companies with low capital have become commercial giants (i.e. Microsoft). Videlicet, look for low book value to keep the data in perspective.

8. Beta compares the volatility of the stock to that of the market. A beta of 1 proposes that a stock price moves up and down at the same rate as the market overall. A beta of 2 means that when the market drops the stock is likely to move double that amount. A beta of 0 means it does not move at all. A negative Beta means it moves in the opposite direction of the market, spelling a loss for the investor.

9. Capitalization is the total value of all of a company's outstanding shares, and is calculated by multiplying the market price per share by the total number of outstanding shares.

10. Institutional Ownership refers to the percent of a company's outstanding shares that are owned by institutions, mutual funds, insurance companies, etc., which move in and out of positions in very large blocks. Some institutional ownership can actually provide a measure of stability and make contributions to the roll with their buying and selling, respectively. Investors consider this an important factor because they can make use of the extensive research done by these institutions before making their own portfolio decisions. The importance of institutions in market action cannot be overstated, and accounts for over 70% of the dollar volume traded daily.

Market efficiency is a marketplace goal at all times. Anyone who puts money into a stock would like to see a return on their investment. Nevertheless, as before-mentioned, human emotions will always drive the market, causing over- and undervalue of common stocks. Investors must take advantage of patterns using modern computing tools to find the stocks most undervalued as well as develop the correct response to these market patterns, such as rolling within a channel (recognizing trends) with intelligence.

Random Stock Market Behavior

Secured Loans Find great deals on secured loans with Accepted.co.uk's loans search engine! www.accepted.co.uk

Gambling your Way to the Market
If you have the money and would like investing it in the stock market, you would do well by studying first the market. It is important for you to know the stock market behavior and the factors that would influence it. There are some who consider investing in the stock market as some sort of a gamble. That the stock market behavior is just too unpredictable and winning or losing in the stock market will depend on pure luck.

People who considers investing in the stock market as a gamble believes that the market cannot be predicted as to the course it would take at any given time. They think of the market as some sort of a rudderless boat floating by its lonesome self without any set of direction to take. You will be lucky if the tide sets the rudderless boat or stock market behavior in your direction but if not, you lose.

Indeed, because of their belief that investing in the stock market is some sort of a game of chance, there are stock market investors, who would even go to the extent of consulting their horoscope before doing their trade. Many Chinese stock market investors even have Feng Shui experts guiding them when to invest or trade in the market.

The Feng Shui Experience
A clear case of this situation wherein investors of a stock market believes that the stock market behavior is simply erratic, random and governed by luck and even by the positioning of stars and other unseen forces such as Feng Shui was demonstrated in Hong Kong when Financial Secretary Henry Tang presented Hong Kong's Budget for 2004/2005.

He made his presentation in a televised coverage. The Finance Secretary was dressed in a dark suit, white shirt and with a corresponding tie maroon red in color. While he was making his TV budget presentation, the TV screen bottom crawler which indicated real time Hang Seng Index performance, started dropping until it dropped to a low of 180.41 points.

Many Chinese stock market investors who have seen the precarious drop of the Hang Seng Index, which is Hong Kong stock market Index, blamed the entire stock market behavior to the colors of the Finance Secretary outfit during the time he made his TV budget presentation.

They pointed out that the colors of water represented by dark blue or black and metal which has white for its color and fire for red and maroon colors are simply against Feng Shui. This is what triggered the very bad behavior of the stock market when the Finance Secretary went on TV, they said.

Economist on the other hand would simply dismiss this behavior of the market as brought about by the color of the Finance Secretary's outfit due to bad Feng Shui. They reasoned that it was not Feng Shui that made the market behave badly. Rather, it was the belief of the investors in Feng Shui that made the market went down. Thus, in effect, it was human attitude which was fear that caused the market to behave badly.

To point out, they noted that while the Finance Secretary was on TV, many investors watching the proceedings were calling their brokers to sell shares rather than buy because they believe that the colors of the Secretary's outfit carries ominous and dire consequences to the economy because it contradicts Feng Shui, while all the while discussing the country's budget for the year. And because of instant communication through mobile phones, there was suddenly a deluge to sell that even while the secretary was still on TV, the Chinese belief in Feng Shui became evident with the heavy downward spiral of the stock market, all because of his color choice of tie, shirt and suit.

Market Behavior and Public Perception
This clearly shows that the market behavior is determined by the public's perception that will have anything to do with the economy. As many successful stock market traders would say, trading is not determined by gut feel but by how any news or information will affect your gut. In effect, they are saying that a market behavior will depend on the present environment and on the public's perception of the near future.

Seasoned traders debunk the idea that stock market behaves at random and there is really no basis for predicting its movements by using whatever forms of analysis. They reasoned out that just like its human conceivers, the market behavior will depend on the fears and greed of its maker in relation to material wealth and resources as affected by natural factors. History repeats itself, so does the stock market charts that continuously show similar patterns since the late 60s.

The Art of Making Money in Stock Market

Secured Loans Compare secured loans to find the perfect deal for you! www.accepted.co.uk

Most people know that the stock market is unpredictable. Losses in stock market investment are an inevitable part of the trading process. Therefore every stock market trader, howsoever shrewd and experienced he may be, is bound to incur a loss at one time or another.

So before you start trading in the stock market, you must be prepared to suffer losses like every other trader. This, however, does not mean that making money in stock market is more a matter of luck or chance.

This only means that you should make a thorough search, both fundamental and analytical, about the profitability of the stock before investing in it. Having done that you must be prepared to suffer loss since, as already said, the stock market always remains unpredictable.

You have to develop a mind set which should be prepared to take losses in your stride.

What is the use of developing this kind of mind set?

If you understand that losses are part of the stock trading, you will look at your losses with detachment and equanimity like a good sportsman. You will not be shocked and perturbed. You will not lose your perspective and you will be able to prepare yourself for the next game, next trade with a cool mind.

A disturbed mind cannot react properly. It is likely to misinterpret the graphs and charts of the market trends and draw wrong conclusions.

A constantly nagging fear of suffering another loss in the next trade may prevent a trader from investing which would mean that the loss incurred in the previous trade would not be recouped.

If you have a positive mind set and understand that you have to make money in an inherently mercurial market, you try to be realistic instead of perfectionist in stock trading.

A good trading day for a realistic and positive trader will not be one when he makes money. It would be the one when he has made both an extensive and intensive research in the stock he wants to trade in. He has made a thorough planning with discipline and focus and follows each step as per his planned strategy. Making money in stock market for such investors will become easy.

Experts in trading psychology believe that it is important to concentrate upon things which you can easily control. You should not try to lose your focus on attending things which you cannot control.

For example, while you cannot control the price trend, you can control your losses by using the stop loss tool effectively. You can understand the concept of support and resistance levels and use them successfully in your trading.

According to Tim Renolds, you should develop three basic strategies to stop your losses. These are price based, time based and indicator based strategies.

In order to use the price based stop loss strategy, you will have "to make a hypothesis about the trade and identify a low point in that particular stock market." Having done that, you should "set your trade entries near your points, thus making sure that losses will not be overly excessive if the hypothesis fails."

The time based stops involves making optimum use of your time. You should fix up a certain holding period to achieve your target in trading a particular stock. If you cannot achieve your target within that time frame, you should not keep that stock and sell it off.

The indicator based strategy involves understanding market indicators. As an intelligent trader you should become aware of the market indicators and utilize your experience to analyze them to your benefit. The market indicators include volume, advances, declines, new highs and lows and so on.

Experts in stock trading psychology recommend that you should set stops and "rehearse them mentally". It will help to ensure that you follow these strategies thoroughly and benefit from them.

Another important point is that you should immune yourself from the influence of mass psychology. It means that you should resist the temptation to do what the majority of stock traders are doing. You must make up your own mind whether or not you have to buy or sell a stock. You can make up your own mind only when you have done your own independent research and do not listen to the secrets and tips offered by your friends and stock market experts.

Why Investors Should NOT Listen to Market Forecasts

Secured Loans Find the best deal on secured loans with Accepted.co.uk. www.accepted.co.uk

A few months ago I wrote an article called, "Market Forecasting: Investors Beware." I talked about how economists and stock market gurus seem to be consistently wrong, and I provided numerous examples to make this point. In the January 14, 2008 edition of By the Numbers from Direxion Funds, they published a report showing how the forecasters did last year. The year 2007 appears to be a different year, but the same story. One thing the forecasters can claim is consistency because they are consistently WRONG!

* The average prediction made on January 1, 2007 by 58 Wall Street forecasters for the yield on the 10-year Treasury note as of year-end 2007 was 4.88%, an increase of +0.17% over its 4.17% level from December 31, 2006. Instead the actual December 31, 2007 yield did not rise from a year earlier, but fell to 4.02% (source: BusinessWeek).

* 82% of money managers believed in late December 2006 that long-term interest rates in the US would be "unchanged or higher 12 months later." The yield on the 30-year Treasury bond was not "flat to higher" but rather declined from 4.81% to 4.45% during calendar year 2007 (source: Merrill Lynch).

* 56 economists who were surveyed in mid-January 2007 predicted that the average price of oil would be $58 a barrel in the 4th quarter 2007, down $3 a barrel from its $61.05 price of 12/31/06. However the price of oil did not fall but rather rose +57% during 2007, closing last year at $95.98 a barrel (source: USA Today).

* The S&P 500 was up +9.2% YTD (total return) through Friday July 20, 2007, closing at 1534. The headline in Barron's over that weekend stated "It's Still Time to Buy" forecasting an additional +6% rise to 1625 by December 31, 2007. Instead the stock index fell 4.3% to finish 2007 at 1468. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: Barron's).

* As of Labor Day Monday last year (Sept. 3, 2007), there were just four months remaining in the calendar year. The S&P 500 had closed the previous week at 1474. Barron's asked eighty equity strategists to predict where the S&P 500 would finish the calendar year. Seven of the eight saw a rising stock market by year-end with one prognosticator foreseeing a December 31, 2007 value of 1700. The S&P 500 actually finished the year at 1468. (source: Barron's).

Also, from a long term historical perspective here is some more interesting "market forecast" trivia. This is also courtesy of Direxion's "By the Numbers" publication.

* On the morning of October 19, 1987, the trading day that ultimately resulted in the largest one-day percentage loss in the history of the S&P 500, the Wall Street Journal ran a front-page article with the subtitle "Some Stay Bullish, Believing Downturn is Temporary." The S&P 500 fell 20.5% that day (source: Wall Street Journal).

* On August 13, 1979, BusinessWeek ran a cover story titled "The Death of Equities." The S&P 500 closed at 107 on August 13, 1979. The S&P 500 closed calendar year 2007 at 1468 (source: BusinessWeek). Apparently equities didn't die...

* At the close of business on Wednesday October 9, 2002, the S&P 500 bottomed at 777 before beginning a bull market run that gained +101% to peak at 1565 on October 9, 2007, exactly five years to the day after the bear market bottom. The headline in the business section of USA Today on Thursday morning October 10, 2002 was "Where's the Bottom, No End in Sight" (source: USA Today).

The moral of the story is that forecasts make interesting conversation and trivia. Just don't use them to try to make money.

Understanding what makes the Stock Market Move Up and Down

Secured Loans Find great deals on secured loans with Accepted.co.uk's loans search engine! www.accepted.co.uk

Successful investing requires more then just a little bit of know how and a dash of luck. It requires a cool head, an analytical mind, and the ability to make quick money decisions. This is especially true when investing in the stock market. Investing naturally comes with a level of risk. The market's activity fluctuates on a daily basis during the opening and closing bells.

Generally the stock market is supposed to grow in value over a period of time. This growth is actually an average of all of the stocks included on the market. While some may have increased in value throughout the day, other stocks will have fallen in value. In some cases growth can affect whole sectors. A sector is a bloc of companies involved in a specific type of business.

Movement in the market is affected by a number of different factors. News reports affecting a specific industry can cause investors to want to increase their holdings, or negative news can cause investors to exit as quickly as possible. These however, are not hard and fast rules. In some cases favorable news can result in lower stock prices as more investors try and sell their shares then are willing to buy, once the stock price falls, it can rise quickly again as even more investors are interested in "buying low".

According to analysts, the erratic movements of the stock market can sometimes be attributed to the large number of inexperienced and amateur investors. This can cause the irrational behavior sometimes seen. Mass panic has been blamed more then a few times for making the market move in directions that completely contradict normal rules of behavior for the stock market.

Amateur investors have a tendency to make decisions based on press releases or rumors that is sometimes not even related to the value of a stock itself. Other causes could be the activity of day traders. Day traders usually trade in such large volumes that they can affect a stock's price either negatively or positively.

Still other ways the stock market can be swayed is by a coutry's attempt at correcting inflation. Usually raising or lowering the interest rate does this. These rates are an indicator of the financial situation for a country. If rates are either raised or lowered, the market activity will usually be influenced.

Some companies are able to increase their individual stock prices by releasing quarterly reports showing they have met or exceeded their profit forecasts. Also releasing information about new products or technology that can increase that particular sector's value.

Conversely, if a company reports that they fell short of profit projections, the value of that companies stock will usually go down as investors sell off some or all of their stocks. Large shifts are usually due to overreaction to changes in risk.

Without the assistance of a professional, the market can be an unforgiving venture for the casual investor. This trend has begun to change due to better resources being available to investors on all levels. Research is a must for any investment.

Why Does the Stock Market Price Rise and Fall?

The question about what moves the tock market is quite complicated. There are several visible and invisible factors that cause the rise and fall in stock market. There are several issues on political, economic and social level that include inflation, change in interest rates, earnings of the people, oil and energy prices, war, peace and terrorism, political and domestic situation and so on. While some of these factors may have long-term consequences for the stock market, others may have only short-term implications.

What, however, drives the market crazy is the uncertainty factor. What the stock market is most sensitive to is the surprises. When something unusual occurs in the country, the stock market immediately reacts to it. Stock market radars are extremely sensitive to changes.

This can be illustrated by an example. If the Federal Reserve Board's Open Market Committee-Fed- thinks of raising the interest rates by one quarter percent, the stock market will not react much. If contrary to the expectation, the Fed raises the interest rate by one-half percent, the market will feel shocked.

So any news which can surprise the market can rattle it, be it on the economic front, terrorist attack and similar other incident. If the news is really good, it also shows its impact in form of rise in stock prices.

The cumulative effect of these factors, whether good or bad, creates market phases such as bulls phase, bears' phase or secular phase.

A bull market is also referred to as a bull run. A bull market is characterized by a rise in stock prices. It keeps most investors happy. It creates and strengthens their confidence and makes them optimistic about the returns on their investments. Therefore they tend to invest in stocks in the hope of making big in the near future.

A notable example of bull market was in the 1990s when the US and several international markets had a very happy time because the financial markets went up very rapidly. The US stock markets had a bull run from 1983 to 2007 except for brief periods of slumps.

Bear market is associated with fall in prices and lots of pessimism. Investors fear losses. A negative sentiment prevails in the market and investors want to sell their stocks fearing further downfall.

The most glaring example of bear phase in the history of United States was after the Wall Street Crash of 1929 that continued from 1930 to 1932 generating what was called the Great Depression. A milder version of bear market occurred from about 1973 to 1982 when the economy became stagnant. It resulted in energy crisis and high unemployment in the early 1980s.

A bear market is often characterized by the constant price fluctuations. A bear market does not mean just a simple fall in stock prices. It may result in substantial price fall. Although you cannot give a clear definition of bear market, it is often characterized by a fall in price by around 20% in a period of two months. A recent example of bear market is current state stock markets of world in the year 2008.

A bear market should not be confused with a period of correction. Correction also results in fall in stock markets, but a period of correction is usually short lived. Moreover correction usually occurs during the bull phase. The price fall does not surpass 15-20%. The bear markets last longer and suffer much greater price falls from top to bottom.

A period of correction in stock prices is usually a welcome opportunity for smart stock market investors. They try to buy high value stocks when most people try to sell them away at reduced prices. The profit from their sales as soon as the correction period, which is usually short lived, is over.

When the stock market price shows downward trend, the analysts begin to debate whether it is actually a correction, a rally, or the start of a bear market or even a bull market. In any case it is usually impossible to arrive at any correct decision. In fact, whether the market is actually passing through a correction or a truly bear phase can be determined only after that phase is over.

It must, however, be noted that a bear market howsoever depressing it may be, rarely wipes out the real (inflation adjusted) gains made during the previous bull market. On the other hand the bulls that succeed the bears often make up for the real losses of any bear market.

Secrets Of Online Trading And Stock Market Hours

Most people would liken stock trading with gambling. However, in truth, the two couldn't be more different. In fact, it isn't simply buying and shares as well. Developing a good trading strategy is the key to making it in the stock market. A stock market simulator, is an online game application that duplicates aspects of real-life stock markets, from trading strategies and information, down to the varying stock market hours of the different stock exchanges. Read on and know more about how you can learn and practice trading with an online stock game simulator.

Two types of online stock game applications are available online for you to practice your trading skills and strategies. Naturally, no real money is involved; play money is used, so you can practice it without the financial risk. The two types of simulators are: Financial and fantasy stock game simulators.

If you want to practice trading through a fictional portfolio based on real entries, scenarios and stock market hours, then the financial stock market simulator is the best one for you. Because this type of simulator downloads and processes real and actual numbers and information, most online trading websites that offer these free stock games use a delayed data feed, that sends the information well after the end of the stock market hours. This prevents any abuse of the simulator and the system by unscrupulous traders who want an edge before the start of the stock market hours of the next day.

Most online simulator systems ensure that the stock market information and data may not be used to do actual trading before, during and after stock market hours using their information. Safe, reliable and enjoyable, a financial stock market online simulator is a great way for you to practice actual stock trading scenarios and gain experience and a working strategy before you move up to the real thing.

Another type of simulator is the fantasy simulator. This type lets you practice stock trading through thoroughly hypothetical yet amusing settings. While it retains many essential features of the stock market like premium picks and options, trading tickers, regular market hours, other traders, among others. But unlike the financial simulator application, fantasy simulators feature imaginary stocks that, while representing real items, would never be actually traded in a real stock market trading setting.

Traded items in fantasy stock market simulators would include questions on how long books will last on selected bestseller lists, the box-office success of specific movies, antics of infamous celebrities, rankings and statistics of sports teams and events, and more. The value of a fantasy market simulator is in its application of principles and how these may work given a real setting.

The simulator uses the analogy to teach anyone with no background in trading understand how it works. Fantasy stock market simulators use these items because they are familiar to a lot of people, thus opening opportunities for learning online stock trading to more and more people. This is one way where you get to practice stock trading techniques and strategies while having fun.

Getting the hang of how shares are bought and sold, and how other variables like stock market hours affect your investments are all part of your learning experience. Learning the ropes with a stock market simulator is one of the best ways to get you started with trading stocks.

he Art of Making Money in Stock Market

Most people know that the stock market is unpredictable. Losses in stock market investment are an inevitable part of the trading process. Therefore every stock market trader, howsoever shrewd and experienced he may be, is bound to incur a loss at one time or another.

So before you start trading in the stock market, you must be prepared to suffer losses like every other trader. This, however, does not mean that making money in stock market is more a matter of luck or chance.

This only means that you should make a thorough search, both fundamental and analytical, about the profitability of the stock before investing in it. Having done that you must be prepared to suffer loss since, as already said, the stock market always remains unpredictable.

You have to develop a mind set which should be prepared to take losses in your stride.

What is the use of developing this kind of mind set?

If you understand that losses are part of the stock trading, you will look at your losses with detachment and equanimity like a good sportsman. You will not be shocked and perturbed. You will not lose your perspective and you will be able to prepare yourself for the next game, next trade with a cool mind.

A disturbed mind cannot react properly. It is likely to misinterpret the graphs and charts of the market trends and draw wrong conclusions.

A constantly nagging fear of suffering another loss in the next trade may prevent a trader from investing which would mean that the loss incurred in the previous trade would not be recouped.

If you have a positive mind set and understand that you have to make money in an inherently mercurial market, you try to be realistic instead of perfectionist in stock trading.

A good trading day for a realistic and positive trader will not be one when he makes money. It would be the one when he has made both an extensive and intensive research in the stock he wants to trade in. He has made a thorough planning with discipline and focus and follows each step as per his planned strategy. Making money in stock market for such investors will become easy.

Experts in trading psychology believe that it is important to concentrate upon things which you can easily control. You should not try to lose your focus on attending things which you cannot control.

For example, while you cannot control the price trend, you can control your losses by using the stop loss tool effectively. You can understand the concept of support and resistance levels and use them successfully in your trading.

According to Tim Renolds, you should develop three basic strategies to stop your losses. These are price based, time based and indicator based strategies.

In order to use the price based stop loss strategy, you will have "to make a hypothesis about the trade and identify a low point in that particular stock market." Having done that, you should "set your trade entries near your points, thus making sure that losses will not be overly excessive if the hypothesis fails."

The time based stops involves making optimum use of your time. You should fix up a certain holding period to achieve your target in trading a particular stock. If you cannot achieve your target within that time frame, you should not keep that stock and sell it off.

The indicator based strategy involves understanding market indicators. As an intelligent trader you should become aware of the market indicators and utilize your experience to analyze them to your benefit. The market indicators include volume, advances, declines, new highs and lows and so on.

Experts in stock trading psychology recommend that you should set stops and "rehearse them mentally". It will help to ensure that you follow these strategies thoroughly and benefit from them.

Another important point is that you should immune yourself from the influence of mass psychology. It means that you should resist the temptation to do what the majority of stock traders are doing. You must make up your own mind whether or not you have to buy or sell a stock. You can make up your own mind only when you have done your own independent research and do not listen to the secrets and tips offered by your friends and stock market experts.

Investment Strategies For the Stock Market

When it comes to Investment Strategies for the Stock Market most people believe that there is only one safe strategy.

'Buy and Hold'

The reason why most people believe that this is the safest investment strategy for the stock market is because that is exactly what their financial advisors have told them. Have you ever heard the phrase

"The key to successful investing is Time In the Market NOT Timing the Market"

I believe that this is a lazy approach to investing and is really just an excuse to hide the fact that some financial advisors have no idea what the market is doing. Wouldn't successful investors use multiple investment strategies for the stock market? If the market is at a record high and there is a chance of a correction then surely there is something that you can do (other than selling your stocks) to protect some of your profits?

The reason why financial advisors don't want you to know about any other investment strategies for the stock market (other than buy and hold) is because it isn't in their interest for you to know about them. They want you to remain reliant on their advice and have you feel as if the stock market is a very scary and dangerous tool - only to be tamed by the so called experts.

What is your opinion? I certainly believe that at times the stock market can be very scary and dangerous but like any thing; the more you educate yourself the more comfortable you will feel with it.

So what are some Investment Strategies for the Stock Market other than buy and hold?

Let's have a quick look one very simply investment strategies that can be used to great effect on any stock market.

Covered Calls

This is one of the most effective, low risk investment strategies that can be used on the stock market. The basic idea to sell call options on a stock that you own. What? I hear you saying. In simple terms it means that you are renting out your shares for a monthly premium and in return you are giving somebody the option to buy your shares at a predetermined price that is higher than what you paid for them.

Let's say you own 1000 XYZ shares that are worth $15.00 each. People will pay you a monthly premium to have the option to buy these XYZ shares at a predetermined price within a predetermined time frame.

For instance someone might offer you $500 for the right to buy your shares at $16.00 within the next month. Why would they do this? Because if the shares happen rise up to $18.00 they will be able to buy 1000 XYZ shares at a $2.00 discount per share ($18-$16).

The great thing about this strategy is that both parties can win e.g. If this was to happen you would be happy too because you would get to keep the $500 premium and you would also make $1.00 from every share that you sold because you bought them at $15.00 and sold them at $16.00.

What happens if the share price was to go down?

If the share price was to go down from $15.00 to $13.00 then you would still get to keep the $500 premium which would reduce your paper loss from $2.00 per share to $1.50 per share.

Writing covered calls (or renting out your shares) is one of the most commonly used investment strategies by the rich. It is a great low risk low risk investment strategy for the stock market that everybody deserves to know about.

So there you have it a simple investment strategy for the stock market that can help increase your cash flow and also gives you downside protection. What more could you ask for in a stock market investment strategy? So next time you see your financial advisor ask them about covered calls and see what response you get. My bet is they probably won't even know what you're talking about because their university course didn't teach that subject.

An All-Or-None Stock Market Order - What is It?

This might sound like a good thing for the investor, but it does need a large amount of money to be able to manage it well. Stockbrokers do not give priority to all-or-none (AON) orders, however, and the investor would be well advised to make sure that there are sufficient stocks available to make his or her order achievable before placing the order.

Here is an example to illustrate what is meant by an AON order. There are 700 of a particular type of shares available, but an investor wants to by 1,000 of them. If he places an AON order for 1,000, then he will have to wait until there are at least 1,000 of the shares available. In the meantime, however, the value of those shares could rise, which would cost him a lot more for the 1,000 shares than he was originally prepared to pay. There is also the question of whether the stockbroker can get the order through when the time comes.

When the full quantity of stocks does become available, the value could be lower, or might have remained the same as it was at the time of placing the AON order. The lower price is particularly likely if there has been a bear market, when lots of people are selling their shares, and this causes values to drop. In the case of an AON order, the investor will now spend less on his purchase than originally planned, and this means that the risk associated with the AON order is less.

Inflation is the biggest problem in connection with AON orders, because the investor might have to spend more money than he originally wanted. He could of course try to cancel the order, but if this is not possible he will have to go ahead and purchase the shares.

Having placed an AON order, there is of course also no guarantee that the requested stocks will be available, and they may not be available for quite some time, perhaps even a number of months. Again, the stock market investor may decide to cancel the order during this time, and not receive the shares he ordered. Because of the low priority allocated to AON orders by stockbrokers, this wait and subsequent cancellation is quite a common occurrence.

If you do decide to place an AON order, then be careful to select a stockbroker who is experienced with these orders and can be relied upon to do his or her best for you in this regard. Be wary of a stock market broker who is likely to cause delays in your order, because of their low priority for him.

Relative Market Share Profit - What Exactly Is It?

Relative market share profit is one of the key indicators to be used when selecting a stock to invest in. The market share numbers is simply a percentage that shows how much of the total sales in a sector or market a company makes. For example in the commodities market lets assume the global annual sales of raw sugar cane are $200 million. If Company A has annual sugar cane sales of $55 million then its global market share is 27.5% (55m / 200m).

Market share is a good indicator of a company's progress if measured over a period of time. Quite often you can plot together the market share over the last few years from information sourced from annual reports, industry publications of market research available on the internet. By looking at the relative market share over a period of time, alongside some other key performance indicators such as profitability can be invaluable to achieve smart stock investing.

A company may have aimed to increase its market share, which is obviously good however to achieve this it may have to reduced the prices it charges. By reducing the profit margins to increase market share the company may have overall reduced its profit. The full effect of this can only be measured by performing relative market share profit analysis.

Such equations and ratios should however be considered alongside strategy information. Many successful companies are highly successful despite having very small market shares. A good example is the car manufacturer Ferrari. Their market share of the entire car market globally is well under 1% however they only target a very small niche of customers, the very rich. By targeting their product to this niche they are able to dominate it and post excellent profits, despite their tiny market share.

Market share, in strategic management and marketing, is the percentage or proportion of the total available market or industry sector that a company operates in. Market share is one of the fundamental analysis tools that many brokers use to pick stocks.

Market share can be expressed as a company's sales (revenue) in a particular industry or sector divided by the total sales revenue available in that market. Alternatively it can also be expressed as a company's unit sales volume divided by the total volume of units sold in that market (non monetary terms).

Relative market share profit is an extension of market share that takes the market share of a company (in percentage terms) and multiplies it by the revenue of that firm.

The figures required to calculate the relative market share profit of a company can usually be sourced from annual reports or in articles or market research that has been carried out. The internet is probably the best place to start this type of research.

Both increasing market share and profit are two of the most important objectives used in business. However they are not linked. Sometime to increase their market share, a company may have to forgo profits by reducing its prices. Conversely focussing on a smaller sector of the market may allow the company to charge premium prices and increase margins and profits.

When relative market share profit calculations are used as an analysis tool to aid stock picking for investing in the equity markets, they can provide more insight to a company and its competitors than many other ratios.

Other investment ratios that are of use to stock investors include return on investment (ROI), return on assets (ROA), and profit margin (gross and net).

Increasing Your Slice Of The Market

There is nothing that attracts business more easily than dominant market share. When you have increased your slice of the pie to the point that it dwarfs your competition, the prospects begin to seek you out.

I coach an agent on the east coast who, in the two towns she dominates, single handedly sells more homes than the number two and number three companies in sales and unit volume. Last year she listed and sold 66 properties in her market areas, over which time the top competing companies together sold 59. And the balance just keeps tipping in her favor, because success breeds success and nothing indicates success better than dominant market share.

What is market share? Market share is the percentage of sales that you control in your marketplace. Market share can be based on listings taken, listings sold, buyer sales, sales volume, or sales by units. In any case, your share reflects the portion of total market activity that is represented by you or your company.

To calculate your market share, simply divide your or your company's production against the overall production of your marketplace. For example, if 575 homes sold last year in your market area, and if your company sold 215 of those 575, then your company handled 37% of all transactions and controls 37% of the market activity (215 ÷ 575 = .37).

Also, calculate market share in various market segments. You might find that your overall market share is low but that you have a commanding market share in a certain neighborhood or price category.

Market penetration is another way to describe market share. If you command large share of your market, you've achieved significant market penetration. If your market share is minimal, your penetration is minimal as well.

A single agent can't expect to penetrate a broad market overnight, if ever. For years, I worked the east side of Portland, Oregon - a geographic area that was home to 750,000 people. Even as productive as I was, with 150 home sales a year, my market share when compared to the size of the marketplace was minuscule. I barely scratched the market surface, let alone penetrate it. But within the market niche I'd carved, I was a dominant force.

A niche is a segment of the overall market. Niche marketers serve a select group of consumers whose interests and needs are distinctly different from the needs of the market in general. Think of niche marketers as big fish in small ponds.

You can create a market niche by serving consumers in a particular geographic area, consumers seeking a certain property type, a certain type of buyer or seller, a certain income category, the list is goes on and on. You can create a niche by focusing your efforts and increasing your penetration of FSBOs, expired, non-owner occupied properties, or small multiplexes.

The key to gaining penetration in a niche is focus. You have to decide which smaller section of the marketplace you want to work and quit trying to be all things to all people. Then, once you identify your niche, you need to create presence, penetration, and dominance, following these steps:

* Make contact with prospects in your niche not just once but repeatedly over a compact period of time.

Studies show that it takes six impressions for a consumer simply to recognize or retain who you are. By increasing both the number and frequency of contacts with prospects, you can increase your market awareness, which is a first step in achieving market penetration.

* Make personal contact. For most agents, the preferred method of contact with people located in a geographic segment is mail. They mail and mail and mail their prospects to death. They send refrigerator magnets, note pads featuring the agent's name and face, local football, baseball, or basketball game schedules, annual calendars, and more. Guess what? That's not enough to achieve market penetration.

A few years ago, I started working with a client named Sue who wanted to penetrate a large gated community where the turnover of homes was brisk and the sales prices were high. She'd given herself a tall order because another agent dominated the market and controlled more than a third of all the community's real estate business. Luckily, though, the dominant agent had gotten lazy and reverted to easier contact approaches than face-to-face visits. Sue moved in with well-designed marketing pieces for use in mailing, but also with a well-crafted personal contact strategy. When all was said and done and her market share goal was met and exceeded, she determined that her success didn't stem from marketing pieces that were better than the other agent's pieces. Her success came from the fact that the people who lived in the gated community saw her frequently.

Whenever anyone in her firm listed a property in the community, she'd ask and receive permission from the listing agent to hold it open. Then, prior to the open house, she'd walk around the neighborhood personally inviting the neighbors. In between open houses, she provided the neighborhood with regular market updates. And on a constant basis she was personally very visible in the community, spending a few hours each week meeting and greeting her prospective clients.
When an expired listing came off the market, she showed up at the owners' front door. When a FSBO sign appeared in a front yard, she was there, as well. In fewer than 20 months she went from a single-digit market share to a share of over 30%. Meanwhile, the once-dominant agent went from 37% to less than 20%. She had been beaten by the effectiveness of personal contact.

How to achieve market dominance

To become a dominant market force, you need to take market share from someone else. Dominance involves growing your percentage of the overall marketplace until you control a greater share of market business than any competitor. In some markets, which are shared by a great number of competitors, a 10% share might be dominant. In other situations, where fewer competitors exist, you might need 30% or even a higher share in order to be the dominant player.

To gain market share and dominance, first you need to gain recognition, which results almost automatically from simply doing more than you are expected to do:

* Do more personal prospecting.

* Create more usable market and industry information.

* Have more communication with your clients.

* Do more for your community, by sponsoring picnics, baseball or soccer teams, or community events as a few examples.

Doing more than is expected will earn you recognition and create a buzz about how you are different. Your reputation will be enhanced. Suddenly, rather than being an unknown agent you'll be a "name," a known entity.

Then, with the confidence you build through your awareness-development efforts go one step further. Dare to do things that no one else is willing to do.

Sue, my client in the preceding anecdote, was willing to take the risk of rejection by calling on people and meeting then face-to-face. Her competitor, even though she was the market's dominant force at the time, was unwilling to subject herself to the potential rejection. Of all the approaches I've seen, I believe that establishing more personal contact is the easiest, most cost-effective way to move to a position of dominance in a real estate market.

By taking each of the preceding steps - choosing a market segment, establishing contact, gaining awareness, establishing personal rapport, going beyond the expected, and daring to be different in your communication approaches - over a period of 18-24 months, you will penetrate your target market niche and be well on your way to achieving market dominance.

Doubling Stock Program - Is it the Right Program For You?

The Doubling Stock Program has been on the Clickbank marketplace for over a year now and has been at the top of the list for sales almost since they hit the market. Because they are so popular it is time to take a good look at this program to see if it can make you money.

What is the Doubling Stock Program?

Doubling Stock is a membership site that will provide its members with their pick of a penny stock they believe will double in price in a short period of time. They are able to make this pick by using a software they call "Marl, The Stock Picking Robot".

Who are the owners of Doubling Stock?

Doubling Stock is run by 2 self proclaimed "geeks" Michael and Carl. Michael developed the famous "Global Alpha" computer stock trading model, while contracted to Goldman Sachs. It was Michael's technical wizardry that created the foundation for Marl that Doubling Stock.com system runs on.

Michael then joined forces with Carl, who was a fund manager, to tweek and perfect Marl so that it could be used on a home computer. Once the system was perfected the two of them took Marl to the people and developed a system that allows the average Joe to benefit from the same type of analysis that the big players on Wall Street use.

Does the Doubling Stock Program work?

Well to be honest Doubling Stock is not for everyone. As with anything there is risk involved in the stock market and Doubling Stock deals with penny stocks. In following the picks of Marl there is a very regular pattern of the recommended stocks increasing in price shortly after the newsletter comes out and then dropping in price a few days later. If you purchase the stock right as the newsletter comes out you stand a good chance of making some money. You can also wait a few days and short the recommended stock as the price falls again. For the very shrewd you can do both strategies and really take advantage of the recommended stock pick.

That being said the system is not perfect and there are still some stocks that do not go up in price. Invest with your own comfort level for risk.

What is the catch to the Doubling Stock Program?

Well the biggest catch is in the fine print of the newsletter. At the bottom of most newsletters there will be a statement that is a disclaimer. The disclaimer often states that Doubling Stock will be compensated a large sum of money for recommending the stock pick of the week. This is not uncommon however it does make some people a bit uneasy and question whether the pick is actually a good one or just one they are being paid to pick.

Tips to making the Doubling Stock system work for you:

If you are interested in this program the best strategy is to join the newsletter for a few weeks. During those weeks do not invest any money in the picks. Just watch them, track the trends and hone your skills on how to profit from the information. Eventually you will see a pattern that you can exploit for your gains and realize that this system is either for you or not your cup of tea.

Learn to Analyze the Stock Charts

When it comes to buying and selling of stocks, which is the most crucial phase in trading, your market knowledge plays a very important role. If you have done your groundwork properly, you can easily manage the trading process. However, there are several factors that directly or indirectly influence your trading such as how effectively you have done the market analysis, how have you analyzed the charts, etc.

Since effective trading determines your success in the stock market, investors therefore need to be prepared. As far as market analysis is concerned, which is again the most important factor in the trading process, there are certain things that really matter and determine the effectiveness of the analysis. One of the most important points is the ability to analyze stock charts.

There are certain critical results you can retrieve from the stock chart. But before that you need to ask some questions to yourself: what is the current pattern being followed in the stock market, is the chart smooth or changing with time, is there any specific chart pattern, can I retrieve some important results by analyzing the chart, etc. Once you ask these questions, you get a fair idea of the stock chart.

Trading largely involves buying and selling of stocks. But this simple process needs a good decision making capability - sometimes you need to take quick decisions and without a positive attitude and intelligent decision-making capability - you cannot trade intelligently. So, you have to be more cautious and optimistic about the market.

The new age Internet based stock trading process is much more easier than the traditional brokerage system. In this system, all trading processes are done online and investors need not to consult any middleman. However, your online presence is important and therefore, you need to open an account on the Internet. New investors often ask some common questions like - do they need to know computer and Internet, how safe is online trading and how to open an account online.

These are some of the basic yet important questions that investors always want to know. It is important to mention here that even if you don't have any knowledge of computer or Internet, you can still trading online. When you browse the website, you can find video tutorials and other guidelines - go through the guidelines and then learn all the processes that are involved in trading. Again the most important question is about the safety - since all your account information is uploaded on the web, safety is important. The online trading company websites use hack free advanced software tools and provide full security to the account.

When it comes to opening an online account, it is very important to first search the best company website. Since, there are various websites and trading services available in the market -first list out some of the major sites based on the company profile, services, terms and conditions and present and past market reputation. Once you short list some leading company websites, compare them and then select the best one as per your requirement. Today, companies are offering best services to consumers and charge a very minimal commission rate as well. You can access a wealth of valuable information, market analysis tools, charts, stock quotes, news and more - all in just few mouse clicks.

Investment is important for everyone and Internet based stock trading is the best option one can have. So, don't waste your time - save some money and also some gain profits.

How to Approach the Stock Market

Before an investor can begin to trade successfully in the Nigerian stock market, there are some basic skills that one needs to be able to position oneself for maximum profits.

The Nigeria stock market is made up of two markets, the primary and secondary markets. A sound understanding of how these two markets operate is very vital if you are going to succeed. At this junction, let's x-ray these two markets to understand their workings.

1. THE PRIMARY MARKET

The primary market is where fresh funds are raised, anyone who buys shares in this market does not pay any commission, If a company's IPO is out for the public, all you do is to fill the form and issue your check,

The primary market is the period from the time of the IPO to the point where allotment was done and money returned to those who could not get all they requested for. The primary market is where both new (unlisted) and old (listed) can raise funds in the future either through PO, IPO, RIGHT ISSUES. Also, it is pertinent to mention here, that privete placement activities also are carried out by small sized companies that are aspiring to be listed at floor of the NSE also come to the public to raise funds privately.

2. THE SECONDARY MARKET

In order to have an enabling ground to buy and exit effortlessly, the stock exchange provides the platform for trading in listed company shares by institutions and individual. The secondary market is where potential investors can buy and sell such shares. Those who buy at the primary market who have received their share certificate and those who bought directly from the floor transact business at the primary market.

3. HOW THE SECONDARY MARKET WORKS.

Once a company is listed, trading on its shares commences. The issuer's broker announces the listing of the shares, immediately after which other brokers start trading on the company's shares from that day. Stockbrokers come to trade on behalf of stock brokerage firms; they are members of the Nigerian stock exchange and are represented at the trading floor by stockbrokers.

When a customer wants to buy a stock either by the advice of your stockbroker or on your own understanding, after the agreement on what to buy is reached, the customer gives his stockbroker a written mandate specifying those stocks. He will also fill out a CSCS shareholder's form and transfer forms. The information given enables the customer to receive correspondence from the registrar and CSCS Ltd, In future, it is on these basis dividends, bonuses, annual accounts and reports will be sent to him. The customer will be issued a contract note by the stock broking firm, which is evidence of purchase. When such stock gets to an appreciable height in terms of capital appreciation in price, he fills out mandate for sale, mandating the stock broker/firm to sell on his behalf.

In the final analysis, approaching the stock market requires that you acquire the foundation know-how, so that you can know how to steer your way in the sometimes uncertain waters of stocks investment.

Watch out for other incisive and impact articles.

AMEX - The Third Stock Exchange

American Stock Exchange directors Alan Quasha, Philip Frost and others hit on investment option that the individual investor should consider: The Exchange-Traded Fund that combines the best of two worlds.

Many of us are familiar with the two major U.S. stock exchanges, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ), for very obvious reasons. The NYSE is the stock exchange with the largest dollar volume in the world - the combined capitalization of all its listed companies was over $30.5 trillion (as of 31/12/07) - and its almost 4,000 listed companies make it one of the three stock exchanges with the highest number of listed companies. The NASDAQ has more trading volume per day than any other stock exchange in the world, and with its over 3,900 listed companies it competes with the NYSE for the second highest number of listings (the Bombay Stock Exchange has over 4,700 listings making it the stock exchange with the most listings, yet it has a combined capitalization of less than $2 trillion).

The third largest U.S. stock exchange with over 850 equity listings is the American Stock Exchange (Amex), and while it may seem to pale in comparison to the NYSE and NASDAQ it has many positive attributes that set it above its larger brothers. The Amex has much more liberal policies when it comes to the listing requirements, and this makes it much easier for small and medium sized companies to list. However, there is another aspect of the Amex that makes it attractive to the small investor - and it is here that its uniqueness and innovation is expressed.

In 1993 the Amex gave birth to a new investment instrument called the Exchange Traded Fund (EFT). In conjunction with State Street Global Advisors, Amex launched the first exchange-traded fund (ETF) with the introduction of the S&P 500 index fund (SPDR - colloquially termed "spiders"), which was linked to the S&P 500 Index. Since then, ETFs have flourished across all the stock markets, yet the Amex remains the home and breeding ground of the majority of ETFs. The flurry of activity following the introduction of the SPDR gave rise to many ETFs, many of them index-linked, and the years immediately following the SPDR's burst onto the investment stage coincided with the tenure of Amex governors Alan Quasha and Philip Frost, who together with the Amex leadership nurtured the ETF revolution.

To understand what an ETF is, and also to appreciate its advantages over other investment strategies, requires a basic knowledge of some of the classic investment options available to the private investor. The ETF is in reality a mutual fund that benefits from the advantages of a fund, yet it acts as a regular bond or stock, and thus incorporates the advantages of a stock, thereby eliminating the limitations of the mutual fund. (Many mutual funds - and in turn, ETFs - are linked to indices, which means the funds mimic the successful diverse combination of investments that comprise an index.)

A mutual fund is a collective investment fund which incorporates a basket of shares of listings across the market and it is seen as one of the most solid forms of stock market investment. This is due to its management by professional managers, but primarily due to the fact that it comprises a diverse portfolio covering many spheres of the market, and thus it is less vulnerable to sectorial fluctuations. Not only does it offer the small investor this cross-market diversity, but he is able to invest in numerous and high quality companies that would require funds far beyond the financial abilities of private individuals. (Of course the exact solidity and yield of the mutual fund depend on the declared aims and scope of each mutual fund.)

Regular stocks and bonds are the most basic commodities of a stock market. They are the shares that offer the public ownership in part of the listed company. Unlike shares in a mutual fund that may only be traded at their closing price at the end of the trading day, classic stocks may be traded at any moment, and the price fluctuations during the day can be utilized by investors in speculative activities. Thus the most fluid, dynamic and flexible investment on the stock exchange is the regular stock.

The exchange-traded fund combines the strongest aspects of mutual funds and regular stocks in offering the solidity and diversity of the mutual fund, together with its increased funds and professional management, and also incorporating the fluidity and dynamism of the stock, allowing all the investment activities and real time behavior of the stock. Additional benefits include lower management expenses, as regular brokerage fees apply, tax incentives expressed by lower rates, and the short-term capabilities of the stock. In effect, while investment in a mutual fund resembles an investment in stocks across the market, the ETF allows one to trade in numerous stocks across the entire market as if they were one stock.

With the many benefits of the ETFs, it is no surprise that this market has grown include hundreds of ETFs within only a few years. The Amex remains the fertile ground for the majority of ETFs, and this will continue due to its experience and flexible constitution. This fast growing investment option is estimated to surpass a capitalization of $1 trillion by 2010, and it is certainly one of the prime investment instruments that the individual investor must consider.

Trend Following in the Stock Market

Trend is the general direction of the price in the stock market. Trend is determined by comparing the price and the average volume of trade in the market. The price and volume have a close relation in determining the trend in the market. There are predominant two different trends that are seen in the stock market - the bullish trend and the bearish trend. Then there are some intermediate trends that also exist in the share market. When there are more buyers in the market and the overall market condition is on the higher side, it is the bullish trend. On the other hand, when there are more numbers of sellers in the market, and the buyers' confidence is low, the market is said to be in a bearish side. These two are the most common trend in the market and the price index and volume of trading are the two most crucial parameters for deciding the overall market trend.

As an investor you can effectively gain from following the trend in the market. In fact there is a group of investors who do the trend trading, i.e. buy and sell the stock by trend following in the stock market. This technique is better way of investing in stock market if your objective is to wealth building from stock market. If you are trading in stocks for income then the trend trading is not really a good option for you. There are so many benefits of doing trend trading and they are as follows,

Trend trading is the easiest and safest way of investing in the stocks. All you need to do is identify the trend and make your investments and then close the deal when the trend begins to reverse. That means when the market is bearish and prices of the stocks are falling on a daily basis, select a few stocks that are fundamentally in good position and invest in them. Wait for the trend to reverse and whenever the market is rising and hits the highest level, sell off those stocks and get the profit. To do that successfully you need to have a good research and technical analysis of the stocks. That will help you to determine the entry and exit point of the stocks that is very much important for trading according to the market trend. The technical analysis and fundamental study of the stock together will help you to identify the undervalued stocks in the bearish market as that will most likely give you maximum return when the market trend reverses.

But following the trend in the stock market is only profitable when you are investing in the stock market for long term. To get the benefit from the trend reversals, you have to wait for the right opportunity and if you can do that you can expect to get benefited from 60% to 80% of the intermediate price change. So, keep an eye on the market trend, identify the right stocks and invest in those stocks for sure profit.

Stock Market Strategies

If you are investing stocks and want to make profit from your investments, you need to have some stock market strategies. There are investors, whose buying and selling decisions are largely influenced by people they know. They blindly follow what others are doing without understanding what might be profitable for others might not work for them. The result is inevitable in these whimsical trading and would result in huge loss at the stock market. On the other hand, if you can have a strategy of your own and you meticulously follow it, then there is a better chance that you will succeed in the long run and make profitable stock market investments.

Make a strategy - The first and foremost thing is to draw stock market strategies for yourself. For that you need to have a clear understanding of the available stock types and different methods of doing stock market trading. For example, there are different stock types, such as large cap, mid cap, small cap stocks, penny stocks, sector stocks, growth stocks, dividend stocks etc.

All of these have their own characteristics and not all the stock types are suitable for a specific investor. Then there are trading types, you can do derivative trading, you can invest in cash segment, and you can do day trading or you can invest on long term. After you have gained comprehensive knowledge of the pros and cons of all these trading types and have a clear understanding of the risk associated with each type of trading, take notes on your capacity and your willingness to take these risks. Then you can find a suitable strategy for your stock market investments.

Always adopt a long-term strategy - While investing in stock market, it is always better to have a long-term stock market strategy. This does not mean that you should buy a stock and hold for months and years. Rather a long term strategy is to have a predefined entry and exit points for a particular stock and follow them without fail. That will make sure that you can gain from the trading.

Stick to the fundamentals - While forming your stock market strategies, stick to the fundamental rules of the market. Follow the results of the technical analysis and fundamental analysis and take decisions based on that. Do not get confused with the sudden trend change in the market and never give in to the panic. If you have done your research well and have a well-defined strategy to follow stick to it and you will gain in the log run. To have the best effective strategy for your stock market investments you can also consult an experienced broker or stock market analyst.

Do not surrender to the sentiments - When you do the analysis of the stocks and form your stock market strategies, never surrender to the sentiments and rely on your personal feelings about a particular stock. Remember when it comes to stock market, numbers speak for themselves and if you want to make profit, follow them.

Exercising Stock Options And Taxes - How Do Taxes Work With Stock Options?

Are you confused as to the question of how to deal with your incentive stock options? Or are you worried about owing a large amount of tax on options that you have not even exercised and do not have the cash to pay for it? Well, luckily, if you manage your affairs well and take on board some simple advice, you will be able to avoid owing too much tax on your stock options, and also postpone paying it until you have the cash to do so. Sounds complicated? Not necessarily so. In most cases, if you have a large amount of money tied up in stock options, then you should probably get some professional advice. Financial advisors can help you put together a strategy that maximizes the value of your options. This article is only intended to give you an idea of the steps that can be taken when tax planning with stock options.

First of all, you do not have to pay any tax owed immediately, if you do exercise your stock options. This is the case so long as you do not sell the stock you receive. If you exercise an option to buy some shares, then so long as you do not sell that stock, you do not have to pay any tax at that time.

The second piece of good news is that you can end up only paying 15 percent tax on the options when you do sell. This will apply if you hold on to the stocks for long enough to qualify for a long-term capital gain.

So things are starting to sound a lot better on stock options taxation. By postponing the tax owed until you sell the shares, you can avoid the hardship of having a tax fall due without any money coming in to pay for it. It is similar to the cases in the past where people received valuable paintings or other works of art in a will, and then immediately had to sell the painting in order to pay the tax that was owed on the inheritance. Also, 15 percent is quite a low rate of tax and it should also be remembered that this is the highest rate that can be payable on a long-term capital gain.

Stock Market Scam And How To Avoid Them

With all the prices going high these days, people would instantly grab the opportunity on anything that will make them earn money. And this is basically where fraudulent people take advantage of.

Today, there are many scams as there are starts in the sky. They had been so rampant that people became so aware of its alarming condition. But still, even if they know that there is a bound to be a scam out there, they could not yet distinguish what is a scam and how can they avoid it.

In the industry, one of the proliferating scams is the stock market scams. A lot of people are getting enticed to join these simply because their offer seems so hard to resist.

Why? Because who wouldn't resist a "get rich quick" strategy? These are just petty things but are actually bigger problems than what you thought it is.

For people to know what stock market scams are and how to avoid them, here's a list of the common stock market scam lurking mostly in the Internet today:

1. The "Pump and Dump" stock market scam

This type of stock market scam is mostly disseminated in the Internet. Here, people usually get to see messages posted in the Internet advocating them to purchase a stock at once. This type of scam also urges those who have stocks already to sell their stocks immediately before the value depreciates.

These deceptive scammers claim that they have reliable sources about a threatening development. They even assert that they utilize a foolproof combination of the stock market and the trade and industry data so as to get some stocks.

The bottom line is that this type of stock market scam is detrimental especially to those who are starting small. In reality, people behind this scam would want to manipulate the stock market through small time businesses because small businesses are easier for them to manipulate.

2. Pyramid scam

Just like its motherboard, this pyramid scam in the Net tries to hoard money from the consumers by letting them invest their little amount of money and grow it really big provided that they recruit more people into the company.

These two are the most common stock market scams lurking in the Internet today, and the only way to avoid them is information. It's a must that people should be aware of them, know their styles, and how they recruit people. If in case, they cannot determine if it is a scam or not, they should verify the claims from the right people. That's the simplest thing to do.


nfomercials touting stock trading systems are ubiquitous on late night television. These infomercials generally showcase examples of people turning small sums of money into making $100,000 plus in a year. Sound too good to be true? It is, and don't be a victim by falling for these traps.

There is a lot of people out there touting stock advice and other investment schemes. Some of these are legitimate; some are not. This article will help you identify those "systems" out there that will just suck the money out of your pocket. Here are the top warning signs:

1. The "system" uses options trading. When you buy stock, you are buying a small share of a major company. If you buy a share of McDonalds, you become a very small owner of the worldwide giant. Stock options, on the other hand, are essentially bets on a stock's price. You do not own the stock; you buy an option to buy the stock. You make a bet with another trader about the price of the stock's movement. Unlike the stock market, the stock options market is zero-sum. Whatever you gain, the other guy loses and vice versa. People who succeed at stock options are generally insiders that work at the Chicago Board of Options Exchange. Betting against these guys is like betting Kobe Bryant that you can beat him at basketball.

2. The infomercial (or advertisement) showcases people who make a certain amount of money a day or a certain amount of money during one trade. The proper way of identifying good investors is what percentage they grew their income compared to the market. For example, an excellent investor will make a 15% return on his money in the market when the stock market only produced a 10% return on average during a year. When an infomercial talks about how someone makes a lot of money per day or per trade, they are banking that the viewer knows nothing about the stock market and can be fooled by such claims.



3. The "system" promises amazing returns. An amazing return in the stock market is 13% a year, compared to the long-term average of 10%. If an infomercial is going to lead you to believe that you can double your money in a year or less, run. It's a scam.

4. Most infomercial scams induce you to visit a free seminar, then expect you to pay an exorbitant amount (several thousand) to attend another seminar, then expect you pay an even greater amount for software or other advice. If it follows this pattern, run.