For a trader, an educated guess can go a long way in profit making. Say the trader wants to invest in a particular stock. The first thing that trader will have to do is study the past trends of the stock, its ups and downs and then guess if buying that stock is a lucrative option or not. The easiest method of doing this is by studying something called the chart history of a stock.

The chart history gives the historical perspective of any listed stock. It lists the ups and down of the stock over the years along with various other aspects. For example, if a stock is flourishing and an investor wants to invest in it, he is always advised to refer to the chart history of it first. The chart history will tell him when the stock had flourished previously, how long it had continued to flourish and when it had started decline and whether that decline was steady or rapid.

With information as empowering as this, the risks of investing in stocks can be reduced greatly. Thus the importance of chart history can in no way be undermined to a investor.

The question obviously arises, why a chart? Would it not be better to use raw data, as a reference? Well the answer is simple. A chart can take that financial data and visually represent it in such a way that trends and inconsistencies become very apparent. What would otherwise be rows and rows of plain numbers become visually appealing diagrammatic representations of that same data. This leads to better and faster interpretation of the data that would otherwise take forever to make sense of.

Thus for any investor, a chart history of a stock is invaluable. Stock market matrix, significant swings, secular cycles, generation returns, distorted averages and several other parameters are studied in a chart history. So understanding it is imperative. And instead of raw data, if this data is visualized, the process is facilitated greatly.

For more information on Financial Charts, Flash Charting, visit us at FusionCharts

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1) First and foremost the stock market is just a vehicle for achieving your financial dreams. You can use it to create an income to live on (great for those with no job such as the unemployed and retired), or you can use it to grow your money for some future expense such as your child’s college, your dream home, or even for your retirement.

2) Whichever way you choose to invest you’ll need a basic understanding of how stock market investing works. In the rawest sense, you are basically buying an ownership interest in a company. If that company does well so do you (and vice versa). When you buy a share you become a shareholder and are entitled to share in the profits (through dividends if the company pays them) and attend shareholder meetings where you can vote on company matters and be heard.

However, I doubt you want to become an investor in the stock market for those things. Most people invest because they want their money to grow for them and multiply. This certainly can be done and the stock market offers many ways, which brings us to rule 3 of our stock market investing basics.

3) When it comes to investing, you can invest in stock through a mutual fund, by yourself, or through the aid of a broker. Of these ways I recommend you invest on your own. No one will take care of your money as well as you will. Brokers love to recommend you move from one stock to another, because they make big commissions when you do. Mutual Funds rarely beat the markets because of rules placed on them. The only one you can count on is you, so learn to become a great investor.

4) This now brings us to rule 4 of my stock market investing basics, how do you know when you are a good investor? You use a benchmark, that’s how. The stock market offers many benchmarks but the three most popular are “the Dow”, “the NASDAQ”, and the “S&P 500″. These are indexes whose prices are based upon the stocks they track. For example, the S&P 500 tracks 500 stocks. If those 500 stocks go up on average, the S&P 500 index goes up.

Your goal as an investor is to “beat the market”. What that means is that your investing return should be greater than the return of the major indexes. It is in this way you can tell if you, are someone else, is a great investor. If someone says, “I made 50% this year.” Don’t believe he is a great investor. While it may sound good, if the markets went up 80% that year, this guy did horrible and underperformed the market.

5) Risk vs. Reward. Every investment offers risk, the more risk you take, the more return you should get.
How much risk do you want to take? Risk comes in many sizes. For example, a penny stock has a much greater chance of being worth 0 than a big company such as Microsoft or Wal-Mart. However, a penny stock could easily rise 100%, 300%, or more.

While Microsoft will be safer than a penny stock, it is also much riskier if you put all your money in it and nothing else. For example if in one year Microsoft loses 50%, Wal-Mart goes up 10%, and Apple loses 10%, by investing in only Microsoft you lose 50%. However if you diversify and buy all three, your loss for the year is now only about 17%. As an investor you goal should be to first determine the risk you are willing to take and invest accordingly.

There you have only 5 basics of stock market investing. To learn more about the stock market and how you can get started investing online, get my latest DVD “Stock Market For Beginners” at: http://www.stocklocater.com/recommends/smfb.html

If you want to learn how to trade stocks for a living, for a limited time I’m offering free training at: http://www.stocklocater.com

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In addition to their homes, most Americans have increasingly invested in the stock market. While many of them may have researched in detail the companies they selected, the reality is that most did not and that many individuals did little more than invest in a piece of paper labeled stock. That being said, why not invest in something tangible that has passed the test of time and been used in countless cultures and eras?

Gold first comes to mind and indeed this is the tangible metallic investment of choice. But the reality of the cost, about a thousand dollars at the time of the writing of this article, makes this somewhat steep for most people. This is where silver comes in. Silver is quite affordable and like gold offers the bearer something which never falls to zero unlike its paper cousins in the stock market.

Silver has historically been used in coinage and most investors typically purchase their silver in the form of Silver Eagle dollars or Morgan and Peace Silver dollars. The beauty of these coins, and in particular in the case of the Morgan coins, the historic value they hold adds a tremendous amount to their holder. Actually holding something in your hands which is a hundred or more years old creates a unique sense as to the long standing worth of these pieces. For more than four thousand years, silver has been regarded as a form of currency. In 1964, it lost its role as legal tender in the United States when its intrinsic value rose above the face value of the coins!

Coins can also be easily divested with any coin collector or at many jewelry stores. The security of investing in a hard asset should be clear and the reality of something whose value should increase if the dollar falls in value is something to consider. As with any investments, it’s important to remember that the price of silver has been volatile at times and can fluctuate between industrial and store of value demands.

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The healthcare sector, especially the research and development section in particular has a very noticeable pattern. Early spring time is typically the time that research companies will start to release information about their products that are in development. These press releases will usually be about the different phases of trials the drug is in and the extent of the success, or failure. It is very risky to try and play the news before hand. This is called speculative trading. Speculative trading is when you have a hunch that a company has a good drug and you buy in low before the news comes out in hopes that the news is good.

If, the news is good, then the stock price will go up form where you bought it. In some cases, the stock price can double or triple depending on the news. The opposite is also true though. If the news is bad, the price can plummet and you will take a huge loss. This type of trading is very risky and is more like gambling. The best way to use this information is to check out reliable companies.

The large pharmaceutical companies that have a steady stream of products are your best targets. They already have a solid line-up and are only adding additional medicines. If the news is good or bad, there typically won’t be a large swing in price either way. Be sure to do your own research before buying into any company.

The retail sector has one significant season, Christmas time. There is a lot of shopping during the holiday seasons and these profits or losses can influence the stock price a lot. Getting into a stock at the right time before the season could bring you a lot of profits. As with any stock, it is important to do your research. Look at a company and see what their products are and who they are targeting.

Look at the economy and see if that target group is going to be inclined to shop at your particular stock. After you are satisfied with your research go ahead and do some more research. There is no harm in knowing too much about a company. Trading the retail sector before holiday season is just like trading healthcare before press releases, it is very speculative. As with most speculative trading, it can either bring you a lot of money or you can lose a lot. The next sector is a little more predictable but with smaller profit potential.

The energy sector has two major swings. These swings occur in the winter and summer. People use energy in the winter to heat their homes and energy in the summer to cool them. By narrowing in on the right energy companies, you can buy in during the spring and fall when the prices are low and selling during the peak seasons. As the cost of energy goes up, most of these companies bring in profits. If you time it correctly you can make a modest amount of money very season. This type of trading is also speculative, but it is not as volatile as the healthcare or retail trading.

Some words of advice, if you have any further questions, consult a professional. I am not a professional and these are only thoughts from my own experience about trading. Always be sure to do your own research before investing in a stock. The market is a cruel place filled with many sharks. They are all looking for an easy meal, be sure that is not you. You need to protect your money while making it work for you. A saying that may seem cliche but is very applicable is, “do not put all of your eggs in one basket.” Diversify your portfolio.

The stock market has brought riches to some and heartbreak to others. The difference between the successes and the failures is hard work. There is a very steep learning curve. With hard work and patience you will be able to make money on the stock market. It will not come over night, but when you do start making money it will be well worth the time.

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Trading on the stock market is a risky business.  However, managing this risk and your perception of this risk is the key to successful trading.

The one thing that people fear most about trading the stock market is losing all their money.  One piece of advice that is rarely heeded is ‘Never trade with money you can’t afford to lose’.  This is sound advice.  Many people borrowed money to trade during the Dot.com bubble only to see it all wiped out in the dot.com burst.

So, how do we manage the risk and our perception of it?  Our perception of money is different from person to person.  Someone who earns $1 million a year will not think much of losing $1000 but for the person who earns $15,000 a year, losing $1000 could be seen to break the bank.

The way to change our perception is to think of money as a tool to make more money.  We must detach our emotions from money.  Think about trading with $500, would you be comfortable with that or would you lose sleep at night?  If you’d lose sleep at night then there is too much emotion attached to that amount.  Try using a smaller amount, for example $100.  Would you be comfortable trading with $100?  If this is better then this is your comfort level.  Trade with this amount until you are happier to trade with more.

Becoming comfortable trading with more money comes from experience.  If you find that you’re profiting from trades more than you are losing then you will build confidence in your ability to read the market.  Don’t become overconfident.  As soon as you become overconfident the market will bite you.  Keep your trades small and gradually build up to higher value trades.

So now that we’ve dealt with your perception of risk, we now need to make sure that you don’t lose all your money.  This is done by making sure that you always, I’ll repeat that, always, put a stop loss on a trade.

A stop loss is an order to sell (or buy if you are shorting the share) the trade you made if it reaches a certain level of loss.  For example, if you bought Google (GOOG) at $460 and it subsequently dropped rather than rose, your stop loss level is the point at which you decide that you won’t take any further losses.  So, in this case I might put my stop loss at 10% less than my buy price.  This means that the shares would automatically be sold at $414.  I’d take a loss but I wouldn’t lose all my money.

Once you have set your limit to what you would be willing to lose, you should never move it down.  However, you can move your stop losses up as the price rises.  I like to keep my stop loss trailing the share price by 10% below but tighter stop losses (for example 4%) would be suitable in less volatile markets.

Think about your trading as a business.  In business you would have sales which would give you profits (winning trades) but you’d also have business expenses for example utilities, phone etc.  Think of your losses as business expenses.  By placing a stop loss on all your trades, you ensure that your expenses don’t go too high and wipe out your profits.

As you can see, there are ways to manage the risk in trading the stock markets.  Managing your risk is a stock market basic and should be covered on any good stock market course.

Stocks4Newbies.com is a website dedicated to teaching those new to trading the stock market the basics to ensure they make profits and not losses. Trade the stock market like the pros. http://www.stocks4newbies.com.

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Secondly you must also accept the fact that the stock market can do anything at anytime.

Thirdly share trading is not about trying to predict the future because it just cannot be done.

If you can accept these three facts then it will be much easier to take losses when they occur without demolishing your self-esteem. So when you make a trade you will be able to accept that you don’t know what is going to happen next.Therefore you will have no expectations that this trade will be a profitable one or not.

So how can you make money if you don’t know what the outcome will be? The answer to that is that you treat share trading as a probability game.

Therefore for very trade you enter, you need to know that the odds are in your favor to make profits before you start..

So how can you put the odds in your favor?

The first step is that you have to develop a trading edge.

This is achieved by using technical analysis and fundamental analysis. You also have to have a number of variables that must be present before you enter a trade and you must make sure that you always use the same set of variables. Your edge is your strategy you have set up to enter and exit trades. This should be well defined in your trading plan. Consistency is the key here.

There is another set of probabilities that I use occasionally. They are quite simple and easy to follow.

1. If a stock is trending sideways then I use the probability that there is a 25% chance of it going up and a 25% chance of it going down. Or a 50% chance of continuing sideways.

2. If a stock is going upwards. I use the probability of 70% continuing upwards and a 20% probability of it going sideways, and a 10% probability of it going downwards.

3. If a stock is going downwards I use the probability of 70% continuing downwards and a 20% probability of it going sideways,and a 10% probability of it going upwards.

Depending on your attitude to risk, the percentage levels above can be varied to suit yourself. These percentages above are shown here as a basic guideline only.

In conclusion, If you have a good trading plan set up with strategies in place to enter and exit your potential trades, plus you have your stop losses in place then you have already put the odds in your favor. Against a trader who goes in blindly with no preset plan at all. They are basically playing “Russian Roulette” with all chambers loaded.

And remember, you will never know if your strategy works properly if you don’t follow it.

Chris Strudwick is a successful share trader on the Australian Stock Market Visit his weblogs at both http://www.asxnewbie.com AND http://www.aussie-retiree.com/ for more free articles and useful information about the stock market.

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It’s important for investors to allocate their portfolios among all market caps to provide diversification, avoid cyclical returns, and take advantage of “regression to the mean” (e.g. one market cap segment outperforms another, but then they converge).

Stocks can be separated into 4 groups, according to their market capitalization:

1. micro caps – below $300 million
2. small caps – between $300 million and $1 billion
3. mid caps – between $1 billion and $5 billion
4. large caps – over $5 billion

Market Cap is calculated by multiplying the number of shares outstanding by the share price. For example, if stock ABC issued 6 million shares, and the price of each share is $6, then ABC has a market capitalization of $36 million.

Stocks within each market cap share important characteristics in the following areas:

1.Growth Rate – Small cap companies tend to be in growth mode because either they are selling a new product or service, or else they are well-established in a certain region and are looking to expand. This means that the stock price may appreciate a lot in the near future, as earnings and sales increase.

Micro caps haven’t yet started to enjoy fast growth rates. They are still plodding along before they hit critical mass and take off. This means that investors willing to take more of a risk have a chance to jump on-board early, and catch the full move.

Large and mid cap stocks are usually past the stage of fast growth, but they have earnings stability.

2. Risk – Micro caps are the riskiest capitalization group because they are the most likely companies to lack stable cash flow, management talent, and infrastructure.

Small cap stocks are riskier than medium and large cap stocks because they may not have the deep management talent, clout, and lines of credit to weather strategic mistakes and/or down markets.

Mid cap and large cap stocks tend to have stable cash flow, talented management, and established product lines.

3. Dividends – Large cap and, to an extent, mid caps tend to pay dividends, making them attractive to investors (such as retirees) who need income.

4. Visibility – Large cap stocks tend to be widely held by institutional investors and followed by analysts. Thus, they are less likely to produce positive and negative surprises. Mid cap stocks may be less covered and thus occasionally offer opportunities to buy at great prices. Small and micro cap companies are less covered by Wall Street, and can offer many more hidden opportunities and pitfalls.

5. International exposure – Compared to small and micro caps, large cap and some mid caps tend to do business globally. This provides geographic diversification for their operations and earnings. They are able to capitalize by moving operations to low-cost countries, and tapping world-wide pools of talent. They are not as dependent on slumps in their home economies.

Success in stock trading depends on both stock selection and having a proven system for knowing when to buy and sell.

Praveen Puri has almost 20 years of trading and investment experience – including serving as a consultant to major insurance companies, banks, and the Chicago Board of Trade. He has a fully automated stock trading business that is boring, predictable, but extremely lucrative. Learn more at his Stock Trading Riches website.

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The Leverage Effect of Sector Rotation

Over time, following a sector strategy in your investment portfolio will have a magical compounding leverage effect. Time is your greatest friend with this strategy as you will find that in the long run you will avoid making investments in poor performing areas of the economy. What this does is creates an upward bias to your long run performance results by avoiding any significant declines in your portfolio value. Over time, your portfolio does not have to work as hard as other portfolios fully exposed to the market index.

Bear Proof Your Portfolio

The mutual fund industry has brainwashed investors to just blindly “buy and hold” investments forever, and to stay invested no matter what the stock market or economy is doing. This buy and hold strategy has decimated millions of retirement portfolios during the 2008 bear market, and some may never recover their past portfolio values for the rest of their lifetime. Why didn’t anyone think to sell equities and shift into bonds or treasuries at the start of the bear market? Practitioners of a sector strategy saw the shift and rotation of capital months before the market started to crash and were able to get their capital onto the safety of the sidelines.

Buy and Rotate, Not Buy and Hold

Why ride down a market decline by 50% buy holding losing investments? If you do that, it will take a 100% return on your shrunken portfolio value just to get back to a break-even starting point. With sector rotation you never get attached to your investment holdings because you know in advance you will be exiting them as soon as the business fundamentals favor better sectors. Once new sectors emerge as market leaders you simply rotate out of your old sectors and into the new ones. It really is that simple.

The Automatic Asset Allocation Effect of Sector Rotation

The real secret of portfolio sector rotation is knowing what asset classes are outperforming the markets. There are several famous studies on asset allocation strategies that have concluded that asset allocation accounts for over 92% of an investments performance success. The hidden beauty of a sector rotation strategy is that the process automatically allocates your portfolio holdings into these top performing asset classes. Over the long run these asset allocation decisions will have a powerful effect on the future value of your investment portfolio.

How to Started with Sector Rotation

Implementing a sector rotation strategy inside your own portfolio can be easily achieved after a little reading and understanding of the 11 basic sectors in the economy, the 4 phases of the business cycle, and knowing which sectors perform best in each phase. For those that need a little more confidence you should read more about how to identify the business cycles and which sectors perform best in the Sector Rotation Model. By reading and understanding the basic sector timing model you will see it is quite easy to follow as it lays out exactly which sectors will perform the best during each phase of the business cycle.

Sector rotation is best practiced with a longer investment time horizon in mind, and inside tax deferred accounts like 401Ks, IRAs, Thrift Savings Plans, and Roth IRAs. With a little reading and research almost anyone can develop a simple sector rotation model. If you don’t have the time there are many free resources and newsletter subscriptions that can offer sector rotation advice to follow.

S.A. Smith is a freelance author, writer, and contributor to several investment portals including http://www.SectorTimingReport.com – The Next Generation of Market Timing

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Mr. A is a trader who was buying equities and fixed deposits of a particular company called XYZ. He usually books profit at a rate of around 5% maximum of the invested capital in a month. Let’s say he had invested 10,000/- and books 500/- in a month. Sometimes he didn’t book any and even incurred loss if the market goes down. He get bored and started to trade in the F & O section of the same company XYZ. Now, with the same 10,000/- capital he gets 5 times more buying margin than it did in equity. At the same time, he books profit in days and doesn’t need to wait for a month, and most surprisingly he even gets profit when the market goes down too as there’s a product which he can buy that earns profit when the stock falls down. It’s when he thought ” What was I doing with Equity or Debt or some Lazy Securities when this F & O trade easily gives 5 times profit with the same capital involved?” Now, he started to break all his secured investements and pumps them into the F & O trades thinking he can build a fortune within a few months which will take many years if he trades with Equity or Debt or Fixed Deposits.

This hope of getting an amazing amount of profit will let him forget and ignore all the potential risk of trading F & O. He will forget he might lose his entire capital if the market behaves contrary to his speculation and shock him with a sudden change of trend. This way, Mr A got burnt and went broke after series of losses he made in his F & O trades which he keeps on doing as it’s only way he will recover his past losses. No any other legitimate investment plan can regain what he had lost. And now there’s the most dangerous thing which every stock traders experience, the hauntings of past losses affecting present trades. For every future trades, the trader always count and calculate his past losses to be regained from that trade which starts giving him some profit. He will wait & wait even though that particluar trade already made it’s highest mark. Because he’s calculating the profit amount to leverage his past loss. Once, the position started giving away the profit, he will get upset for not booking at a higher profit margin earlier and stand confused whether to book or not or wait for a second time rise which didn’t happened and end up the position with the lowest profit or no profit or even loss.

So, the best thing Mr.A could have done with a capital of 10,000 in the stock market is:-

* Invest 5000/- in FD or Debt Security
* Invest 3000/- in Equity
* Invest 2000/- in F & O by limiting an amount of 500/- in a single trade keeping a bearable 50/- as stop loss.

He must realise that his total investment now has an earning potential what he was getting earlier with Equities & Debts with the surplus of some more income from the 75% capital in Equities & Debts. Look from the angle of an equity trader, never look from the F & O trading angle.

ONE MUST ALWAYS REMEMBER NOT TO PUT MORE THAN 5% OF THE ENTIRE CAPITAL IN A SINGLE TRADE WHILE TRADING FUTURES & OPTIONS

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First, let’s look at exactly what a mutual fund is. Imagine this investment option as a microcosm of everything into which you can put your money: stocks, bonds, real estate, etc. A mutual fund is like a pie, and everyone who invests in the fund gets a slice of this mixed-berry pie. It may have hundreds or thousands or even hundreds of thousands of investors that all buy into the mutual funds, which translates into them investing in whatever the mutual fund has to offer.

Next, we should determine why people choose to buy into this type of investment in the first place. Mutual funds are actually hugely beneficial for a wide variety of people because they offer a great variety of options, leading to a very diverse portfolio. A diverse portfolio means that you have interests in multiple items, like stocks and bonds and property, etc. This is helpful because if one crashes, you still have the other types that can stay valuable.

By nature, mutual funds are diverse portfolios. You can actually choose how varied you want your mutual fund to be, as different funds offer different securities and options. Usually, if you wanted to diverse your portfolio, it would be much more expensive. This is because most items have something like a “buy-in” price. For instance, you may have to buy a minimum of $1,000 in stocks, $2,000 in bonds, and $10,000 worth of real estate if you wanted to purchase each one of them singularly.

With a mutual fund, you can buy into a slice of the diversified portfolio with much less. This is because the large amount of investors allows the managers of the mutual funds to have tons of money to work with-they can easily buy up a variety of securities, then divide them across the board to the investors. Basically, mutual funds help you own lots of different interests in the market without causing you to go broke just to buy in.

Also, as mentioned above, there are managers who take care of the fund. You don’t have to take the time to check your stocks each day, and buy and sell accordingly. Once you stake into this type of investment, you are good to go. The controller will pay attention to what stock is doing well, and what stock is crashing, and adjust the investments as needed. Overall, a mutual fund is a great choice for many people, and it is something everyone should consider when they are getting started in the stock market.

The stock market and other investment options can be difficult to navigate on your own. For more information on investing and other business topics, check out the helpful Business Directory today.

Joseph Devine

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