Posts Tagged ‘Stock Investment’

The Fundamentals Of Basic Online Stock Trading

Mar 19, 2010 Stock Investment

Investing on the stock exchange has been popular over the years, whether the market is high or low. With proper handling of stocks in his account, an investor can expect to produce a good return of investment. However, patience and learning is needed before someone can jump right in and make money investing in stocks.

Here are just a few steps you can take to start investing in the stock market while online. The choice for an investor to invest offline or online really depends on what strategy they would like to apply. Would they rather handle things on their own or have a stock broker do most of the work for them? Here are some examples of the many ways available to you if you choose to invest online:

1. To start buying and selling stock on the net an investor just needs an internet connection, an account with an online brokerage, and some money. There’s definitely no need for special software and basically all you need is an Internet browser.

2. The Internet offers a selection of websites that conduct online stock exchange trading. It is best to check out forums for sites that look interesting and get reviews that way. Most online stockbrokers are very similar while their pricing differs somewhat for the services offered. Beginners are encouraged to pick one of the top brokers just to make sure their money is safe.

3. When the investor looks over the site, he will be able to start filling out a form for opening his new account. The questions on this form will include things like, their name, phone number, and address. You have to give them your correct social security number so that the government can see the money you make and tax you on it.

4. When the investor is done filling in all of his personal details, he must transfer money into the new account. As soon as the investor has transferred some money into the new account, he will be able to start purchasing and selling stocks online.

Are you trying to find out the best stocks to buy right now? If you are please take a look at my website How To Buy Stocks For Beginners.

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Short Selling Stocks - A Quick Guide

Mar 14, 2010 Stock Investment

Briefly, the short sale occurs when the seller of a security does not own what is being sold but promises to deliver it anyway. When you enter into the short sale of a stock, it must be loaned to you by a broker. The actual stock may be obtained from the brokerage firm’s inventory, from another brokerage firm, or from another customer at your brokerage.

Once the shares are successfully sold, the earnings are credited to your account. Eventually, you would have to “close” the short. This is done by buying back the same number of shares and then returning them to your broker who lent you the stocks you sold. If the price of the stock is lower you make a profit because you could buy the stock back at a lower price. Short sellers lose money when the price of the stock rises because they have to buy it back at a higher price.

It is necessary to have a broker if your plan includes short selling stocks. In order to use a broker’s services, you will be required to establish an account with the brokerage firm as either a cash account or a margin account. With a cash account, you will be expected to pay for your stock at the time of the purchase. Alternatively, if you have set up a margin account with the broker, you are allowed to borrow a portion of the purchase money. The security itself will collateralize the transaction.

In essence, the stock you are short selling does not belong to you as you borrowed it before selling it. You must therefore pay any stock lender the dividends or rights declared during the process of the loan. Therefore, you will owe the lender of the stock twice the number of shares if the stock splits during the course of the loan.

A short selling stock is something that no beginner should try to do as it involves an understanding of the market and an understanding of greater risk. When you short a stock, there is technically no ceiling on the amount of money you can lose. Contrast this with buying a stock where the most you can lose is everything you paid for it but no more. Many also frown on short selling because you are making a bet that a stock will do poorly which is not a productive action.

Please visit my website Stocks For Dummies to learn more about investing in stocks.

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Short Selling Without Knowing Short Interest Ratios Can Be Dangerous!

Mar 13, 2010 Stock Investment

Everyone wants to ride the rising tide in the stock market by buying stocks and later on selling them at a higher price to make a capital gain. However, can you make money when the tide in the stock market is going down? Yes, you can with short selling. In short selling, yo borrow a stock from your broker and sell it. Later on you buy it back at a much lower price and return it your broker making a good capital gain.

Now for short selling to work, the stock price should go down otherwize, you will make a hefty loss in case the stock price starts to go up. Since, you are trading with a borrowed stock, you have to return that stock to your broker. In case the stock price goes up, you will have to buy it back at a much higher price with a loss. Now, when you go short and the market suddenly turns against you in the sense that it goes in the wrong direction, you are in trouble. You want to buy back the stock but the price is continously going up. The harder it becomes to buy back the required number of shares, the more desperate you will become and the higher the prices can go before you are able to buy back the required number of shares and return them to your broker. So in a way, short selling is tricky and must only be practiced by the experienced traders.

Short selling in stocks is done by investors with the expectation of a making a capital gain when they expect that stock price to go down in the near future. Short selling is also done by the fund managers to hedge their stock portfolios. Now, in other markets like the currencies, futures or the options market, you don’t have to borrow the security in order to go short. You can straight away go short by selling that security or currency in the market.

In the case of stocks, you need to monitor the rate of short selling in order to gauge investor expectation as well as the future market direction. Now, NYSE and NASDAQ report the short interest in stocks listed with them. Now this data is released on monthly basis as the brokerage firms may need a while to report how many shares have been shorted and then report that data to the exchange.

Now this number is known as the Short Interest Ratio. Short Interest Ratio is a very important number for short sellers as it can give important clues about the investor expectation to the short sellers.

So what is the Short Interest Ratio? Short Interest Ratio is the number of shares of a particular stock that has been shorted in the market. It also reports the percentage change in the short positions from the previous month. Plus the average daily volume for that stock in the same month and also the number of days of trading at the average volume that it would require the market to cover the short positions in that stock.

The problem with Short Interest Ratio is that it is not calculated frequently. It is calculated on monthly basis. So, the trader cannot use it to gauge the short positions in the market on a daily or weekly basis. However, it can give you the general trend in the market. A high short interest ratio should make you nervous if you have taken a short position in that stock as most of the investors who are short will soon become desperate to dump that stock in the market and cover their short positions.

Mr. Ahmad Hassam has done masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report. Get your FREE COPIES of the HVMM Ultimate Day Trading System and the Universal Risk & Money Management Tool.

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A Shockingly Simple Stock Trading Momentum Indicator

Mar 12, 2010 Stock Investment

Trend is your friend. You will keep on hearing this from the trading gurus. Trend trading is indeed one of the most profitable trading strategies. So when you are trading a trend, you want to know how fast the trend is moving so that you can get ahead of the trend. When the rate of change of a trend goes up, it means that the prices are also going to follow and rise soon!

Momentum was the velocity multiplied by the mass of the object. Now first what is a momentum? You must have read about the momentum in high school physics.Velocity was the rate of change. Now. a simple way to calculate the momentum of any security price is to divide the closing price today by the closing price ten days back and then multiply it by 100! So when we talk of momentum in trading, we are talking of the rate of change of any security prices.

This is your shockingly simple momentum indicator that you can use profitably in your trading. Now, if the price did not change, the momentum indicator will obviously will be 100. If the price went down, the momentum indicator will be less than 100 and if the price went up, the momentum indicator will be more than 100. Now, when the momentum indicator is greater than 100, the trend is expected to continue in the future.

This momentum indicator tells you what is most likely to happen in the future not what happened in the past. So it is a leading indicator. You must have heard about momentum investing or you can even call it momentum trading. In momentum investing , you buy a security at a high price and sell it even at a more higher price unlike ordinary investing where you buy low and sell high. The trick is to know that the price will continue to rise when you do momentum investing. How do you know that the security prices will continue to rise in the future? By looking at the business fundamentals like the sales or profits, if you find them to be rising and accelerating at the same time the security price is rising,there is momentum behind this move!

However, in momentum investing, you search for stocks that have rising prices that are expected to continue for sometime. So you buy high and sell even higher within a few weeks making a decent profit. You can use that profit to do more investing. As said before, instead of investing in a security or a stock you can do momentum investing. When you are doing ordinary investing, you are waiting for its price to appreciate to give you a capital gain. This price appreciation might take from a few months to even years tying down your capital in that investing.

So when you are doing momentum investing, you are looking for a security or a stock that has a potential to move big. How long this big move might take to materialize? Well, the expectation is for the big move to happen in a few weeks to a few months. Just like in ordinary physics, when a ball is set in motion, it will continue moving unless stopped. This is what the Newton’s First Law says. You can expect a security price to keep on rising as long as something drastic doesn’t happen to stop that rise. So what can be that something drastic? It can be a sudden breaking news about the misdoings of the management that have not been known to the public before. I am just giving you one example. There can be more. So before you do your momentum investing, it is always better to do some fundamental research on the company. Remember the Dot Com Bubble that burst and hurt many people a decade back. Lot of people were doing momentum investing without doing fundamental research on the stocks that they were investing in. So you need to do some fundamental research as well to ascertain that the rise in prices of a stock are sustainable over the long haul or not.

Now just like price momentum that we have been talking about above, we can calculate the earnings momentum. Earning momentum is the province of the investors. The investor looks at the quarterly earnings of the company to see if it is going up at a faster pace say from a steady pace of 10% a year to 12% or 15% and so on. If the earnings growth rate is going up what this means is that the underlying price is also going to accelerate.

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Candlestick Trading Patterns- The Hanging Man, the Hammer and the Spinning Top!

Mar 8, 2010 Uncategorized

Hanging Man and the Hammer are two different candlestick patterns. The patterns are not identical. Hanging Man is considered to be bearish and the Hammer is considered to be bullish.

How to spot the Hanging Man and the Hammer? These candlestick patterns are easy to spot on the chart. When you spot a very small candle body accompanied by a pretty long wick on the bottom, it is a Hanging Man if it appears at the top of the uptrend and it is a Hammer if it appears at the bottom of the downtrend.

Now suppose, you find the Hammer or the Hanging Man. What you need is to look for the confirmation the next day! Now, in most of the cases, you will also find a small wick on the top of the candle body.

If you think that you have spotted a Hanging Man appear on the top of an uptrend, wait for the next day’s opening price. If the opening day is lower than the last day’s close, you have spotted a true Hanging Man.

Similarly, if you spot a Hammer at the bottom of a downtrend, you need to confirm it with the opening price on the following day. If the opening price on the next day is higher than the closing price on the last day, the Hammer formed was a true Hammer.

When you trade candlestick patterns, you need to look for the confirmation on the following day to confirm that the candlestick pattern formed was indeed true. Once you have the confirmation signal, you can safely trade on that candlestick pattern. If you cannot get the confirmation, you should ignore that pattern considering it to be false. Most of these candlestick patterns are ideally suited for the daily charts.

Spinning Top is just like the Hanging Man and the Hammer. Spinning Top is a signal that the battle between the bulls and the bears ended in a draw. It will start next day again with ony side giving in. What this means is that an explosive move in the price action can take place the following day.

How to identify a SPINNING TOP? A Spinning Top has a very small candle body in the middle with two equal wicks on the top and the bottom. This pattern appears very frequently in the daily charts and can be highly profitable if spotted correctly.

Mr. Ahmad Hassam has done Masters from Harvard University. Get this 49 page Quantum Swing Trading Report FREE. Master Candlestick Charting with this 82 page PDF FREE Candlestick Guide!

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Shocking Stocks Short Selling Facts!

Mar 8, 2010 Uncategorized

Short Selling Stocks is one of the favorite day or swing trading strategy. Many traders short stocks. Now many stock brokers make it very easy for the investors and traders to short stocks. Now a days, most of the trading is being done online. When you sell a stock, a message will ask you whether you are selling stocks that you own or you are selling short. With one click, you tell the broker that you are short selling. The broker than goes about and arranges the shares for you to short sell. These shares are a loan to your account.

In some cases, the brokerage firm cannot borrow the shares as so many people have sold the stock short that there are no more shares to borrow. In that case, you will have to find another stock or use another strategy.

Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down! Day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts.

You have to be careful about the uptick rule as stock exchanges have rules in place to help maintain an upward bias in the stock market. What this means is that you can only short a stock when the last trade was a move up. In other words, you can’t short a stock that is moving down.

How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. So if you are wrong in your short selling decision, your loss can be catastrophic. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

Now, don’t get caught in the market with short selling when good news spreads about the stock that you had shorted driving its price up. This is known as Short Squeeze. Once that happens, almost all short sellers get desperate to dump their stocks and exit but when they try to buy back the stock, they get more hurt as the prices go even higher and higher on rising demand for the stock in the market.

If you have already shorted that stock, you might get a call from your broker to return that stock immediately. In such a case, you will have to immediately return the stock even if it doesn’t make any sense to you!As said before, companies, investors and many brokers hate short sellers. They think that short sellers had intentionally driven down the stock prices. So sometimes, they will spread rumors of good news to create a momentary short squeeze. Sometimes, a campaign will be started by the owners of a particular stock instructing their brokers not to loan out their stocks to short sellers.

Mr. Ahmad Hassam has done Masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options! Turn $200 into $100K in just 3 months with this Penny Stock Trading FREE Report!

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How to Easily Buy Stocks Online in 2010

Mar 7, 2010 Uncategorized

Right now in 2010, most people who open a stock account for the first time will do it online. This is a departure from how to open a stock account in years past where you had to physically go in to a broker’s office and sign up. When you were sitting in front of the broker, he would ask you all sorts of questions like what your investment goals were and what investing time horizon you had.

It was a bit of an ordeal to open an account and it probably kept some people from ever doing it because they didn’t want the hassle. Now though, with a few clicks of a button, you can open any account online and have money transferred into your account. Papers will be sent to your house to sign and anyone can do it easily. It makes one wonder whether it is almost too easy to open an account and allowing some people to get involved in stocks that really shouldn’t be.

Initially, learning to buy stocks can be intimidating, but it is quite simple after you know the basics. The terminology may scare a new investor, and if you do not understand it, you may not progress beyond the first step. But since opening an account and buying stocks online eliminates the need to work with a broker in person, you don’t have to be embarrassed by a lack of knowledge.

Online information will give you all the knowledge needed to begin investing. You can still go to a stockbroker and ask for further guidance if you desire to become more knowledgeable about trading and the market.

The ease of pushing a button to buy stocks online makes it almost seem like betting. The stock market is designed to be for serious investing in America’s future, but today buying stocks may feel more like gambling. The case could be made that online transactions have made stock trading too easy, and that day trading has damaged the lives of many people.

Are you wanting to learn how to buy stocks for beginners? If you would you can take a look at my site Stock Market For Dummies.

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Doji Candlestick Pattern-Something Unique And Highly Profitable!

Mar 7, 2010 Uncategorized

A Doji Candlestick Pattern is formed when the opening and the closing prices are the same. So, there is no stick on the candlestick. There are some variations but essentially a Doji is almost all wicks with no body. A Doji looks more like a cross rather than a candlestick pattern.

So for a Doji to be truly formed on a trading day, throughtout the trading day heavy buying or selling may take place but at the end of the day, the price should be where it had been at the start. In other words, the opening and the closing prices should be the same for a Doji to be formed.

When a Doji is formed with the opening and the closing prices equal, it is a signal that the battle between the bulls and the bears had been a draw during the trading day. Soon, either the bulls or the bears are going to previal. In other words, a trend reversal is about to take place.

A Dragonfly Doji pattern is unique in the sense that the opening, closing and the high prices are all the same or equal. A Dragonfly Doji is formed when the stocks opens, trades down during first part of the day. During some part of the day, the price starts to climb again and eventually closing on the high which is the same as the open.

In other words, the open, the close and the high for the day are the same for the Dragonfly Doji to form. So when a Dragonfly Doji Pattern is formed, the bears had been in control of the market at the start. But at some point in the trading day, the bulls become active and step in. Bulls start buying. This takes the prices up and at the end of the day, the security price ends up right where it had started.

The low of the Dragonfly Doji can be considered a near term support level because it is clear that the buyers stepped in at that level and turned the trend from down to up. Dragonfly Doji is a bullish candlestick pattern.

The second important variation to the Doji is the Bearish Gravestone Doji. This pattern is formed when the open and close of the day is equal to the low of the day. This is something opposite to the Dragonfly Doji where the open, the close and the high were equal. When a Bearish Gravestone Doji Pattern is formed, it is a signal that a prolonged downtrend is about to start in the market.

As said before, this pattern is rare but very easy to spot on the chart. When it does form, get ready for a trend change!

Mr. Ahmad Hassam has done Masters from Harvard University. Learn this powerful Fibonacci Retracement Method that pulls 500+ pips per trade FREE! Get this 49 page Quantum Swing Trading Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options FREE!

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Etf Trading Strategies: The Truth Behind Trading

Mar 5, 2010 Uncategorized

When you jump into the etf trading market its imperative that you have a set of etf trading strategies. This is imperative if you want to develop a good set of trading skills in the etf market. You can also purchase a book on etf trading strategies. There are so many things you can learn from reading what others have to say about trading and you can save a lot of time and money by learning from other people’s experience.

If you want to come up with a good solid and winning ETF trading strategies you need to first have a bit of experience in the ETF market. It will also do a great deal of good if you have some one or somebody who can teach you the about ETF trading strategies. The basis of a good ETF trading strategy is that it takes many things including good information into consideration.

Learning from other people’s experience is good because it will save you a lot of money, and time when it comes to developing a winning strategy. The best way to learn is from stories of other people’s success as well as their mistakes. Your job is to go and use what they tell you to develop your own unique trading style which can be adapted to the every changing etf trading market.

The market is constantly changing as each participant in the market changes their methods as well as their objectives drive the change in the market. There are times when the entire market may follow a trend and then there are times when trading against the trend will have its advantages. Sometimes trading with very strict set of profit targets will do the work for you.

Traders who have been trading for a while will begin to develop their own personal form and style of trading. This will largely be based on their experience as well as the markets they have chosen.

The ETF trading strategies you come up with needs to be designed in a way that makes it so flexible that you can would it to your taste and requirements. You also need to be able to accomplish this as soon as possible before the market takes another turn.

People who have traded and have made alto of money often fail later on because they were not able to keep up with the changing market. So you also need to find a way to compensate for that.

You need to develop a sense for the market and feel the change in the market. This is something you can learn but it take time. Effective etf trading strategies are flexible and suit your mindset and style.

Go to ETF trading and sign up for their free newsletter to receive the best ETF of the month or find more about their ETF trading system.

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Harami And The Harami Cross Candlestick Patterns Can Be Highly Profitable!

Feb 28, 2010 Stock Investment

There are simple as well as complex candlestick patterns. There are single stick, two stick as well as three stick candlestick patterns. Harami is a two stick candlestick pattern. Two stick patterns take two days to form on daily charts. A Harami is formed whent the first day candle is longer than the second day candle. Harami can be bullish as well as bearish!

A bullish Harami candlestick pattern is formed when the first day candle is bearish. Rather the first day is very bearish and occurs on a downtrend. But on the second day, the bulls come into action and try to move the prices higher. But bulls are not very successful. The second day close is still lower than the first day open and the first day’s high is never surpassed. However, the second day is a signal that the bulls have started to take the stand and stop the current downtrend.

The second day is still a down day that follows a bearish trend. On the second day, the open is higher than the close of the first day. The bulls ruled the second day as the close is higher than the open.

Bulls and bears are always fighting with each other for the control of the market. When a bullish Harami is formed what this means is that the bulls are still cautious about their success and fear that the bears might return to take the prices lower again. However, when this does not happen, it gives confidence to the bulls encouraging more buying in the market and the reversal of the trend.

Now, like most of the candlestick patterns, a Harami can fail. What this means is that you need to confirm it with the price action on the following day. Always place the stop loss first when you trade. When you spot a Harami, place the stop loss near the open of the second day.

Harami pattern has got few variations. On of them is the Bullish Harami Cross Pattern. Now,a Bullish Harami Cross is not formed very frequently. But when it does form, it means an sudden trend reversal. So you should act immediatetly when you spot it. The first day in case of a Bullish Harami Cross is a bearish candle. The signal day or the second day is a Bullish Doji with an open higher than the close of the first day and the close lower than the open of the first day.

The bearish Harami Pattern is the other way around. The first day candle is bullish but the second day candle is bearish with the open lower than the close of the first day and the close higher than the open of the first day. But this means is that bears have taken over the market and soon a new downtrend is going to develop.

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