Since the U.S. stock market hit its closing low on March 9th, it has rallied over 20%. Even prior to the Dow Jones Industrial Average's 497 point advance on March 23rd, the market had shown significant signs that a nice rally was in force. Smart investors, who've been waiting for a decent opportunity to put some capital to work, have set their sights on the stocks that are showing significant strength compared to the rest of the market.
Picking the next big movers in the stock market can be a daunting task. But, many of today's analytical programs make this task a little bit easier. I use a program called Telechart by Worden Brothers, and have been using this program for about ten years. However, many of the online brokerages offer good capabilities as well.
Here are a few tips to finding stocks that are ready to make nice moves over a couple month period:
1. Look for the stocks that are trading at or near new 52 week highs
2. Look for stocks that are trading further above their 52 week lows than other stocks
3. Look for stocks that have shown significant increases in volume over the last six months
Once you have identified a number of stocks that show these characteristics, look for stocks that have been consolidating for a couple weeks, and up to four or five weeks. We don't want to enter a new position when a stock has been up 10 days in a row, so we look for those that have traded sideways for a bit within a nice uptrend. We then look to enter a trade when the stock breaks out above its recent consolidation pattern.
These are your high momentum stocks that, when market conditions are good, can give you a pop of 50% to over 100% in just a couple months. However, in the current market environment, it is a good idea to scale back expectations, and not to use any leverage. However, these stocks can provide you with decent short term returns. If it becomes clear that economic conditions are improving significantly, you can then be more aggressive.
Remember, there is no full proof trading strategy. This type of strategy will generally result in more losing trades than winning trades. However, if you use some common sense and manage your risk, you can enjoy decent returns, as a few good trades will more than make up for the small losing trades.
Copyright (c) 2009 Scott Cole
Scott Cole is a stock market analyst and owner of the website http://www.theultimatestocktradingsystem.com. He also writes daily market commentary at http://www.kungfutrader.com
Article Source: http://EzineArticles.com/?expert=Scott_A._Cole
Thursday, April 2, 2009
The Market is Rising But Stocks Keep Breaking Down. By Dr. Winton M. Felt
The market appears to have changed from being a declining market to being a rising market. Day after day, reporters announce that there has been another market advance. Yet, it may seem that every time you invest in a stock it breaks down and your stop loss is triggered. It is not always easy to participate in a new uptrend.
During the transition from a bear market to a bull market, is parking your assets in a money-market fund really your best option? Here are some alternatives.
In the transition time, when the market appears to be in the beginning phase of a new up-trend after a prolonged decline, we may hesitate to invest until we have more assurance that the trend is likely to endure awhile. In the early stages of a recovering market, we may be slower to invest than we could be. There is a good reason for this. Those who carefully monitor stock behavior during these times may notice that an inordinate number of stocks break down and collapse after attempting to reverse course. Even though the market seems to be recovering and indexes are rising impressively, individual stocks are churning. During a recovery after a bear market, stocks may make a big rise and then fall enough to lose almost all the gain. Only those who bought at the very beginning of the price surge can make a profit under those conditions. Most investors will not do that, so they will lose on their trades. When thousands of stocks alternately rise a little then plunge to give up most of the previous gain, the overall market may look good as it rises steadily to higher valuations. In the meantime, though investors may hear that the market is up 12% year to date, they notice that their own portfolios are down 5%. Thousands of stocks are taking turns at pushing the market a little higher. Even though the percentage of breakdowns is high, the combined effect is a rising market. During times like this, when individual stock breakdowns are relatively frequent, the volatility (and risk) of individual stocks is much greater than that of the market as a whole. Thus, many investors move assets to the money-market while the market as a whole is making gains that are much more attractive.
Individual stocks do not always evidence this level of instability in the early stages of a market turnaround. However, when they do, I suggest that investors and traders evaluate whether or not it would be wise to make the following "tweak" to their discipline. During the waiting period between the time when the market turns bullish and when you begin to take positions in selected stocks, you might be able to further enhance returns by investing in the market as a whole. There is a security (symbol = SPY) that tracks the S&P500. It is an exchange-traded fund (ETF) also known as a SPDR (Standard & Poor's Depository Receipt). Our traders track SPY and a large number of other ETFs daily and rank them relative to each other. They make this part of their daily discipline because it gives them the information they need to participate in the market even when individual stocks are churning but the market is rising. If this helps them, you might benefit from doing the same thing.
Technically, it is a no-load mutual fund that trades on the stock exchange like a stock. Investing in this stock is somewhat like buying the Vanguard 500 Index fund, but it is better for the purpose. Vanguard discourages people from buying and selling their fund like a stock.
Almost all mutual fund managers want to minimize fluctuation in the amount of assets they are managing. That's why most are so ardent in opposing attempts to "time the market" (an issue I may take up at another time).
"Timers" sometimes sell their stock positions or mutual funds because doing so is required by their discipline for managing risk. Fund managers, on the other hand, have a vested interest in discouraging investors from doing anything that removes cash from the consolidated investment account they are managing. SPY, on the other hand, can be bought and sold like any other stock. Thus, if you get a buy signal on the market, but are not yet ready to take individual positions because of the number of breakdowns you are seeing in individual stock patterns, you might consider filling several of your portfolio slots with SPY. Then, as you need cash for the purchase of individual stocks, you can sell enough SPY to meet your needs. Because SPY represents 500 stocks, it is less risky than individual stocks in the early stages of an up-trend. This will enable you to participate on the upside even if individual stocks still lack stability. While you are waiting for good opportunities in individual stocks, you have the possibility of making much more than money market returns by investing in the market (S&P500) as a whole through the purchase of SPY. Even here, though, proper timing is essential. Do not invest in SPY until indicators confirm that the market is in an up-trend.
How can one know when to use SPY instead of individual stocks? The issue hinges on whether the new market trend has sufficient internal momentum to support individual stock trends long enough for them to be profitable.
A simple way to monitor the development of a new market trend is to watch the Dow (tests conducted by our traders have convinced us that the Dow gives more precise signals for shifting trends in the market than does the S&P500). One way to approach the problem is to track the 10-day and 20-day simple moving averages of the Dow Jones Industrial Average. Your alert signal would occur when the 10-day moving average rises above the 20-day moving average. Your signal would occur when the 20-day moving average begins to rise while the 10-day moving average remains above the 20-day average. This alignment and the rising of the 20-day average would suggest that the momentum of the new trend is sufficiently developed to support trading in individual stocks. The position of the 10-day average above the 20-day average lets you know that the short-term trend still supports the rising of the 20-day average. Until these conditions occur, a person could stay with the SPY positions. Even after the signal is given, SPY would be sold off only as needed to free up money for a stock purchase. Reversing the configuration of these moving averages would provide a bearish indicator. Of course this combination of moving averages is only one example of the tools that might be employed. The purpose here is to be able to place money where it can earn a return well above that offered by any money market fund when individual stocks are whipsawing too much or triggering stop losses too frequently for most people to make significant headway toward profitability.
Copyright 2009, by Stock Disciplines, LLC. a.k.a. StockDisciplines.com
Dr. Winton Felt has market reviews, stock alerts, and free tutorials at http://www.stockdisciplines.com Information and videos about stock alerts and pre-surge "setups" are at http://www.stockdisciplines.com/stock-alerts Information and videos about stop losses (including volatility based stop losses) are also provided.
Article Source: http://EzineArticles.com/?expert=Dr._Winton_M._Felt
During the transition from a bear market to a bull market, is parking your assets in a money-market fund really your best option? Here are some alternatives.
In the transition time, when the market appears to be in the beginning phase of a new up-trend after a prolonged decline, we may hesitate to invest until we have more assurance that the trend is likely to endure awhile. In the early stages of a recovering market, we may be slower to invest than we could be. There is a good reason for this. Those who carefully monitor stock behavior during these times may notice that an inordinate number of stocks break down and collapse after attempting to reverse course. Even though the market seems to be recovering and indexes are rising impressively, individual stocks are churning. During a recovery after a bear market, stocks may make a big rise and then fall enough to lose almost all the gain. Only those who bought at the very beginning of the price surge can make a profit under those conditions. Most investors will not do that, so they will lose on their trades. When thousands of stocks alternately rise a little then plunge to give up most of the previous gain, the overall market may look good as it rises steadily to higher valuations. In the meantime, though investors may hear that the market is up 12% year to date, they notice that their own portfolios are down 5%. Thousands of stocks are taking turns at pushing the market a little higher. Even though the percentage of breakdowns is high, the combined effect is a rising market. During times like this, when individual stock breakdowns are relatively frequent, the volatility (and risk) of individual stocks is much greater than that of the market as a whole. Thus, many investors move assets to the money-market while the market as a whole is making gains that are much more attractive.
Individual stocks do not always evidence this level of instability in the early stages of a market turnaround. However, when they do, I suggest that investors and traders evaluate whether or not it would be wise to make the following "tweak" to their discipline. During the waiting period between the time when the market turns bullish and when you begin to take positions in selected stocks, you might be able to further enhance returns by investing in the market as a whole. There is a security (symbol = SPY) that tracks the S&P500. It is an exchange-traded fund (ETF) also known as a SPDR (Standard & Poor's Depository Receipt). Our traders track SPY and a large number of other ETFs daily and rank them relative to each other. They make this part of their daily discipline because it gives them the information they need to participate in the market even when individual stocks are churning but the market is rising. If this helps them, you might benefit from doing the same thing.
Technically, it is a no-load mutual fund that trades on the stock exchange like a stock. Investing in this stock is somewhat like buying the Vanguard 500 Index fund, but it is better for the purpose. Vanguard discourages people from buying and selling their fund like a stock.
Almost all mutual fund managers want to minimize fluctuation in the amount of assets they are managing. That's why most are so ardent in opposing attempts to "time the market" (an issue I may take up at another time).
"Timers" sometimes sell their stock positions or mutual funds because doing so is required by their discipline for managing risk. Fund managers, on the other hand, have a vested interest in discouraging investors from doing anything that removes cash from the consolidated investment account they are managing. SPY, on the other hand, can be bought and sold like any other stock. Thus, if you get a buy signal on the market, but are not yet ready to take individual positions because of the number of breakdowns you are seeing in individual stock patterns, you might consider filling several of your portfolio slots with SPY. Then, as you need cash for the purchase of individual stocks, you can sell enough SPY to meet your needs. Because SPY represents 500 stocks, it is less risky than individual stocks in the early stages of an up-trend. This will enable you to participate on the upside even if individual stocks still lack stability. While you are waiting for good opportunities in individual stocks, you have the possibility of making much more than money market returns by investing in the market (S&P500) as a whole through the purchase of SPY. Even here, though, proper timing is essential. Do not invest in SPY until indicators confirm that the market is in an up-trend.
How can one know when to use SPY instead of individual stocks? The issue hinges on whether the new market trend has sufficient internal momentum to support individual stock trends long enough for them to be profitable.
A simple way to monitor the development of a new market trend is to watch the Dow (tests conducted by our traders have convinced us that the Dow gives more precise signals for shifting trends in the market than does the S&P500). One way to approach the problem is to track the 10-day and 20-day simple moving averages of the Dow Jones Industrial Average. Your alert signal would occur when the 10-day moving average rises above the 20-day moving average. Your signal would occur when the 20-day moving average begins to rise while the 10-day moving average remains above the 20-day average. This alignment and the rising of the 20-day average would suggest that the momentum of the new trend is sufficiently developed to support trading in individual stocks. The position of the 10-day average above the 20-day average lets you know that the short-term trend still supports the rising of the 20-day average. Until these conditions occur, a person could stay with the SPY positions. Even after the signal is given, SPY would be sold off only as needed to free up money for a stock purchase. Reversing the configuration of these moving averages would provide a bearish indicator. Of course this combination of moving averages is only one example of the tools that might be employed. The purpose here is to be able to place money where it can earn a return well above that offered by any money market fund when individual stocks are whipsawing too much or triggering stop losses too frequently for most people to make significant headway toward profitability.
Copyright 2009, by Stock Disciplines, LLC. a.k.a. StockDisciplines.com
Dr. Winton Felt has market reviews, stock alerts, and free tutorials at http://www.stockdisciplines.com Information and videos about stock alerts and pre-surge "setups" are at http://www.stockdisciplines.com/stock-alerts Information and videos about stop losses (including volatility based stop losses) are also provided.
Article Source: http://EzineArticles.com/?expert=Dr._Winton_M._Felt
Proven Tips to Buy Stocks Online. By Robert J. Tyler
In order to buy stocks online, you must first establish an account with an online discount broker that offers low commission trades. If you don't already have an account with a discount broker, it is important to select one that meets your needs. Don't simply open up an account with a online broker because they have the cheapest trades or advertise FREE trades. Those agencies may not offer the same support as other traditional stock brokers, so do your analysis before choosing.
When you buy stocks online, there are several things you must understand that are different than placing orders with a traditional brokerage firm. The majority of the time, you are in complete control of your trades and are the only one looking at the order before it is placed. While this may not typically be an issue, you need to recognize that you are to blame if the trade is placed incorrectly. Some investors may prefer to continue trading with a "live" broker instead, to ensure their transaction goes through properly.
If you decide to buy stocks online, then you will also need to understand the terminology. You will need to understand the difference between a limit and market order as well as what a Good Till Canceled trade means. While these terms are not complex to learn, you will at least need to have an understanding of what their definition is. Educating yourself is imperative when it comes to investing your money and buying stocks online.
Buying and selling stocks takes a lot of homework and due diligence. Successful investors research financial statements, market trends, technical analysis, and more. Why worry about making online stock trades and your online broker when you should be focusing your time and effort on your investments? Research your broker and define your trading strategy upfront so it doesn't come back to harm you!
When you buy stocks online, you must take responsibility for your own actions. You are ultimately responsible for your trades and actions. While some online discount brokers may offer unlimited customer support and analysis on a particular trade - you will still be the one pushing the button.
Regardless of the type of investor you are - it is still a great opportunity to buy stocks online for the lower commission costs and the flexibility it offers.
Interested in learning more about How to Buy Stocks Online?
Visit BuyStocksOnlineInfo.com today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
When you buy stocks online, there are several things you must understand that are different than placing orders with a traditional brokerage firm. The majority of the time, you are in complete control of your trades and are the only one looking at the order before it is placed. While this may not typically be an issue, you need to recognize that you are to blame if the trade is placed incorrectly. Some investors may prefer to continue trading with a "live" broker instead, to ensure their transaction goes through properly.
If you decide to buy stocks online, then you will also need to understand the terminology. You will need to understand the difference between a limit and market order as well as what a Good Till Canceled trade means. While these terms are not complex to learn, you will at least need to have an understanding of what their definition is. Educating yourself is imperative when it comes to investing your money and buying stocks online.
Buying and selling stocks takes a lot of homework and due diligence. Successful investors research financial statements, market trends, technical analysis, and more. Why worry about making online stock trades and your online broker when you should be focusing your time and effort on your investments? Research your broker and define your trading strategy upfront so it doesn't come back to harm you!
When you buy stocks online, you must take responsibility for your own actions. You are ultimately responsible for your trades and actions. While some online discount brokers may offer unlimited customer support and analysis on a particular trade - you will still be the one pushing the button.
Regardless of the type of investor you are - it is still a great opportunity to buy stocks online for the lower commission costs and the flexibility it offers.
Interested in learning more about How to Buy Stocks Online?
Visit BuyStocksOnlineInfo.com today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
Want 20% Return in Your Stock Investments? Here are the 5 Crucial Numbers a Company Must Possess! By Robert Marsh
It is downright tough finding the right stock picks to invest in with such and up and down Economy! With all the financial companies going belly up and the housing Market in a slump, it is a challenge to get any kind of positive rate of return with good stocks!
Here are the 5 crucial characteristics a Company must have to be able to make a rate of return of 20% or more each and every year if you invest in it..
1. ROIC- Return on investment capital is simply the rate of return a company makes on the cash it plows and invests in itself each and every year. It should be above 10% per year for the last 10 years.
2. Sales - A Company's Sales is the amount of dollars they bring in from the sell of their Products. You want to look at the last 5 years and see a continuing growth in sales each year.
3 EPS- This stands for Earnings Per Share. It is a very important figure of the Company and its operations. It takes the complete earnings of a company and divides it by the number of outstanding shares. You want this figure to be high. It means that each share is generating a very good amount of profit!
4. Equity - This figure is the amount a Company would be left with if it sold off everything, paid off all debts, and took the money that was left! Of course, the higher this is the healthier and more attractive the Company is to invest in.
5. Cash Growth - This figure allows potential investors to know if a company's profits are aligned with making hard, cold cash. Profits are great on paper. But cash growth tells what the company is worth in accurate dollar amounts! The higher, the better.
I hope these stock tips give you some insight in to what makes a company a potentially good investment. Remember, always be selective and do your research before investing in any good stocks.
Robert Marsh owns a site where he provides the top hot stocks and stock tips for the beginning investor as well as the experienced one!Also visit his other site where he shows you how to make free money with the best money making opportunities on the Net !
Article Source: http://EzineArticles.com/?expert=Robert_Marsh
Here are the 5 crucial characteristics a Company must have to be able to make a rate of return of 20% or more each and every year if you invest in it..
1. ROIC- Return on investment capital is simply the rate of return a company makes on the cash it plows and invests in itself each and every year. It should be above 10% per year for the last 10 years.
2. Sales - A Company's Sales is the amount of dollars they bring in from the sell of their Products. You want to look at the last 5 years and see a continuing growth in sales each year.
3 EPS- This stands for Earnings Per Share. It is a very important figure of the Company and its operations. It takes the complete earnings of a company and divides it by the number of outstanding shares. You want this figure to be high. It means that each share is generating a very good amount of profit!
4. Equity - This figure is the amount a Company would be left with if it sold off everything, paid off all debts, and took the money that was left! Of course, the higher this is the healthier and more attractive the Company is to invest in.
5. Cash Growth - This figure allows potential investors to know if a company's profits are aligned with making hard, cold cash. Profits are great on paper. But cash growth tells what the company is worth in accurate dollar amounts! The higher, the better.
I hope these stock tips give you some insight in to what makes a company a potentially good investment. Remember, always be selective and do your research before investing in any good stocks.
Robert Marsh owns a site where he provides the top hot stocks and stock tips for the beginning investor as well as the experienced one!Also visit his other site where he shows you how to make free money with the best money making opportunities on the Net !
Article Source: http://EzineArticles.com/?expert=Robert_Marsh
What is the Key to Trade Success? By Stu McPhee
The road to trade success is very long and colourful. There are many things to consider when trading and for many starting out, there is too much to remember. The best way to ensure that you follow your trading plan and do not cut corners is to develop a routine, preferably written down. If needed, you could write down your routine in the form of a list in a logical sequence, and tick off every item as you complete it. This way you can be guaranteed of completing everything that you should.
You have little hope of developing a routine if you have not developed your trading plan. Your routine will be a logical progression from your written trading plan, and it will facilitate the adherence to your trading plan. You should aim to develop a routine that will guide you through all of the necessary steps and which will stop you getting distracted by other matters.
Decision making heavily influences your trading success. Anything that can help you focus on the important decisions that need to be made should be considered. This is where your written routine or checklist can greatly assist.
One of the advantages of developing a routine is to assist with information management. The amount of information now easily and conveniently available to people is vast. Considering an individual trader can easily be overwhelmed with the amount of information available, your routine will reduce the likelihood of accessing information that is not included or necessary to the adherence to your plan.
As an example, many reputable Internet sites offer market information containing analyst's reports, company reports and other general news. Traders don't need to browse all of the available sites that offer such commentary, yet you can easily be distracted and go searching for material that may support your own opinions. Another example is internet chat rooms.
As a guide, your routine might include items like download the Australian Stock Report, download ASX data for charting software (if applicable), review all of your open positions to see if any of your stops have been hit. If some positions are moving well, you may have to adjust the stops to ensure you are in a position to lock in a profit. You may consider the recommendations made in the report and place one of them on your watch list, review your present watch list and remove those stocks that no longer meet your entry conditions. You may also include some actions that you perform weekly and monthly, for example inserting all of your completed trades into your record keeping spreadsheet or personal financial software and conduct a systematic review of past trades.
Having a trading plan with a supporting routine that will assist you to adhere to your trading plan, is likely to provide you an advantage over most other traders in the market, and increase your chances of long term profitable trading and ultimately trade success.
Have You Read The Ultimate Trading Manual?
Click http://www.tradinginanutshell.com/
Article Source: http://EzineArticles.com/?expert=Stu_McPhee
You have little hope of developing a routine if you have not developed your trading plan. Your routine will be a logical progression from your written trading plan, and it will facilitate the adherence to your trading plan. You should aim to develop a routine that will guide you through all of the necessary steps and which will stop you getting distracted by other matters.
Decision making heavily influences your trading success. Anything that can help you focus on the important decisions that need to be made should be considered. This is where your written routine or checklist can greatly assist.
One of the advantages of developing a routine is to assist with information management. The amount of information now easily and conveniently available to people is vast. Considering an individual trader can easily be overwhelmed with the amount of information available, your routine will reduce the likelihood of accessing information that is not included or necessary to the adherence to your plan.
As an example, many reputable Internet sites offer market information containing analyst's reports, company reports and other general news. Traders don't need to browse all of the available sites that offer such commentary, yet you can easily be distracted and go searching for material that may support your own opinions. Another example is internet chat rooms.
As a guide, your routine might include items like download the Australian Stock Report, download ASX data for charting software (if applicable), review all of your open positions to see if any of your stops have been hit. If some positions are moving well, you may have to adjust the stops to ensure you are in a position to lock in a profit. You may consider the recommendations made in the report and place one of them on your watch list, review your present watch list and remove those stocks that no longer meet your entry conditions. You may also include some actions that you perform weekly and monthly, for example inserting all of your completed trades into your record keeping spreadsheet or personal financial software and conduct a systematic review of past trades.
Having a trading plan with a supporting routine that will assist you to adhere to your trading plan, is likely to provide you an advantage over most other traders in the market, and increase your chances of long term profitable trading and ultimately trade success.
Have You Read The Ultimate Trading Manual?
Click http://www.tradinginanutshell.com/
Article Source: http://EzineArticles.com/?expert=Stu_McPhee
Wednesday, April 1, 2009
What Moves the Stock Market? By James Leitz
You don't need an MBA to get a handle on the stock market. Unless your instructor has plenty of "hands on" experience with stock investing, the class room is not the best place to learn stock market basics.
It's important to gain "market sense", and this is best accomplished by studying the stock market itself. How can the Dow Jones Industrial Average (DJIA or the DOW) be up 300 points one week and down 500 the next? What causes stock prices to fall 50% in less than two years?
The law of supply and demand explains stock market basics and stock prices, if you want to get academic. What keeps stock investing interesting is that in the real world it's not so simple. View the stock market as a very large collection of people, each person with a profit motive. As a group they determine stock prices and move the market as they bid prices either up or down. Stock investing is a people game, not an analytic exercise. Market players are emotional beings, and do not always make rational decisions.
You do not need to be a great stock picker to win at the stock investing game, but you should have a feel for the markets. In a rising stock market, a significant majority of stocks participate and go up. In a bear market like 2008-2009, few buck the downward trend. To get a firm grasp of what moves markets, let's look at recent market action that took the DOW down 50% between late 2007 and mid-March of 2009.
Instead of thinking in terms of supply and demand, think fear and greed. Stock prices move down when investors (on balance) increase the supply of stock by offering shares for sale, sometimes motivated by fear. When greed kicks in they scramble to buy stocks, increasing demand and sending stock prices higher.
By late 2007 the stock market as measured by the DOW had been up five consecutive years. All that was necessary for a change of investor sentiment was bad news. By late 2008 fear was rampant as financial crisis gripped Wall Street and the nation. The financial news went from bad to incredulous. Stock prices fell like a rock as fearful investors swamped the market with "sell" orders.
A market does not fall 50% without a "fake-out" or two along the way. Here's where it pays to understand stock market basics and market dynamics. For example, after a three month drop of 2000 points on the DOW, a 1000 point rally would not be unusual. Such action is often caused by a spark of unexpected good news, and investor greed takes over as "buy" orders flood the market. In other words, who wants to miss out on the action?
Rallies in a bear market hype the emotions, fear vs. greed. The perennial investor question is "how long will this rally last"? An upward move in stock prices can mark the beginning of a new bull market where stock prices go up for years. On the other hand, such a move could be a bear trap as fear once again takes over sending stocks to new lows.
View stock investing as a people game. Understand that people move markets, and they are sometimes acting out of emotion. If you can keep a cool head while those around you panic, you're a step ahead in the stock investing game.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com
Article Source: http://EzineArticles.com/?expert=James_Leitz
It's important to gain "market sense", and this is best accomplished by studying the stock market itself. How can the Dow Jones Industrial Average (DJIA or the DOW) be up 300 points one week and down 500 the next? What causes stock prices to fall 50% in less than two years?
The law of supply and demand explains stock market basics and stock prices, if you want to get academic. What keeps stock investing interesting is that in the real world it's not so simple. View the stock market as a very large collection of people, each person with a profit motive. As a group they determine stock prices and move the market as they bid prices either up or down. Stock investing is a people game, not an analytic exercise. Market players are emotional beings, and do not always make rational decisions.
You do not need to be a great stock picker to win at the stock investing game, but you should have a feel for the markets. In a rising stock market, a significant majority of stocks participate and go up. In a bear market like 2008-2009, few buck the downward trend. To get a firm grasp of what moves markets, let's look at recent market action that took the DOW down 50% between late 2007 and mid-March of 2009.
Instead of thinking in terms of supply and demand, think fear and greed. Stock prices move down when investors (on balance) increase the supply of stock by offering shares for sale, sometimes motivated by fear. When greed kicks in they scramble to buy stocks, increasing demand and sending stock prices higher.
By late 2007 the stock market as measured by the DOW had been up five consecutive years. All that was necessary for a change of investor sentiment was bad news. By late 2008 fear was rampant as financial crisis gripped Wall Street and the nation. The financial news went from bad to incredulous. Stock prices fell like a rock as fearful investors swamped the market with "sell" orders.
A market does not fall 50% without a "fake-out" or two along the way. Here's where it pays to understand stock market basics and market dynamics. For example, after a three month drop of 2000 points on the DOW, a 1000 point rally would not be unusual. Such action is often caused by a spark of unexpected good news, and investor greed takes over as "buy" orders flood the market. In other words, who wants to miss out on the action?
Rallies in a bear market hype the emotions, fear vs. greed. The perennial investor question is "how long will this rally last"? An upward move in stock prices can mark the beginning of a new bull market where stock prices go up for years. On the other hand, such a move could be a bear trap as fear once again takes over sending stocks to new lows.
View stock investing as a people game. Understand that people move markets, and they are sometimes acting out of emotion. If you can keep a cool head while those around you panic, you're a step ahead in the stock investing game.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com
Article Source: http://EzineArticles.com/?expert=James_Leitz
How to Use Options Trading Strategies to Make Money in a Bear Market. By Robert J. Tyler
Did you know that you can implement several options trading strategies that can earn you a monthly income even in a bear market? Many people are surprised to hear that they don't have to sit on the sidelines in a stock market that is spiraling downwards. Education and proper discipline using bear market options trading strategies will put extra cash in your pockets and give you the edge when the next bull market occurs. Here is a simple low risk trading strategy that you can implement when the market is trending down.
Trading deep in the money puts is one of many options trading strategies that can be implemented in a bear market. It is very easy to implement once you have completed your due diligence. This strategy only requires a few hundred dollars upfront and an online discount broker to start.
The first step is to identify a stock that you believe will continue to head lower in the next 4 to 6 months. Then you investigate several put option contracts that have a strike price well above the current share price of the security. After you have identified potential put contracts, you place a buy to open limit order with your online discount stock broker.
Once you have purchased your put contract(s), immediately place a sell to close limit order with your online broker. The limit order should reflect your overall options trading goals. Some investors may require a $1 increase in the price of the put contract before selling, while others may decide to sell after reaching a certain percentage gain. Your exit strategy should be included with your options trading strategies goals. You may also want to place a stop loss order to minimize your exposure if the underlying security begins an upward trend.
Trading deep in the money put contracts is just one way to implement an options trading strategy for a struggling market and economy. Are you ready to trade what the market gives you instead of losing money trading against the market?
I have been implementing options trading strategies for over 5 years now as a way to supplement my income. Along the way, I have learned the power of options trading as well as the risks involved and have taken advantage of bullish and bearish trends to make money!
Did you find this information on options trading strategies useful? You can learn a lot more about how options trading strategies can help you earn an income and quit your day job by visiting - Options Trading System.
Sign up for the FREE VIDEO on trading and managing options to generate monthly income by visiting Options Trading System today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
Trading deep in the money puts is one of many options trading strategies that can be implemented in a bear market. It is very easy to implement once you have completed your due diligence. This strategy only requires a few hundred dollars upfront and an online discount broker to start.
The first step is to identify a stock that you believe will continue to head lower in the next 4 to 6 months. Then you investigate several put option contracts that have a strike price well above the current share price of the security. After you have identified potential put contracts, you place a buy to open limit order with your online discount stock broker.
Once you have purchased your put contract(s), immediately place a sell to close limit order with your online broker. The limit order should reflect your overall options trading goals. Some investors may require a $1 increase in the price of the put contract before selling, while others may decide to sell after reaching a certain percentage gain. Your exit strategy should be included with your options trading strategies goals. You may also want to place a stop loss order to minimize your exposure if the underlying security begins an upward trend.
Trading deep in the money put contracts is just one way to implement an options trading strategy for a struggling market and economy. Are you ready to trade what the market gives you instead of losing money trading against the market?
I have been implementing options trading strategies for over 5 years now as a way to supplement my income. Along the way, I have learned the power of options trading as well as the risks involved and have taken advantage of bullish and bearish trends to make money!
Did you find this information on options trading strategies useful? You can learn a lot more about how options trading strategies can help you earn an income and quit your day job by visiting - Options Trading System.
Sign up for the FREE VIDEO on trading and managing options to generate monthly income by visiting Options Trading System today!
Article Source: http://EzineArticles.com/?expert=Robert_J._Tyler
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