Posted by admin on August 29, 2009 under Stock Market Tips | 
Stock Market Basics
The term stock market, as the name connotes, is a place where you can market or trade a company’s stock, which the corporation issues through shares in order to raise capital. Of course, capital is the cost that a company incurs in relation to producing its products and services.
The people who buy these shares are the shareholders, and the term can refer to an individual or an organization.
The term stock market can also apply to all the stocks available for trading (as well as other securities), for example, when used in terms like “the stock market performed well today.”
The stock market involves the trading of bonds, which is a debt security that stipulates that the issuer of the bonds holds the holders a debt. It is exactly like a loan, only that it is in the form of a security. These bonds are traded over-the-counter, which means they are traded directly between two parties. This is opposed to exchange trading or the trading that occurs on stock exchanges or future exchanges.
The stock market also involves the trading of commodities, which refer to raw commodities such as agricultural products (coffee, sugar, wheat, maize, barley, cocoa, milk products) and other raw materials (pork bellies, oil, metals).
The stock market is different from the stock exchange, which is primarily concerned with bringing together buyers and sellers of stock and securities.
You can participate in the stock exchange as an individual stock investor or as major player (large hedge fund trader). Orders at a stock exchange are usually made through a broker.
There are two types of exchanges where stocks can be traded. There is the exchange that has a physical location where verbal trading takes place. This is the more famous type of exchange because it is often depicted on TV showing animated trader shouting at each other, waving and running around frantically. That’s exactly how the stock exchange works. What happens is traders enter into verbal agreements on the prices of stocks. The other type of exhcnage is the virtual kind where traders deal electronically through computer terminals.
Author - Jonathon Hardcastle writes articles for http://4investing.net - In addition, Jonathon also writes articles for 1stconsumerinfo.com and universeofjobs.com
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Posted by admin on under Stock Market Tips |
Plan For Stock Market Success
To be a successful investor or trader, a written investment plan is a must! In fact, most broking firms will not allow its professional traders to trade money without a trading plan!
Each and every trader must submit their plan and have it approved to be able to start trading money on behalf of clients. The trader is then judged and compensated for how well he follows his own plan and how well he does financially. If he violates his own plan, he may be subject to immediate dismissal !
So it’s crazy for us non-professionals traders to start trading without a plan, especially when things don’t go our way, and they won‘t always go our way, you can be assured of it!
Now, before we begin to write our plan, take just a moment to think about your true investment objective. What do you want to accomplish with this trading account? Simply saying “ I want to make money” is not an investment objective. You have to have a specific objective, like, “To outperform the All Ords by at least 10% annually”. That’s an objective.
Then you must decide what type of industry and sector of shares you are going to invest in. The energy sector, the housing sector or the retail sector are unlikely to outperform the All Ords. That means you might have to look at the more volatile, but more rewarding sectors, like the computer sector, telecommunications, etc. This will likely give you lots of volatility in your portfolio and you’ll have to accept it or don’t get involved in that sector in the first place.
There are 7 necessary ingredients in your investment plan:
- Reasonable investment objective – What growth factor do I want to achieve? Be realistic. Are you actively trading or long-term investing?
- Risk tolerance statement – What industries, sectors and types of shares will I invest in?
- Diversification plan – How many different types of companies do we buy on average? Between 10 –20 should be a maximum.
- Price range of the shares we buy – Do we buy $30 shares, or only the sub $10 shares? Do we invest only in Australia, or overseas too?
- A defense strategy – How much price decline are we willing to accept? Be sure to use a Stop-Loss!
- Contingency / Repair plan – What do we do in a potential large market correction? How do we prevent and/or repair large market losses?
- Time frame – How often do we, or will we, re-assess our investment strategy? It should be reviewed every 3-6 months and updated if and when the market conditions change.
To help tailor your investment strategy, try asking yourself these questions:
- Do I usually average down in price, or do I take a small loss?
- How many shares do I buy and sell everyday and do I diversify well?
- What is the usual size of my trades? 500 shares, 1000 shares, or even more?
- When do I take my profits? When I’m up 10%, 20% 50% or more?
- If I have a profit in a stock, do I hold it overnight?
When you have considered all the above aspects, you will be well underway to finalizing a very valuable and effective investment plan.
Author - Daniel Kertcher is a licensed stock market educator. Daniel has trained many people from North America, Australia and Europe in various trading systems. Join his trading mail list http://www.danielkertcherweb.com and read more about him at his personal website http://www.danielkertcher.com
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