Search the Web:

TO TRADE AT THE STOCKMARKET - FOREX - STRATEGY - TIMING - PATIENCE - MOST OF ALL TACTICS

QUOTE: Try not to become a man of success but rather to become a man of value Remember that time is money

What is Asset Allocation?

Asset allocation is not a matter of owning several stocks or several mutual funds. You need to be holding assets in different sectors of the market.

When talking about mutual funds they are generally divided into the sectors of large cap, small cap, international and fixed income.

Cap is short for the word capitalization, how much capital a particular company has.

A large cap company might for example have $5 billion in capital while a small company may have only $50 million.

You can further divide these sectors into value and growth. Value stocks are ones that are not performing up to par.

Maybe there was some bad news about the company that caused the stock price to decrease, but overall the company is believed to be a good company.

Generally these are large, well established companies where there is normally not a lot of volatility in the stock price, but are currently selling below their value.

Growth stocks on the other hand are expected to be increasing in size at a rapid pace, maybe because of a new product coming on the market or because the company has developed a new technology.

This company is expected to get bigger. It is important to note that while one financial analyst may consider a stock a value stock, another financial analyst may consider that same stock a growth stock.

The purpose of asset allocation is to reduce the overall risk of your portfolio while achieving a good rate of return.

The point is that you have assets in all sectors all the time. Today and for the next six months it may be that international funds are going to be performing better than usual.

Or maybe it will be small cap growth stocks are performing better.

Do you know which sector of the market is going to be the "hot" sector for the next several months?

By having your investment diversified into the different sectors you are going to have part of your money in that hot sector. No trying to time the market and figure out where the best place to be is next.

How much you put into each sector of the market will vary with the level of risk that you are willing to accept.

As a 20-something you might be willing to put 40% into international stocks, which are considered more volatile while as a 70-something you may only put 10% into an international fund. You still need asset allocation at every age.

There are numerous programs available that can help you determine the best allocation for someone of your age and risk level. They can be found on the websites of most mutual fund families.

The key to a good asset allocation portfolio is rebalancing. Say for example that large cap growth stocks have done well in the market for the last six months.

If your ideal portfolio is 30% large cap, 25% small cap, 30% international and 10% fixed income you may now have 45% large cap since there has been a run-up in these funds.

At the same time small cap funds were doing poorly and now only represent 15% of your portfolio. You need to sell some of the large cap fund and buy some of the small cap fund to bring your portfolio back into balance.

What does this cause? It causes you to sell when a fund is high and buy when a fund is low.

This is exactly what you need to do to increase the overall rate of return without increasing the risk of your portfolio.

Rebalancing can be done as often as quarterly or as little as once a year. Rebalancing your portfolio more than quarterly is not considered advantageous.

The goal is to keep your portfolio at the percentages that you determine when you set the portfolio up. Do not get caught up in the fact that a fund is doing really well and thinking that you should not sell it.

How will you feel in six months if the fund is under-performing?

Do not trust yourself to be able to sell when you should?

Do not want to be tied to having to remember to rebalance every quarter?

Do not want to incur the tax consequences that may result if you are rebalancing in a taxable account?

Have only a small amount of money to invest? Invest in one of the many asset allocation funds available. These funds do the allocating and the rebalancing for you

Generally you only need to decide if you want the aggressive, moderate, or conservative allocation fund.

These funds may also go by the name of target retirement funds or lifestyle funds. What you are looking for is a fund that invests in all the sectors of the market.

HYIPs: An Alternative to Stock Trading

People who are successful stock traders are no strangers to the 'educated guess.' They analyze the risk associated with a company's stock and then make a decision.

When they are correct in their decision they earn a gain. If they are incorrect in their decision they will lose money.

Investors that continue to lose money will sell their stock to recap their investment. This ultimately means they stop investing in that company and move on to the next one that looks promising.

Believe it or not stocks are not the only way the investor can use this same strategy to make money.

People who make money with HYIP (high yield investments) operate on this principle.

To fully understand the comparison, it's important to first understand:

1) what an HYIP is,

2) how a legitimate HYIP works and

3) how people invest in the HYIP. Each of these are discussed in more detail below.

WHAT IS AN HYIP?

HYIPs are investment programs that offer high returns quickly. Like stock trading the more you invest the more gain you receive.

Unlike stocks, however, HYIPs offer more of a return for a smaller investment. The reason why HYIPs can do this is because some of the money is funded from new membership.

However, HYIPs that last DO NOT and CANNOT function on new member money alone. They must have other legitimate methods of generating revenue.

If they don't the HYIP is really a Ponzi scheme and will collapse eventually. This will be discussed in more detail later in the article.

There are two types of HYIPs that are popular online: those that require a person to do nothing but simply invest and those that require a person to view advertisements.

The latter has gained more popularity through a concept known as the autosurf.

Autosurfs that are HYIP-based operate on the same principle as television does: offering members something 'free' for viewing advertisements. In this case the freebie is money.

If the autosurf is not HYIP-based, it will offer advertising credits for its members. The more credits a member receives, the more they can advertise their sites.

HOW A LEGITIMATE HYIP WORKS

Unfortunately, because of greedy, unscrupulous people, a large percentage of HYIPs out there are scams.

This is especially the case with HYIPs not based on advertising revenue though there are shady autosurfs out there too.

But the reason why HYIPs not based on advertising are more dangerous is because there is even less certainty on where and how funds are being generated.

At least with advertising-based HYIPs one can usually see that they are selling advertising, whether through an 'Advertise on our site' link at the bottom of their web site or even an Ebay auction.

However, the HYIP that is not based on advertising usually won't make it apparent how they are generating income streams.

If they don't have some fluff about making money through Forex or other legitimate trading methods, they may have the audacity to say they are a ponzi.

Whether they say it or not, if they don't have other ways of making income they are nothing more than a ponzi.

So this means that the ONLY way they are generating funds are through new member signups. When new members stop joining the scheme the program will collapse.

This is assuming the owner is 'honest' enough to let it run that long. Sometimes individuals using the ponzi scheme will let it run for a few months, then after getting a healthy build-up of member investments, flee with the money.

Okay, so keeping all this in mind how can one distinguish the legitimate HYIP from the typical HYIP which is a scam? Below are some factors which are common to the legitimate HYIP.

1) Legitimate HYIP sites will generate revenue from a variety of sources

Member signups alone are not enough to keep a legitimate HYIP running. This is because when new members stop signing up (which is inevitable even for established membership-based businesses), the HYIP's revenue source is gone.

So if an HYIP is legitimate it must sell a service or product or invest in stable trades FOR REAL.

12 Daily Pro is an example of a legitimate HYIP that generates revenue through web design and advertising services.

2) Legitimate HYIP business owners can be contacted

HYIP business owners who are serious about their business will treat it as such. This means they will establish a company just like any other entrepreneur and reveal their contact information.

If an HYIP webmaster can give no verifiable information about their 'company' including telephone numbers, they are scams.

12 Daily Pro is operated by a company known as My Life Clicks, a registered business in North Carolina.

3) Legitimate HYIPs receive positive feedback

HYIP monitors are sites which evaluate HYIPs. If they pay then they receive a positive rating. If not, they receive a negative rating. Legitimate HYIPs tend to get mostly positive rating through HYIP monitors.

Legitimate HYIPs also receive positive feedback on virtually any place on the web, even those not related to investing.

12 Daily Pro, for example, has received thousands and thousands of testimonials from people on a variety of websites and message boards.

HOW PEOPLE INVEST IN HYIPS

The best way to invest in an HYIP is to start small and 'risk' only what you can afford. Risk is the operative word because there is no way to know whether or not an HYIP is legitimate until one actually starts investing.

However, the risk tends to be worth it if the investor thinks the HYIP is legitimate because the return is incredibly high.

Once investors find HYIPs that are legitimate, they try to recover their initial investment as quickly as possible.

After this, they invest using their profits so the risk of 'losing' is minimized. If something does happen to the HYIP it doesn't matter as much because they were playing around with just their profit anyway.

Indeed, the HYIP game may not be for every investor, but for those who want a high return quickly and are excellent at risk assessment, it is an excellent alternative.

And believe it or not, there are thousands if not millions who have made money through HYIPs, despite the number of them that are shady.

So while there is a risk of loss,(which is also present for conventional trading methods), investors continue utilizing HYIPs simply because the gain is so profound.

Investing in the Stock Market

When it comes to investing in the stock market a lot has been said and written. So much so that you would think everybody would know how to manage their money in this arena.

In reality however, nothing could be further from the truth. Even though people can easily access a wide range of financial information these days, successful investing remains a mystifying topic for many people.

The biggest problem is not the lack of information. There is plenty of information around for anyone who wants it.

The real issue is the lack of security and predictability, that is inherent to the stock market, and people's ability to deal with it.

People love to be secure and in most cases they like to be able to foresee things at least to a minimum degree. At the same time however they want to make a profit; the more, the better.

And unfortunately high profits are usually accompanied by high risk.

Feel the dilemma here?

Of course, one solution to this dilemma would be to simply put your money in a savings account, collect a little interest and just relax. If this sounds good to you, well, good for you, but don't bother reading the rest of this article.

Which means that if you're reading this, you're probably not satisfied with the meager returns from today's savings accounts and you want to let your money work just a little harder for you.

But you would still like to minimize your uncertainty right?

Let me give you a prediction with a very high degree of certainty.

If you invest in the stock market you will inevitably:
- make money some times
- lose money some times

That should at least cover the uncertainty factor. Perhaps this sounds a bit simplistic and if it does, good, it should.

Because the point I am trying to make is very simple. You just can't make money every single time you make a transaction. Even Warren Buffet did not make money on every investment he has ever made.

The best investors and traders in the world lose money on a certain number of their transactions. So don't get too hung up when it happens to you.

Fortunately it's very hard to lose money every time you invest. Perhaps you could find some people who claim that they lost on every investment they've ever made, but chances are they are not telling you the truth.

Even they have made money on some of their transactions. However they probably re-invested that money into other stocks that ended up losing money.

It's a lot like the guy sitting at the slot machines. After playing for a while the machine starts chucking out a whole bunch of coins resulting in a nice profit.

But instead of calling it a day and taking his winnings home, the guy simply keeps pouring money into the machine until the very last coin. Then he goes home wondering why good luck never comes his way.

It's important to face the reality of losing some money from time to time and be ok with it. This does not mean that you should feel ok every time you lose money.

Your goal should always be to make a profit. Just be aware of the fact that you can't realistically expect to make a profit every single time.

This will ease some of the fears of failing, since losing money on an investment doesn't mean you have failed as an investor.

Many people never get started just because they're afraid of losing money. And if they do lose money, they feel they have failed and retreat from the stock market in its entirety, never to return again.

If this hasn't happened to you personally yet, just look around.

Can you remember a time when either a colleague or a relative would frequently inform you of their investments?

Just about every time you bumped into them they would tell you how good their stocks were doing and how much profit they were making. And then, all of a sudden, they completely dropped the subject.

You never heard them talking about it again.

And if anyone asked them how their stocks were doing, they would either mumble something inaudible or utter some kind of defensive statement. What happened?

They lost their money and withdrew from activity in the market. They have essentially given up, and in doing so, they've lost. Not because they lost money, because they gave up.

If you want to be a successful investor, you can't be like that. The though of giving up can pop up in your mind when things don't seem to go your way, but you should never give in to it.

When it comes to success in investing your attitude is more important than your knowledge, just as in many other areas of life.

Now, I am not saying that you don't need knowledge. You should try to learn about investing, at least enough to get a basic understanding of how the stock market works.

Neither am I saying that it's ok to be an idiot and not learn from your mistakes. You should learn from them, as much as you possible can.

Just realize that you will not be right 100% of the times and as long as you're investing in stocks you will not be able to prevent making mistakes.

So before you put your money into the stock market, or any other investment for that matter, remember this: You will win some and you will lose some.

Nerves of Steel

Investing in todays financial markets takes at least a bit of control over your emotions. Some say it takes nerves of steel.

It is certainly true that last months market turmoil has rattled investors. Consider many of the big boys having to write off billions due to bad loans. What does that mean for the smaller private investors?

Of course to a very large extent it depends on what type of investor you are.

Are you a traditional Buy and Hold type of person?

In that case the current market slide probably won't stir you that much. You may view it as a nice moment to get some bargains and add some friendly priced stocks or mutual funds to your portfolio.

The only slightly difficult thing here is that seemingly hard to grasp phenomenon known as market timing.

Who knows what a good price is?

Is it good today just because it was higher yesterday?

If so, will you still consider it good tomorrow if tomorrows price turns out to be even lower?

Of course fundamental analysis can give you some guidance on what a good price could be, but these days P/E ratio's don't always carry the same meaning as they used to.

Of course to someone who is more of a trader the last few weeks have probably been pretty exciting.

Whether or not that is positive or not depends on the way that they have managed their risk.

What is an exciting, but perhaps bumpy, ride for one could be a nerve-wrecking slide for someone else. For many private investors risk management is easier said than done.

If you lack the discipline to put risk management in place and act on it when called for it easily lead to an unpleasant situation.

A serious drop in market value could have an immediate effect on the buying power of your portfolio.

And if you've used margin, for instance by shorting uncovered stocks, that leverage could quickly start working against you. In that case you'll probably need a bit more that just a little control over your emotions.

Nerves of steel could help you sleep better in a situation like this but when push comes to shove it won't pick up the check.

It is good to the extent where it keeps you from becoming too jumpy and making decisions driven by fear.

It can be very bad when it makes you become cocky, thinking your cool will save you when markets continue to fall. It won't. Nor will it stop a margin call from your brokerage firm.

It's great if you don't panic when the markets don't do exactly what you, or everyone else, expected.

Much money can be made if you can keep your act together in a situation like that. But it's even greater if you've got your risk management in place so that your nerves aren't put to the test when things take an unexpected turn.

Eight Steps to Building a Solid Stock Portfolio

Are you an investor looking to build a brand new stock portfolio?

Or maybe, you have managed investments or a retirement plan and you are now looking to maximize your investment portfolio?

This report will help you build your stock portfolio to generate "real" wealth.

Easy access to investing information and the availability of online trading has made life much more enjoyable and less costly for do-it-yourself investors.

The Internet has brought the "trading" desk to millions of households and it is now possible to buy and sell shares, options, warrants, interest rate securities and managed funds from your own home.

All you need is a computer and an internet connection. In addition, you can do your own research on a particular company or fund manager as well as finding out what some stock brokers are recommending to their clients.

Much of this information is free or available at a reasonable cost and you can save yourself hundreds, or even thousands of dollars in fees and commissions every year via the internet.

Rather than go through a full service stockbroker or investment advisor, why not give it a try?

When building your own stock portfolio, here are some pitfalls you need to avoid!

While you can find a plethora of good information on stocks, you can also find very poor information.

Each website claims to have the latest hot picks or the "top ten" stock buys and often they contradict each other.

Who do you believe and what about the scams?

You will undoubtedly come across websites and chat rooms that give investment advice or tips about investments, but many of these are not qualified to do so.

The information may be wrong or misleading and some websites even repeat incorrect rumors.

There is overwhelming evidence that you will not become rich by listening to the advice of others. As an investor you need raw information, not recommendations.

You would not buy a car just by looking at it...nor should you buy a company's stock without doing significant research.

There is no point trying to take control of your finances if you are going to rely solely on a "tip" from a newspaper or a broker or an internet chat room.

It is true that someone may know more about a particular company or stock than you, but they could easily be wrong - so do your own homework!

You need to be certain that you have sound reasons for investing in a particular company.

Does the company have an instantly recognizable name?

Do you understand what the company does?

Do the products or services of the company stand a good chance of being in high demand in a 10, 20 or 30 year time frame?

Does it have a management team that moves with the times and is innovative, yet keeps a firm grip on the company's finances?

Most of this information is available in a company's Annual Report, but make sure that you read it with a degree of skepticism...most reports are written to promote the company.

In the Annual Report, the financial statements, the balance sheet, the profit & loss statement and the cash flow statements are very important.

They are important because they will help you assess if the company is providing value for your money.

You are going to be buying stocks at a certain price and you will want to make sure that you are not paying an excessive amount.

The financial numbers give you a snapshot of the financial structure, strength and growth rate of the company.

This type of analysis is often called fundamental analysis, and also includes analysis of the economy and industries related to the company.

Keep in-mind that the historical and present prices of a stock hold clues to the future price. In practice, most analysts use fundamental analysis for short and long term buy/sell decisions and use technical analysis to confirm the decision.

Internet websites are a great place to collect information about companies. Naturally, a company owned website will attempt to portray the company in the most sympathetic light.

Depending on how serious you want to be about investing, it is advisable to either visit or subscribe to investment research websites.

Research websites are valuable tools for any investor and provide company reviews, give general investing information, market updates, stock pickers, stock ratings, watch-lists, portfolio managers, charts, share indexes, newsletters, alerts and model portfolios.

So, how can you structure a stock portfolio to maximize your wealth, ensure your peace of mind, give you total control of your investments, be easy to manage and give satisfaction?

Here is a recommended strategy that has worked well for many do-it-yourself investors:

1. Subscribe to a well respected investment research website dedicated to analyzing financial information for investors.

They are independent from companies they list, do not receive commissions or brokerage and rely solely on investor subscriptions for income.

They have to give their subscribers quality information to maintain subscriber confidence.

2. Look for the model portfolios they have developed and study the methodology they have used to create and maintain each portfolio.

3. Read the research reports supplied for each stock and study the graphs supplied for price movements and trading volumes. Get a good feel for both the long term and the short term trends of the stock.

4. Test each portfolio within a designated test period i.e., one month, one quarter, one year etc.

Depending on the website, you can set up each of the model portfolios in a free portfolio manager provided on the website with unlimited stocks. Set a starting date for a test period where you "buy" stocks listed in the model portfolio at the closing price for that day.

Make sure you include brokerage as it is part of the cost base for the stock. The website should either maintain up-to-date or 20 minute delayed stock prices, so a running balance can be maintained for the profit/loss for each stock over the designated period.

5. Compare each portfolio's published results with the results that you have achieved in the portfolio manager.

They should agree with each other when the same stocks are compared over the same time period. Your testing should develop a level of confidence in the model portfolio.

6. Determine the best model portfolio for you to use. You can do this using the last the last three months of stock price history or perform a trial evaluation for the next three months of future prices.

You can use one of the existing model portfolios or create your own from the stocks selected.

7. Subscribe to an online share broker website and begin trading.

8. Monitor stocks daily and review the performance of your actual portfolio against the model quarterly.

You should take care to evaluate the methodology used by the research website to develop the model portfolios.

These portfolios are designed by research firms to provide sensible medium-term portfolios that make it easy for investors and financial planners to replicate.

You need to understand the research methodology and develop a level of confidence in it rather than just blindly accepting the published results of each portfolio.

You do not need to become an expert in methodologies.

Building a share portfolio that meets your investment objectives will substantially build your wealth over a period of time.

You can also save money in commissions and fees, have peace of mind, total control over your investment and gain a real sense of satisfaction.

As a final word of caution...nothing is for certain in this world except for death and taxes. This also applies to the stock market.

Be prepared for some ups and downs and be ready to sell stocks to cut losses.

If the core of your portfolio is made up of stocks that have strong capital growth and a reasonable dividend you will do well overall. Have "at it" and good investing!

You Can Write Put Stock Options And Get Paid Right Away

There are two items in our everyday lives that are normally considered a necessity; shelter and mobility. So it follows that - most everyone owns a car, and many people have purchased a home.

In addition to requiring money, these purchases share another trait. They both require that you protect these assets with insurance.

In fact, coverage is required by law or lender to offset any damaging and catastrophic events that might jeopardize repayment.

By the same token, there are individuals who, having purchased shares of a company's stock, choose to insure their stock holdings against catastrophic drops in share price or outright market collapse.

Essentially, these investors are "hedging" or offsetting their potential stock gains. To do so, they pay a cash premium to buy insurance and guard against potential stock losses just as we guard against damage to our cars and houses.

There is one appealing difference, however. Your house and your car are insured by companies that specialize in providing this service.

And these companies are usually big business firms. And Warren Buffett owns one of the largest of these insurance companies.

So, why would he choose to buy and own an insurance company?

For a very specific purpose. All those insurance payments being paid to his firm, to cover all those houses and autos, bring in cold hard cash every month.

And that continuing cash stream allows Mr. Buffett to reinvest, leverage, and compound that cash into bigger and bigger profits.

Done wisely, prudently, and selectively as he has...well you too could be on your way to returns you never thought possible using only conventional investing strategies.

And the great thing is, unlike those corporate auto and home insurance providers, but just like the great Mr. Buffett, stock insurance can be written by individual investors.

You don't have to be a company - large or small - to do so. All you need is to get approved by a reputable discount brokerage, which is not difficult, and away you go.

Here's what happens when you write "insurance" for a stock to immediately get cash deposited into your account:

The first activity is essential. Identify a stock as one you wouldn't mind owning, because that could be the result.

Next, you simply write or "sell to open" a "put" contract on the associated stock's option. Next thing you know, a premium - also known as cold hard cash - will immediately be deposited into your brokerage account.

Now remember this: one put option contract represents 100 shares of a company stock.

For example, XYZ stock is currently selling for $21.00 a share. At the moment, cautious investors are willing to pay $1.00 in insurance "premium" for every $20 put option contract.

They do this to insure themselves against losses should the stock drop during a predefined time period.

Well call it one month in this example. In reality, this time period may range from less than a full day up to a couple years.

You, as a writer or seller of this "put" insurance, guarantee that you will buy those 100 shares should the stock fall below $20 anytime during this month long time frame.

If the stock closes above $20, at months end, the contract expires, and you simply keep the $100 that was deposited into your account when you sold the "put". If the stock closes below $20, you agree to buy the 100 shares per contract.

So instead of just one contract, writing (selling to open) 10 "put" contracts would result in $1000 in premiums paid to you for your obligation to buy 1000 shares of XYZ should they be assigned to you.

Just as you may have to buy the shares, should they fall below $20, during that month long period, alternatively, you can also close your position at anytime, if you choose.

For example, the stock price may be at $20.50 halfway through the month. You can "buy to close" the position and keep some portion of the $100 deposited premium as cash profit.

Conversely, the stock price might be below $20; say its $19. In that case, the shares may be "put" to you, making you a proud new owner of 100 XYZ shares.

Because you knew about the company and liked its prospects, and you had the cash to cover the purchase of the shares, you don't mind owning the stock.

On top of that, because you were paid $1.00 in premium per contract. your effective purchase price (before commissions) is $19.00, instead of $20.00.

At this point, since you own the shares, you might write "covered calls", obligating you to sell your shares at a certain price, again being paid a cash premium. But, that's another approach and another article.

So now you have the basic idea of how to write insurance for stocks that allows you to get immediate cash deposited into your account.

Plus, you can buy stocks for less than you might have otherwise. Warren Buffett does this. Perhaps you should, too.

E - Dove services   20 - 10 - 2008

Wise Stock Investing is about Much More than Being "Right"

The title may sound strange to some investors or traders, especially to those that are new to the subject.

Some people are convinced that this is the single most important thing for success in the stock market.

But the truth is; when it comes to being a successful investor, how much money you make when you're right really isn't all that counts.

The simple fact is you won't always be right. Oops. Bad news, right. It's not something you like to hear, but it's true. Isn't it?

Even though it's possible that some of you may have met someone, at one time or another, that claimed to be right almost 100% of the time.

And if you haven't met that person yet, you might run into him or her somewhere in the future. When you do, be careful.

When someone tells you he or she is always right, in general, three scenario's are possible:

- You're talking to the world's best investor / trader
- You're talking to a textbook example of beginners luck
- You're talking to a liar

Let's take a quick look at all these possibilities. The first scenario is of course highly unlikely. Fortunately it's easy to find out if this is the case.

Just take a look at the person's track record. People that like to brag about being right all the time, usually enjoy making their point.

So they would love to prove their track record to you. If they fail to cough one up, they're probably not telling you the truth.

The second scenario is a lot more likely. Only a couple of years ago, when every idiot could make a profit because share prices were continuously on the rise, it seemed like these people grew on trees.

In todays market you won't find a lot of those people hanging around. Most of them got more than they could handle when the bubble burst.

And many of them never had the courage, or the financial means, to return to the game of investing.

Then of course we have the third and most likely scenario. In this case, you would take the same approach as you did with the super investor.

You ask them to show you their track record. The liar of course will never give you this. Instead they will try to convince you with wonderful stories.

All of which are probably fascinating. Some would be interesting enough to serve as a plot for a Hollywood blockbuster on Wallstreet.

However, none of these stories will do you any good when it comes to making it in the stock market.

The plain and simple truth is that nobody can invest for any period of time and be right each and every time. It simply is not possible.

Now that doesn't mean that anyone telling you they never lose is lying. It depends on what they're really saying.

They are not saying that they never lose on a trade or on a specific investment. What they may be saying is that they never close out a year with a loss at the end.

So how come they can make money every year even when they lose on some trades just like everybody else?

The answer is simple; they are right more often then they are wrong. And more importantly, when they are wrong they limit their losses.

To illustrate this, let's compare the stock market to a game of roulette. Some people could easily substitute one for the other.

They live under the assumption that both are simply games of chance. Others may find this comparison ridiculous because the two are so vastly different.

The two camps would probably never agree, so let's not go into that discussion here. However there is something very important we can learn from roulette.

In a game of roulette the odds are actually divided in a reasonably fair way. If you were to continue playing by constantly just betting a small amount, say $10.00.

And you would consistently play the same color, say black. You would be right 18 out of 37 times on average. Of course you would also be wrong 18 times.

If you would consistently play the game this way, you would probably never win much, but you couldn't lose much either.

As a matter of fact if you would just continue playing long enough, you would eventually lose on 1/37th of all your bets.

Unfortunately the same can not be said for the stock market. The odds are quite different there.

Yes, the market can go up and down, and there is no zero, but there are many more factors to be taken into account than in a game of roulette.

The same strategy that was described in the roulette example could work quite well in the stock market, but it could also cost you everything you've got.

One part about being a successful trader is to be right as often as possible. And even though you cannot predict the market, at least not perfectly.

You can do your homework by studying the technical analysis charts and doing some fundamental analysis into the company. If you know what to look for, this will greatly increase your chances of being right.

However, you still will not be right all the time. And that is where both the lesson from the roulette example and the title of this article come in.

First of all, you have to place your 'bets' evenly. Stick to the $10.00 example. Don't be persuaded to invest a significantly large part of your investment capital into any one trade just because you're so sure this time.

This may work out fine many times, but sooner or later it will hurt you, and it will hurt bad. You see it is not how much you make when you're right that counts.

It is what you keep yourself from losing when you're wrong that really matters in the long run. You can be right 90% of the time and make some pretty good money.

But it won't do you any good if you lose it all on the 10% of your trades when you're wrong. Of course diversification and proper asset allocation can help protect you, but that simply isn't enough. You have to know when to get out.

So next time when you're about to make a trade, ask yourself: "What if I'm wrong". And then determine a price level at which you will take your loss and get out. Once you've determined this simple rule, just stick to it.

It may cause you to lose a little money every once and a while. Even on trades that may bounce back just one day later.

But in the long run that will hurt far less than the losing trade you so desperately hang on to, hoping it will recover. Only to find out that it won't.

E - Dove Services    21 - 09 -2008     New

 

Are ETFs Right for You?

In the investing world ETFs (exchange-traded funds) are the latest and greatest. Although they have actually been around for more than ten years it is not until recently that the explosion of ETFs has occurred.

ETFs are a group of stocks that trade on the stock exchanges as if they are one stock. Generally in the past they have tracked a particular index such as the Dow Jones Industrial Average or the NASDAQ-100.

Recently however they are forming ETFs that have a particular characteristic in common, invest in a particular region or sector of the market, or have a certain market capitalization.

There are many advantages to ETFs over open and closed mutual funds. They can have a low cost of obtaining since you are paying a commission just like when you purchase individual stocks.

If you use a discount brokerage you can purchase for $14.00 or less. The ongoing maintenance fees for an ETF are also minimal compared to actively managed mutual funds, and in some cases lower than index mutual funds.

Because ETFs trade like stock they have liquidity. With a simple phone call you can buy or sell.

ETFs are priced every 15 seconds and trade continually throughout the day.

This is different from mutual funds that are only bought and sold at the end of the trading day. Since the ETF will be held in a brokerage account is easily traded.

Tracking an index means less selling within the fund. This makes for a tax efficient fund. It is rare that an ETF declares a capital gain distribution.

This means you determine when the taxes will be paid on the gain by choosing when you will sell.

Index and actively managed funds retain a portion of their investable assets in cash. This is used to pay someone who is selling their fund.

Since ETFs trade like individual stocks on the open market there is no need to retain a portion in cash.

There is no room for style drift in an ETF. In an actively managed mutual fund, the fund can say it is a large cap fund, but may chase performance by investing in small or mid caps at times.

ETFs are required to maintain a 99% correlation with the index or basket of stocks that it represents.

Because ETFs trade like individual stocks you have the additional features of stock. ETFs can be sold short or on margin.

They can have limit buy and stop loss orders for buying and selling. Put and call options can be purchased and sold using ETFs.

There are of course disadvantages to ETFs as well. They are not an appropriate investment to use with dollar cost averaging.

If you have to pay a $10.00 fee each month when you make that $50 or $100 investment it can be difficult to make up that fee.

With the explosion of ETFs you have to watch what the fund is using as its underlying stocks. Sometimes it can be such a narrow focus that you really are not achieving diversification.

Due to the ease of trading you can get caught up in riskier strategies than you want. Short term trading and market timing can result in significant losses.

Buying and selling ETF puts and calls or buying on margin is speculating and is riskier than buying and holding.

ETFs make sense under the right circumstances. You can use a broad index ETF as a core holding.

This can be supplemented with targeted ETFs to provide weighting in a particular sector, region or type of market capitalization.

As always know what you are investing in and be sure that it fits into your portfolio.

Trading Forex with the Right Software

The trading software is one of the more overlooked aspects of trading Forex online.

For those who are not familiar with the Forex market, it is extremely fast-paced and volatile.

That is why all brokers claim that their software offers the minimum latency in providing real-market updates.

Unfortunately, this is a very generous statement and it does not take into account the client's internet connection or his geographic location.

The client's connection to the web is obviously the most important factor regarding receiving real-market updates from the broker.

It really should be the best connection that one can afford, whether it is cable, satellite or ISDN. Cable is the preferred connection, as it is more secure and offers greater bandwidth.

And then there is geography. It is common sense that Broker X who is located in Toronto can establish contact with Client A located in Montreal much faster than Client B, who is located all the way down in Mexico City.

The fact is that all internet connections are affected by distance. The farther a client is away from his broker, the more delay he will receive as a result because of the physical limitations imposed on wiring.

Thus, always research your broker's geographic location before selecting it as the right one for you. For best results, always choose a broker who is closer to you.

Any decent broker will offer its trading software for free. Some will even offer different versions of its software for traders of different skill levels.

Usually, "advanced" versions loaded with extra features are available for free to those who request them.

Trading software comes in two flavors- web based and client based software. If your broker offers both kinds, great!

Each has its own advantages, but it is the general consensus that web-based software is better.

Web based software operates completely on the broker's server and is interfaced through a web browser like Internet Explorer or Mozilla Firefox.

This creates a lot of flexibility for the client, as he can access his Forex account anywhere providing he has access to an ISP and a browser.

Security with web based software is not an issue, as all exchanges between the client and the broker take place over secured sockets and are heavily encrypted.

Client-based software is downloaded onto the computer and executed from there.

It is faster and more convenient to access, and is more "homely" in the sense that it will blend into your desktop environment.

However because client based software resides on your computer and stores sensitive information like name and passwords locally, it is very vulnerable to hackers.

If they managed to sneak pass your firewall through Trojans or some other backdoor virus, they can do great harm to your bank account.

If you are just starting off with Forex, be sure to take these factors into consideration when selecting the best broker.

Analyze the features of the provided software to make sure that they're right for you. So with all that said, good luck and happy trading!

E - Dove Services   26 - 09 - 2008    New

Some Day Trading Tactics That You Should Learn analyse

Day trading may seem easy for some people, but it is a lot harder than it seems. Others felt the need to do an intensive study on the financial market before they could achieve success.

But while gain is relatively hard to attain, it is not impossible. Here are some strategies that might be helpful for traders.

Concentrate on a certain group of stocks like currencies or financials. Or you may decide to look into other kinds of companies like technology and oils.

In any case, make sure that you know how the industry works. With that information, you can make better analysis and, in the process, make better decisions with your stocks.

In buying stocks, some use charting software with built-in hot lists. One strategy is to pull up the hot list and look at the stocks being traded. If you find one that meets your criteria, then purchase the same.

If none of them meets the criteria, then do not do any trading for the day. Experts will tell you not to dwell too long on one kind of stock, as you may tend to purchase it even if you must not.

Another strategy is to concentrate on one trade per day. There are some long-term traders who swear by the saying "less is more."

More trading does not necessarily result to successful trading. By making single transactions per trading day, they feel that they've made better decisions.

But this does not necessarily mean that multiple transactions should be avoided. Some traders like the idea of making multiple transactions because they think that their money moves faster, and in effect, profit as well.

But never spend more than you can afford. While loans may be readily available, remember also that you need to pay the amount loaned plus whatever charges and interest. Investing all your money is risky, so make sure that you do not use all of it.

These are some tips which you can use when day trading. You may follow one of the strategies or define your own by integrating one or more of them.

Some experts suggest on not deviating from your plan or strategy. On the other hand, there were some who changed plans and got the results that they wanted.

Whichever plan you choose, in the end financial gain is all that matters. So it is important to trade wisely at all times.

Steps on How to Become a Master of Day Trading

The success with day trading does not knock on the doors of all people. If you are striving to become a master of the craft, then you will have to bet your wits against a rival in the stock market.

Every time you earn a profit, it means that someone else or another day trader loses a part of his investment. Thus, you should be equipped with a profound knowledge and loads of valuable techniques on day trading and then execute your smartest moves.

Needless to say, day trading is one full time career. Literally speaking, there is the need for you to watch over the market, its prices, and how your stocks can play well with the ongoing flow. Just a minute of being inattentive may mean a defeat of your purpose.

Basically, if you are aiming for a stable profession in day trading, you have to keep yourself abreast of all its ins and outs as well as its ups and downs.

The following are some of the insights that will help you make the best out of your day trading experience.

Open your eyes to reality. Day trading is no fairy tale. Your money can't accumulate your desired profits overnight. You will need enough time to market your stocks.

Learn from mistakes. No one is perfect, so to speak. The same goes with day trading. There are always mistakes that you will end up with and you are no super hero who can fight off these odds.

Therefore, you need to learn from all these wrongdoings and try to do things better the next time.

Strike while the iron is hot. When there is a great opportunity to make profit, be ready to plunge into the business. Work hard. Try to limit your chances of losing and heighten your possibilities of winning.

Set a limitation for your losses. Ask yourself as to how much you are ready to lose as you partake in the stock market business.

But be sure that you don't exceed such limits. Be a hundred percent confident with your preferred day trading technique. Success is often the result of your will and desire to standout.

Be responsible. Whatever your decision is, be ready to face its consequences. Your self-discipline, determination, and persistence are very important.

Study, study, study. You can take online tutorials and learn about the stock market and day trading through the cd-rom packages sold online, by joining the online forums, reading newsletters, and attending seminars.

Read on the valuable tips for day trading. You can only overcome your fear if you are knowledgeable of the things which you can do to improve your craft.

Enjoy. It is important also that you enjoy what you are doing. Day trading can be both risky and exciting. What is most significant is that you know how to handle things so that you will end up with a fruitful experience.

Techniques in Day Trading

Day trading, in its basic sense, is the investing or disinvesting of a stock or several stocks within the day. All trading positions will then be closed before the day ends. Traders who participate in this kind of trading are called day traders.

There are several techniques used in this trade to increase profit. They are as follows:

News Trading

This technique relies on the good and bad news. If the news says that a certain stock is taking off with a positive trend, this is taken as an indicator to buy the stock. If, on the other hand, a stock receives bad news, it will be sold.

These provide a greater chance of losing or winning the trade because the news carries with it good information on the volatility of the stocks.

However, trading news has its disadvantages. For one, depending on the news for a decision alone will cause time lag which most traders can't really afford.Another is that the market does not always work exactly as the news says it.

Scalping

Also popular for the name of spread trading, scalping is a technique where the trader distributes his stocks on trades with only small gaps.

He then establishes and liquidates the trading position, therefore incurring only small profits from each trade.

This style really minimizes the probability of losing however; the rewards are significantly lower due to the time duration and the size of the gap being exploited.

Range Trading

The exact opposite of trending, range trading takes advantage of the pattern created by the consistent falling off and rising up of the stock from its resistance price towards its support price.

The trader profits from this style by buying the stock at its lower price and by selling or short selling it at its high price.

Trending

This works by following the continuous rise and fall of the stocks or trades. The trader will buy the stocks which have been rising or sell them when they start to fall as long as the trend is expected.

Contrarian

This style is not exclusive to day trading. Traders profit from this by observing the stocks that are continually rising and would suddenly move in the reverse positions, and vice versa.

The trader will sell the shares that has been rising or buy those that has been falling believing that the trend occurring will suddenly change.

The Facts of Online Day Trading

Day traders employ a multitude of techniques mainly because they want to gain more profit and succeed in their craft. However, it is a fact of life that day trading is somehow risky and not everyone who engages in it ends up on the winning end.

Therefore, before you plunge into the decision of becoming a day trader, you first have to pay careful attention in learning and analyzing the chart and stock patterns before purchasing a particular stock.

Online day trading has become popular because of its convenient nature.
First and foremost, the Internet is in full operation for twenty four hours.

Some clients find the time to survey the stock market at the end of the day or before they turn in at night.

Thus, there is a greater chance that you can cover a larger number of clienteles. Likewise, the Internet hosts a wide array of choices when it comes to stocks.

It is then an advantage on your part since you can conveniently watch the behaviour of the market wherever you may be and also purchase new stocks if you wish.

Meanwhile, it is significant that you take enough time to look into many of the considerations regarding online day trading before arriving at the decision of participating in the trend.

Here are some of the tips that you can ponder on: 

Learn a variety of techniques. Before you enlist yourself as a full fledged online day trader, you should first collect as much knowledge as possible.

You can take online tutorials, partake in the online forums, read newsletters, study through the cd-rom packages, or attend live seminars or webinars.Keeping yourself educated is an important ace in facing the world of the stock market.

Check out the demo account. Many of the online companies provide a demo account wherein you can practice your skills in day trading without further investing real money. In this way, you can better get to learn the ropes of the trade.

Research on the company's profile. You will not want to risk your money for nothing in return. Better yet, take the time to study the characteristics of the company that you are to deal with. At least, you will be forewarned should anything fishy happen.

Start small. Since you will just be figuring out your future as an online day trader, it is best to employ a small amount of money for starters.

If ever you lose, you will not be disappointed that much because you engaged only a small part of your wealth.

With all these pieces of information, you are more confident to face your career with online day trading.

The Growing Popularity of Day Trading Today

Perhaps you've heard of people quitting their regular jobs to go into day trading. This, despite the fact that an estimate of 70% of traders and securities investors lost some or all of their money in the process, or for futures traders, about 94% of them lost some or all of their money and quit trading altogether.

Or that it has other added costs which you need to pay like commissions in both buying and selling stocks.

The thing that lures people into this type of business is the same temptation that gambling or betting does to others - the possibility of earning fast, easy money. But while others see this as another form of gambling, traders and investors would argue otherwise.

For one, it is not based solely on chance. Before buying securities, stocks or futures, you need to have information on the financial market.

In other words, you need to study and do your homework. There are tons of books that you can read, websites that can provide you with more information.

Some firms educate would-be traders by offering lessons and training on the topic. For as much as $5,000, you may be trained for a few weeks to know the ins and outs of the trade. If people are willing to spend this much to learn, then the business must be lucrative.

A businessman wouldn't invest in something which has slim chances of profit, would he? That explains why this business is popular.

We knew of some people who earned thousands of dollars in just one day, or a friend or a friend's friend who became millionaires by trading.

Of course, there's the privilege of being one's boss. This, alone, is reason enough for some people to venture into this type of business.

You can work in your most casual clothes, and come and leave as you like. You may not even report to work everyday if you want to.

Day trading is not all luck or chance. You need to have adequate trading intelligence and knowledge before you can trade successfully.

With luck you can only gain for a certain degree or period of time, but not in the long run. As they say, you need to trade intelligently.

Together with the chance of earning is an equal risk of losing money. Trade brokers and analysts can only suggest. Ultimately you have to listen to yourself, whether it is your brain or your gut which tells you.

The Must-Haves of Day Trading

Day trading used to be set in a day trading pit where only the large firms and brokers could participate. However, with the advent of the internet and advanced communication technology the trade was able to reach even those people who have not even seen the actual market.

It has become a popular home-based business that people with enough money and interest can invest in.

However, even if everyone has an equal chance of profiting in this trade the people with the right gears are in general more competitive than those who don't. Here are some trading tools that every trader should have:

High connection speed

You participate in real-time trading so you cannot afford any time lags. You will be buying or selling trades in a market that fluctuates at all times and you should be able to get a good timing in accordance to the market behaviour.

Bad timing is often a problem of most traders. They either don't have the right connection speed or they just take too much time in deciding on when to enter or re-enter and when to exit the trade.

Thus, you cannot rely on a dial-up connection because this won't give you up-to-date feeds. To be more efficient, you can rely on the fastest speed available for DSL or cable connection.

Hardware

A reliable computer unit is an absolute requirement if you want to be a serious trader. You have to get the basic items offered by hardware plus additional applications you want to have.

The computer must be efficient enough as for its speed, memory and processor. Remember that while trading, you will be handling a lot of figures and numbers and the computer you have should be able to do the computations efficiently for you.

For better feeds you should also have an excellent video card. Since you would be dealing with a huge amount of data, you may need to use two monitors or split monitors.

Software

There are various types of software available on the market today, each offering different programs. Software could be divided in three different categories: charting, data and trade execution.

The trading software makes the work easier for the trader. Apart from getting stock quotes, market prices, and market indices, software will also store, retrieve and present the bits of information in an organized manner.

This way, the trader could readily understand the behaviour of the market, making it easier for him to make his decisions.

These tools can be bought in several computer shops or on online vendors. Take note that a trader has to pay for each tool unless they come in a single package.

The Pros and Cons of Day Trading

It is not surprising why many are getting into the day trading business. Of course, money is the primary reason why people join the bandwagon.

But like any other business, there are disadvantages as well. Here are some of the advantages and disadvantages of day trading.

The first advantage is being able to work at your own pace, on your own terms. No boss breathing down your neck, no snoopy co-workers, no company rules to follow.

You don't need to drive yourself to the office, no dress code, no scheduled breaks, no unapproved leaves. More so, you can still earn even if you have already retired or unable to work.

You are the master of your own time. There is no fixed work schedule that you need to follow. You can go on vacation during off-season, and plan for an early retirement if you've earned enough for it.

You don't need to work for 30 years before you can retire, and you may not work everyday. You have flexible work hours and working days. This gives you time to do other important things.

But because more people are into day trading, there are also many trading sites that abound.

While others may be legitimate businesses, there are some which are not. Choose sites which can provide technical support and training to traders at a minimal rate.

There are also many brokers, good and bad, who'd offer their services to traders. Choose your broker well. Find one which offers low commission rates but provides maximum results.

Experts and long-time traders can tell you which brokers are better than others.Together with the possibility of success is the peril of failure.

With this in mind, do not put all your savings in this business venture. Remember that in any transaction, as a person gains profits, another person loses money.

But just the same, if you are not strong enough to make decisions, you will never earn in this type of business.

That is why it is important for you to be objective in the decisions that you make. Do not easily be discouraged if you experience losses. Every successful trader has experienced money loss at one time or another.

You can be financially successful with day trading. But as to any business venture that you wish to pursue, you must know it well enough before you start. And as you go along, learn a couple more things along the way.

The Sad Picture of Day Trading

There are people who are remarkably successful in day trading but there are a lot more who have to leave the trade with a debt in their accounts. It is a take-it-at-your-own-risk playing field.

Thus you should have an idea of the risks you are taking and should know your way out. If not, the only way you could go out of this trade is when you have nothing more to trade.

While it is true that trading appeals to many people, it has its share of sad sides that would-be investors should be aware of:

It is an expensive job

Day trading is a full-time job, it won't allow you two hold two jobs at a time. This is because you have to be always on the look out for any changes in the market that could severely affect your portfolio or bring you the income.

This is an extremely complicated job that requires you to acquire technical understanding of how the trade works.

You need to invest on a number of things like your risk capital (which you could lose at the end of the day), your professional training, your technical support and for larger day traders, the payments of the firms they are commissioning.

It is not a sure investment

Nothing in this trade comes with a guarantee. Traders will have to wait for the rise and fall of some stocks, ride in the momentum, and hope that they profit from their decisions.

But even the rise or the fall of a specific stock is not an assurance that your investment is lucrative, everything changes in this kind of trade and a trader should be able to understand that reality.

Every decision is a risk and each risk leads to other risks. If you are not sure if you can handle the uncertainty of this investment, it is in your best interest to first- learn more and second- look for other trades that work for you and invest your money.

It makes you suffer financial losses.

Like all other businesses, this trade may make you deal with severe financial losses. If you open a restaurant, for example, and the restaurant doesn't click in your intended market, you will have to wrap up and accept the deficit in your investment.

Or you could be a bit more patient and make some adjustments in your business. The same is true with day trading, only everything is fast forwarded.

Anything and everything could happen in a nick of time. You can lose hefty amounts now but you may profit a lot within the next few hours or vice versa.

The Value of Day Trading Charts

Almost all people who are within the confines of the stock market business are perfectly aware that such a place constantly undergoes change.

Thus, they deem that there is the dire need for the so-called algorithms in order to appropriately analyze their actions as they partake in day trading.

Foresight is one valuable factor that day traders need in visualizing the possible outcome of their endeavours. In order for them to achieve such foresight, what they depend on are the day trading charts.

The day trading charts paint a clear picture regarding what is basically going on with the stock market. Are the prices going down?

Is there any possibility that the prices will go up? As a matter of fact, every second counts in the algorithms reflected in these charts.

Among the general features which are promoted by the trading charts are the TRIN, TIKI, fair value, and the TICK all of which are market internals that play integral roles in the course of your trading.

With these market internals, you can define the suitable strat