Candlestick Trading Blog: June 2008

June 28, 2008

Investment Opportunity

Investment Opportunity in the Forex Markets Forex trading is a great investment opportunity for investors interested in trading currencies. It is also known as foreign exchange trading and it is one of the largest sources of income and savings available on the internet today. It continues to gain popularity among investors considering two trillion dollars are traded each day on the forex markets! Forex trading is highly speculative in nature meaning that currency prices can become extremely volatile. Currency must be bought in pairs and the object is to buy currency on the cheap and sell it at a higher price in order to make profits. Forex traders buy and sell foreign currencies of different countries and a single unit cannot be purchased or traded. Investing in forex is a very popular investment opportunity because it requires very little to begin investing. The minimum investment can be as little a few hundred bucks and many brokers don’t charge transaction fees. There are still services fees associated with the broker, but it is not feasible for them to charge for the numerous numbers of transactions that take place daily. Fx trading is also popular because it takes place 24 hours a day, 5 days a week. Investors find this very attractive because they can trade according to their schedule and they are not forced to trade between specific hours of the day. This investment opportunity allows the investor the flexibility to trade at a time that is convenient for them, which proves very handy for those who trade forex as another form of income in addition to their day job. Additionally, investors can trade from anywhere they choose, as long as they have an internet connection. Also, it takes place electronically between a network of banks, so it is not bound to one trading floor. Another great advantage to forex currency trading is the ability to turn a profit in any conditions, unlike the stock market. The stock market requires prices to rise in order to make a profit however forex traders can make a profit at any point in time, no matter how the economy is doing. While this is a popular investment opportunity, many investors hesitate due to the perceived complexities of trading forex. It is true however, that many forex investors find that it really is not all that complicated after receiving the proper training and education. They also realize that the most important part of trading currency is that the fluctuation of the currency markets is continuously changing and they must be on top of it at all times in order to make a profit. Like any type of trading, they key is to have a full understanding of how the market moves. For those investors interested in trading forex as an investment opportunity, be sure to find the right forex strategy that works for you. Once you find a successful strategy, stick with it. There are thousands of people earning over $100,000 per year by trading on the forex exchange. Study hard, practice as much as possible, and perhaps you can be included in that group! Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 24, 2008

American Mutual Funds

American Mutual Funds – Loaded Funds American mutual funds are of the nation’s oldest and most popular mutual fund families. This fund company manages over $600 billion in investments and 30 million shareholder accounts. It was founded in 1931, and many investment analysts worried that it wouldn’t be able to continue successfully due to the growing popularity and difficulty in finding investments with more money at stake. American mutual funds are very popular due to the performance, the sales commissions generated for financial advisors, and the endurance of the funds. The fund is made up of 29 mutual funds and is most commonly found in retirement plans. American mutual funds come in many different classes and have 529 versions of most of the funds. These classes include bonds, balanced funds, large growth funds, large value funds and international funds. While American mutual funds are popular, keep in mind they are considered the best of the loaded funds. This means that brokers and investment advisors are paid to sell these funds and they typically carry a 5.75% sales charge plus a 0.25% 12b-1 fee. Ouch! Many investors are not fond of these fees, as you can imagine, and they look to only invest in no load mutual funds. In fact, unless the company that you work for waives the fees charged by these funds for your 401(k), you may want to talk to someone about looking into other fund families that are not loaded. How to Spot a Loaded Fund You should always research American mutual funds, or any other mutual fund that you invest in to determine all associated fees. Keep an eye out for anything that refers to a load and make sure that it says none or zero. When mutual fund investing, look for words such as front-end, back-end, front-end sales charge, deferred load, deferred sales charge, 12b-1 fees, and actual fees. Also, loaded mutual funds have classes such as Class A, Class B, Class C, etc. If you are discussing classes of mutual funds, then you are dealing with a loaded fund. Also, watch out for common lies that are told by some sales people who are very good at pointing you towards American mutual funds and other loaded funds. They will sometimes tell investors that there is no commission, and that the fund company will pay the commission. Guess what? The fund company is basically you. They may also tell you that load funds are better managed, and they outperform no-load funds when investing in mutual funds. This is completely untrue and in fact, no-load funds often prove the opposite after taking into consideration all of the fees associated with loaded funds. Another thing they tell investors is that you only pay on the loaded funds if you don’t hold them for at least five years. Sounds a little better, but this is only a way to prevent you from selling a fund that performs poorly. Mutual fund investing is a great way to diversify your investment portfolio while providing less investment risk that many other forms of investing. Check out if you are invested in American mutual funds in your 401(k) and take a look at the associated fees. While it is lower risk, it is important that each investor researches mutual funds as they would any type of investing that uses your hard earned money. Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 20, 2008

Corporate Bonds

What are Corporate Bonds? Corporate bonds are bonds issued by major corporations and can be divided into five major groups. These groups include utilities, banks and other finance companies, industrials, transportations, and international. These bonds are often listed on major stock exchanges however most of the trading volume takes place on over the counter markets. Sometimes corporate bonds include all bonds except those issued by the government however technically speaking they must be issued by a corporation to qualify. When compared to government bonds, they also are considered to generally have a higher risk of default, and as a result, receive a higher yield than government bonds. Corporate bonds contain a provision known as the “poison pill provision” which is a risk prevention measure that a corporation can make in the event they may be acquired by another company. What it does is it allows its shareholders to buy stock of the acquiring company or more of the same stock at a heavily discounted price. This protects the corporation because lowering the stock and providing it to the shareholders would have a negative impact on the acquirer and would therefore reduce their interest in purchasing the company. This prevention measure typically sets the investor’s mind at ease because it is nearly impossible to predict dramatic changes in a company. Other measures taken by corporations to decrease investor uncertainty when investing in bonds include putable bonds and floating rate notes. Putable bonds are designed to protect bonds against interest rate fluctuations and floating rate bonds also help to protect investors against interest rate risks while keeping the value closer to par. There are many benefits to investing in corporate bonds as well. They provide attractive yields as discussed above in comparison to government bonds or CD’s. They offer diversity to investors looking to build a strong portfolio, and they provide a dependable income by providing a steady income. This is a very attractive feature to those looking to preserve their principal for their investment portfolios. Another benefit of corporate bonds is that they are safe and marketable. You can pretty easily sell a bond before maturity due to the liquidity and size of the market, and they are evaluated and assigned a rating based on the corporation’s ability to repay obligations and their credit history. If you are in the market for corporate bonds and would like to purchase one in order to achieve greater portfolio diversification, please keep a few things in mind. You must find out how liquid the bond is, and if the bond is listed on an exchange or over the counter. You also need to know the credit history of the corporation, and if there is a callable option fixed into the bond. You should also find out if there is a putable or floating rate option as discussed above. Bonds are a great way to invest money in the long-term and are typically less risky when compared to other forms of investing, such as stock options trading, or other methods that are considered more short-term. Just be sure that with any type of investing that you do your homework! Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 17, 2008

Australian Stock Market

Australian Stock Market – Australian Securities Exchange (ASX) The Australian stock market, known as the Australian Securities Exchange, is the primary stock exchange in Australia. It is known as the ASX, is entirely electronic, and resulted from a merger of the Australian Stock Exchange and the Sydney Futures Exchange in 2006. The ASX is actually a public company listed, with its own shares traded on itself! The ASX cannot regulate itself obviously since its job is to regulate other listed companies on its exchange so it is regulated by the Australian Securities and Investment Commission (ASIC). There are other stock exchanges in the Australian stock market however the ASX is the main exchange. It started off as far back as 1861 and the average daily turn over in dollars is around $4 billion with about 122,000 trades placed each day. Before the ASX, the Australian stock market consisted of six different exchanges that merged in 1987! Basically, each major city had its own stock exchange with the first being the exchange in Melbourne in 1861. The trading platform used is called the SEATS (Stock Exchange Automated Trading System) and it has extremely low brokerage fees. The ASX is the 8th largest exchange and has had three different methods of trading stocks. The first was obviously verbal auction, followed by the chalk system on the Australian stock market in 1869. When one man could no longer verbally call out the names of stock for bidding, the Aussies moved to scribbling buy and sell stock orders on chalkboards. Upon its implementation of SEATS the trading floors were actually closed. The Australian stock market (ASX) is a multi-asset class vertically integrated exchange group and offers a wide array of products and services. It operates two trading, clearing and settlement platforms with one for equity and one for a suite of interest rate, commodity futures, options futures, equity index and Contracts for Difference (CFD). The first is traded on an integrated trading platform between 10:00 a.m. and 4:00 p.m. and the other is traded on a globally distributed 24-hour platform. The Australian stock market works just like the NYSE or American Stock Exchange in that it has full-services and discount brokers. The full-services brokers act just the same as and are called full-services brokers however the discount brokers are referred to as non-advisory brokers in this stock market. They perform the same services and their online discount brokers are typically internet and/or telephone based. An interesting feature of the ASX is the LEPO. LEPO stands for low exercise price options and they work like futures contracts in that it is a call option with a low exercise price of $0.01 and a contract size of 1000 shares to be delivered on exercise. Since they are European style they cannot be exercised until expiration and the premium is practically the whole share price. The trader can only post margin and cannot post the full price, and can take a long or short position. There is a lot of additional information regarding the Australian stock market that this article does not address. Continue to research other markets as seasoned traders often do in attempts to expand their knowledge base. Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 13, 2008

Invest Money

Invest Money in Day Trading To invest money in day trading means to potentially profit from fractional increases in the stock market. Day trading is the buying and selling of stock throughout the day using technical analysis tools rather than fundamental analysis typically used in long term investing. It requires as well that you close out your traders at the end of the day each day. Day traders will look at a determined set of criteria when deciding whether or not trade a specific stock. The criteria that determine this are liquidity, volatility, and price transparency and they are discussed below. Day traders will look at the liquidity of a stock when they plan to invest money in it, with the understanding that if a stock is too thinly traded, then the market makers can manipulate the price too early. Liquidity is based on the number of outstanding shares on the stock market, the number of market makers, and the volume of transactions that take place on the market for a particular stock. Day traders want high liquidity for a stock that they are trading because the higher the liquidity, the more people trading that stock, and therefore the more opportunities to make a profit. In addition to the liquidity of stock, these traders will also analyze the volume of a particular stock. It is essential that a stock is traded at 250,000 to 500,000 shares per day in order to qualify for day trading. (Day traders usually have a minimum somewhere in that range). The higher volume allows the trader to buy stock or sell stock at a very large amount without deeply affecting the price of that stock. Stock volatility, as introduced above, is the predicted or actual price movement of the stock and is a very important element to day trading. It is defined as the rate at which the price of a security moves up or down. Large price swings are where the educated traders make money, the less educated lose money. Day traders look to invest money in those stocks that change price frequently over the span of one day, or in other words are highly volatile. If there is no stock price movement, (or little price movement), then there is little to no chance for day traders to make a profit! The last important piece to successful trading of this nature is price transparency, also known as market depth. Price transparency assists the trader to invest money through determining how much money they can make on a specific stock. This is completed through the gathering of information on the order flow of a stock. Day trading is an extremely risky way to invest money, however it you really understand what you are doing, you can make a killing! Study as much as you can possibly stand before you begin, and practice online paper trading for up to one year, before you begin trading with real money. You will lose money before you make money, so the key is to be patient, study hard and practice. Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 10, 2008

Investment Online

Investment Online – Paper Trade First With the advent of the internet and the numerous amount of brokerage firms available, many investors have opted to make an investment online rather than going through a real life person. You no longer have to waste time waiting by the phone for your stock broker to call you back but can instead make your decisions and take action from the comfort of your own home. This article discusses a few benefits of online investing and also takes a quick look at the benefits of paper trading online. Two major advantages to making an investment online including the following: 1) You can manage your investment portfolio from anywhere at any hour. 2) It is also almost effortless in comparison to how it used to be. Now you don’t have to make an appointment with your investment advisor, wait for him to call you back to confirm, get dressed, go meet with him, etc. All you have to do now is log-in and click away and you are done. Another thing that is great about the internet is the numerous tools available to the average investor. Say you are interested in learning online forex trading. Now you can take all of the classes and tutorials you would like right from home. If you prefer, you can never leave the house through your entire forex trading education. You can join online forums, order books online to have them delivered right to your home, and chat with a mentor online. It really is amazing how easy it is to make an investment online with the click of a button! So, now you have done all of your research from home and you want to make your first investment online. As you probably were told during any training that you took, the first step towards trading online is do practice by paper trading first. Online paper trading is when the investor makes use of paper credits to practice real life trading on markets such as the foreign currency exchange. Basically the paper credits are used in place of real money to provide the investor with practice and so the investor can see how he would make out if it were real money. In order to do this, the investor must set up a demo account through the trading platform that he or she will use to make their investment online through trading. Paper trading futures or options, or whatever you choose, offers many benefits that are not only good for the beginner investor. While it allows the traders to get a feel for the platform that they are using, it also allows the intermediate or seasoned investors to try out new investment strategies before making a real investment online with real money! It will also assist seasoned traders to develop more sophisticated strategies over time without risking a lot of money. The only knock against paper trading is that many people are not in the right mind set when they participate. You must not be in the mind set that you aren’t trading with real money, therefore allowing you to take risks and make decisions you wouldn’t normally do. If you are paper trading and you are in that mind-set, try thinking of it this way instead. The more time you waste by not fully engaging in the exercise of paper trading, as its intended, the further you are from realizing your true profit potential. Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 6, 2008

Stock Market Investment

Stock Market Investment - How to Invest In Stocks First and foremost each every wise investor invests in himself first before making a stock market investment. The successful trader does this through obtaining a thorough education, through a ton of practice and through developing a network of peers. Many obtain this education through a stock market home study course, through attending trading seminars, and through taking technical analysis stock tutorials. The first piece of information necessary to understand before investing in the stock market is what is stock? Stock, also known as a share, is a portion of ownership or equity in a company with rights and obligations. To buy stock and sell stock involves contacting a stock broker who can make the trade on your behalf. You can do this by working directly with a discount broker or regular broker, or you can do it online. Either way you must go through a brokerage firm. Once a company decides to “go public” and is listed on the stock exchange, it means that they can now sell their shares to the public. They use this money to grow their business through raising capital. When you make a stock market investment, you are assisting these companies in raising capital. Once a company goes on the NYSE, the American Stock Exchange, or any other exchange, their shares are permanently traded by traders and investors. Once you decide you would like to make a stock market investment or two, you will learn about fundamental and technical analysis. Both methods are used by traders and investors and both will swear by their methods. Most likely, however, you will go with one or the other. Those who practice fundamental analysis learn more towards long term investing. They opt to invest in a company that they believe will increase in value over time, predicting that the stock is worth more in the future. They then choose to cash out and take the profit or keep the stock in the hopes that it will continue to increase in value. Those who practice technical analysis when they want to make a stock market investment are referred to as traders more than they are called investors. Its not that they aren’t investing, but they invest in the short-term by predicting where they think the price of a stock will go next. They study the price trends, and trend analysis, and they buy or hold a stock based on that analysis. This type of trading if often referred to as day trading and swing trading because they literally trade within hours, minutes, and/or days. They don’t really care what the market’s perception of a stock is, they only care about what that perception does to the price. They then follow the price and look for trends to base their trades on. Very exciting! Whichever method you choose when you are ready to make a stock market investment, the key is to have a through understanding of what you are doing. Get educated and seek the help of a mentor. Join online forums and network with other peers who can point you in the right direction. Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

June 3, 2008

Investment Strategy

When studying finance and trading and investing you will come across the term referred to as “investment strategy.” An investment strategy is a set of rules or procedures that are designed to guide an investor through the creation of an investment portfolio. When creating a portfolio the first thing an investor should do is determine his or her risk tolerance. This will help the investor determine whether or not he or she is more interested in passive strategies such as mutual fund investing, or more aggressive strategies such as day trading stock online. This article will focus more on passive strategies such as mutual funds, and index funds, as well as the “buy and hold” concept. Investing in mutual funds allows an investment company to spread its money across a diversified portfolio of securities, such as stocks and bonds, or money market instruments. There are many advantages to investing in mutual funds and many investors make a common practice to incorporate these investments into their investment strategy. Mutual funds investors make money by receiving dividends and interest from their investments or by the rise in value of securities. Shareholders receive dividend interest and profits from the sale of the securities in the form of distributions and they are typically allowed to redeem their shares during any time for the closing market price of the fund on a particular day. Mutual funds are also known as open-end funds as well. An index fund is another investment strategy and it is known as a collective investment ploy that seeks to replicate the movements of an index of a specific financial market. It is also known as an index tracker and the tracking is achieved by attempting to hold all of the securities in the index, in the same proportions as the index. An index form is typically in the form of a mutual fund or an exchange traded fund. A very popular investment strategy is known as the “buy and hold” strategy. This concept works for long term investing and it is based on the concept that the equity markets give a good rate of return in the long run, in spite of periods of volatility or decline. Typically stocks are bought and then held for a long period of time, regardless of the market fluctuations therefore holding onto the idea that market timing does not work for small or average investors. This investing strategy is one that is backed by 50 years of historical data. Keep in mind, however, that they are referring to the smaller and/or average investor and not the professional and/or advanced investor. Deciding on an investment strategy is the first step towards investing your hard earned money. It is the most important step in that you must first decide your risk tolerance. Once you have decided your risk tolerance you can then decide if you will be an aggressive investor or a passive investor. Aggressive investors must be willing to take chances and are more inclined to partake in day trading or forex trading, while the more passive, reserved investor is more likely to stick with investing in bonds and/or mutual funds. Online Stock Market Reviews presented live via the internet by Stephen Bigalow	Website Specials

Candlestick Trading Blog

Links

Archives