Stock

Are Penny Stocks Right For Me?

Are Penny Stocks Right For Me?

In order to determine whether investing in penny stocks is right for you, you’ll need to take a careful and honest look at various criteria, always being mindful of your risk profile and of course, of your available disposable capital possibilities. Some of these criteria have to do with your own abilities—that is, with things that you can control—while others have to do with things that lie far outside of your own control and thus, must simply be accepted for what they are. Let’s get you started by discussing what you should be considering, so that you can make the most informed choice.

Of primary concern to any investor should be careful consideration of their appetite for risk, and every investor should be able to state whether their risk appetite is low or high. Typically, investors with the lowest risk appetite are also the most conservative, and thus, such investors usually do not invest for growth; instead, they’re more prone to invest for long-term value, and may fill their portfolio with blue-chip stocks, dividend-paying stocks, municipal bonds and similar traditionally low-risk investment vehicles. Often, such investors represent an older demographic, and are switching their investment strategy from high-yield, growth-oriented products to such conservative investments specifically to protect the profits which they had generated earlier in their investment career, which is a well-known and highly worthwhile strategy.

Pennystockchart

Investors with a higher risk profile are typically younger and not necessarily yet concerned with building a portfolio that can assist them in maintaining their accustomed standard of living after having reached retirement age. They’re professional, and have a certain degree of disposable income which they’d like to use to maximize their investment earnings potential through more aggressive, and correspondingly risky, equity purchases. It’s often the case that investors with a higher risk appetite are those who have already achieved a measure of investment success and thus, being confident in their ability to research and identify solid growth picks on their own, want to continue to ride their momentum for as long as they can. Either way, such investors are perfect penny stock investment candidates.

The risks associated with penny stock trading are paradoxically both low and high at the same time, and your interpretation of these risks is simply a function of your attitude. Those who profess that the risks are unwarranted are those who focus on the less regulated climate of the penny stock market, equating regulation with safety, and who are put off by the high volatility of penny stocks. In general, those who view the risk of trading in penny stocks as being low are those who recognize that because the buy-in, that is, the amount of capital needed to purchase penny stocks, is so low, there’s only upside: the risk of loss is deemed to be minimal, yet the corresponding possibility of riding a small-cap equity  to its breakthrough to genuine shareholder value is high, particularly if the small-cap investor has done thorough research;  further, the opportunity to get in on the proverbial ground floor and realize exponential gains only exists in the penny stock markets.

While penny stocks may indeed be less regulated, they are by no means the equity version of the Wild West. The OTC markets are more regulated than the novice investor may realize, and a wealth of information is indeed available on penny stock issuers.  Although you may not be able to control the amount of official filings issued by small-cap companies, you can supplement whatever public information is available by undertaking your own research. Check industry and trade websites, check out investor boards and forums, and check in with the company’s own investor relations department o gain further insight into the larger picture and provide yourself with the material you need to make informed investment decisions. If you are skilled in the usage of analytical tools and charting, spend some time going over the stock’s history, in terms of share price and volume, to get a feel for momentum and trends, if any. It’s simply not as hard as people think to gain a complete picture of a small-cap company, and it’s obvious that if you cannot find the necessary information regarding a penny stock issuer, and if your research—and your gut instinct—tell you not to invest, then move on: there’s over 10,000 companies listed on the OTC Markets, and you should not reject them all out of hand. Keep looking, and you’ll be certain to find a few penny stock picks that fit both your risk profile and your research skill level. Start with a small investment to minimize your risk of loss, and gain confidence through your experience. With very few exceptions, penny stocks indeed are right for almost everyone.

Posted by Judy Romero in Dividend Stocks, Investing, Stock, Stock Market
Stock Analysis Using the Profitable Investing Strategy

Stock Analysis Using the Profitable Investing Strategy

An effective Stock Analysis has a pre-established series of steps just as our profitable investing strategy has a set of pre-established steps.

Stock analysis is step 3 of the profitable investing strategy and assumes that Step 1 – Stock Market Analysis and Step 2 – Sector Analysis has been accomplished.

Certainly, a stock analysis can be performed independently of profitable investing steps 1 & 2, but an independent stock analysis without the first two steps will miss an assessment of when to buy a stock.  However, its a great way to build a stock watch list while you wait until market conditions are more in your favor of future price increases.

Investing

 

Stock analysis really goes through a series of steps by itself.

First we will examine the sector that contains the stock. Second is an assessment of the stocks relative strength.  Third is an analysis of the stocks weekly chart.  Fourth is the analysis of the stocks daily chart.  And fifth is an assessment of whether the stock is a candidate for immediate purchase or to be added to a stock watch list with an associated up or down alert.

Stock Analysis Step 1 – Sector Analysis

This is really a simple step and is mostly taken care of by the profitable investing Step 2 – Sector Analysis.  Essentially, stock analysis step 1 is a screening step to remove any stock not trading in the strongest sectors.  Said another way, we are only going to perform a stock analysis on stocks that are contained in the sector(s) that is(are) outperforming others in the market.

Stock Analysis Step 2 – Stock Relative Strength

The profitable investing strategy is always heavily focused, or driven by, the relative strength of any stock or sector.

Do not mistake this analysis for the Relative Strength Index, or RSI, that is commonly found on many stock charts.  The RSI is a measure of technical momentum that compares the magnitude of recent gains of the stock to recent losses.  This is an attempt to assess whether or not a particular stock is overbought or oversold.  This measure has nothing to do with the relative strength used in the profitable investing strategy.

Profitable Investing uses a measure of the strength of the stock RELATIVE to the performance of the stock market as a whole AND RELATIVE to the performance of other stocks in the sector.

Think of this in terms of your favorite sports team.  When a team is hot, and winning most of their games, you can say their relative strength compared to their peers (the other teams) is high.  If you had to choose a team to win a championship game you would want to select the strongest or the hottest team going into the playoffs.

The Relative Strength of a stock is similar.  In a stock market going up, within a sector that is going up, I want to own the strongest stock. The one that is outperforming the others. This gives me the best change of owning stocks that are going to yield a profit between when I buy it and when I sell it.

Stock Analysis Step 3 – Performance of the Stock on a Weekly Basis

Just as in Step 1 of the profitable investing strategy  for the entire stock market, we want all our investing decisions to be correlated with the stocks performance on a weekly basis.  We just simply use the same strategy used in the stock market analysis on the stocks weekly chart.  This gives us our best chance of being coordinated with the stocks weekly trend.

Stocking

Stock Analysis Step 4 – Performance of the Stock on a Daily Basis

Just as in Step 1 of the profitable investing strategy,  for the entire stock market, we want all our investing decisions also to be correlated with the stocks performance on a daily basis.  We just simply use the same strategy used in the stock market analysis on the stocks daily chart.  Step 3 and Step 4 together ensures that we take on new positions when price increases are supported by two different time horizons.

Stock Analysis Step 5 – When to Buy a Stock

After the completion of Steps 1 through 4, we now have a fairly good idea about this stock.  If any of the prior steps were negative then the stock is off our list for now.  If all the prior steps were positive then we can continue to assess when to buy it.

Think of what this stock analysis process accomplishes.

We know how strong the stock is compared to the overall market and its peers in the same sector of the market.  We know what the weekly and daily performance is like.

Essentially we use the stock analysis of the daily chart to decide to buy this stock now or  or add it to a watch list or an alert list.

This whole process is a logical well though out way to filter stocks out that don’t meet the profitable investing criteria.  The stocks that are left after completion of this process are the best candidates for profitable investing.

Posted by Judy Romero in Investing, Stock
Penny Stock FAQ

Penny Stock FAQ

1. What are Penny Stocks?

Penny Stocks, according to the Securities and Exchange Commission (SEC), refers to low-priced (below $5), speculative securities of very small corporations. A penny stock is traded over OTC (Over the counter) through quotation services such as the Pink Sheets or OTC Bulletin Board.

2. Why Buy, Sell or Invest in Penny Stocks?

Penny stocks are normally shares of small corporations that have abundant potential but are not followed by normal Wall-Street money managers or stock brokers. Oftentimes, Wall-Street money managers and stock brokers won’t follow a stock unless it trades above a certain threshold, sometimes $1.00, $3.00 or even $5.00 per share. These low priced penny stock companies and shares can reward investors who get in early with very substantial returns. Sign up today for our FREE penny stock alerts so that you do not miss out on some of the best penny stocks.

Penny Stock

3. How can I find Hot or  Good Penny Stocks to Invest in?

Start by joining our FREE email list to receive alerts on the hottest Penny Stock companies. Do your research on the company we alert you to and make sure you understand the company’s business as well as its goods and services. Read the company’s reports, filings, press releases and financial statements. Speak with your registered stockbroker or financial advisor.

4. Where can I Buy, Sell or Trade Penny Stocks?

Most online brokerage firms will allow you to purchase penny stocks. Some examples would be Scottrade, TDAmeritrade, Etrade, Ing Direct, Charles Schwab, Trade King and Interactive Brokers.

5. How safe is my money in these stocks?

All investment strategies involve risk and you should always consult with your registered investment advisor or stockbroker when considering investment opportunities. While considered more speculative than other investments, penny stocks also provide the opportunity for substantial returns.

6. What kind of Penny Stocks do you alert?

We alert our members to penny stock corporations, listed on the OTC, OTCBB, NASDAQ, AMEX and even sometimes the NYSE. Mainly we tend to focus mainly on OTCBB companies that we believe have both short and long term potential. Some of the things we look for in penny stock companies are: an experienced and proven management team, goods and/or services with excellent potential, emerging growth sector, existing contracts or clients, proven track record and much more

Penny-stocks

7. Are you compensated for providing alerts?

We’re sometimes compensated for alerting our subscribers to a particular company. However, we do turn down a number of companies that approach us and we will only accept compensation for a company that we have researched and believe will provide our subscribers with substantial opportunities both for short and long term returns. Whenever we do accept compensation on an alert, as required by the

Securities and Exchange Commission (SEC), we’ll disclose who paid us, the

amount, and the type of payment within our email and website disclaimer.

8. What is a Stock Quote?

A stock quote can either mean the very last price of which a stock sold at or the current price in which market makers are prepared to buy and sell a stock. Stock quotes can be displayed in either real-time or 15-minute delay. The type of quote you obtain relies upon the source of the information and the exchange on which the stock is currently traded.

9. What are Delayed Quotes?

The easiest stock quotes to comprehend are delayed stock quotes. These quotes are typically on websites like Yahoo Finance and show the price at which the stock traded about 15 to 20 mins ago. Having said that, these prices don’t show you at what price an individual is willing to buy or sell the stock right this moment.

10. What are Real-Time Quotes

Real-time quotes are tricky since the act of buying or selling a stock can move the price up or down. This is especially valid in an “order driven market” like the New York Stock Exchange where the orders themselves set the price. Electronic exchanges such as the NASDAQ are “quote driven markets” where market makers compete to publish the best bid and ask prices for stocks. You are more inclined in this type of market to know precisely what price you will get, or there a bouts, before placing the transaction. As an example, Alphatrade.com offers real time quotes as well as Level I and Level II quotes.

11. What are Level 2 Quotes

Skilled stock traders depend on “Level 2 Quotes” to analyze the buy and sell pattern of a stock in real time in order to better predict what their own order may do to the price. Level 2 quotes display what type of institution was active in the transaction, the volume with the trade and what prices were being offered. As an example, Alphatrade.com offers real time quotes as well as Level I and Level II quotes.

Posted by Judy Romero in Stock
Guide to Moving Averages

Guide to Moving Averages

Moving
average is a term that is often being used when there is talk about trading,
but what exactly is it and how can you use it in your own analysis? You
probably know how to calculate the average of a pool of numbers but let us
start with the basics.
Average- and moving average- calculation
When you
have a series of numbers and you for some reason want the average of those
numbers you simply add all those numbers and divide the sum by how many numbers
you have. E.g. you have these five numbers: 8, 9, 10, 8 and 10. The sum of
these numbers is 45. Divide 45 by 5 (as you have five numbers here) and you get
an average of 9.
If the five
numbers listed above were price data for company ZZZ we could say that the last
five days average price for ZZZ is 9. Next day we read that ZZZ closed at 13.
If we were to calculate the new five day’s average it would become:
13 + 10 + 8
+ 10 + 9 = 50 and five day average will now become 50 / 5 = 10 (Fig. 1). What
we have done here is to “move” the five day period one step forward by
including the latest close and excluding the now sixth day close thereby
creating what we call a moving average. This procedure is repeated for every
new day so that we will get a series of moving average numbers that we can plot
as a line in our charts.
Fig. 1. Five day average calculation.
Plotting moving average
When doing
technical analysis we analyze charts where price and other data are plotted. To
be able to get something useful from moving average we should plot the data in
our charts together with the price curve (Fig. 2). In figure 2 you see price data
plotted along price and volume (light blue bars). On top of the price bars we
have plotted a five day moving average as a dark blue line. Taking a closer
look at this line we see that it is smoother than the actual price movement. If
we were to plot a longer moving average using e.g. 50 days moving average we
would see an even much more smoothed curve as the value plotted for a specific
day is the average of the number of days we have used in the calculation for
the moving average.
moving averages
Fig. 2. Plotting of a five day moving average. The
blue line seen in this chart is the five day moving average of the closing price
for this stock.
Types of moving average
The moving
average we have talked about in this article so far is what we call a simple
moving average. There are many other types of moving averages as well but the
most common one beside simple moving average is exponential moving average.
When applying exponential moving average, last days values are being weighted more
than earlier days thereby making last days movements “more important”. The
result of this is that the graph will react quicker to the price changes that
occur. In Figure 3 we have plotted two moving averages. The blue line is a 20
day simple moving average and the green line is a 20 day exponential moving average.
It is easy to see that there is a difference between the two lines. Even though
it is the same number of days that is being used in the calculation of the
moving averages we see that the green line (exponential moving average) is
following the price development a bit more closely than the more smoothed blue
line.
We earlier
said that we plot moving average along with price data, but it is also
important to remember that moving averages can be applied on all kinds of data
and not just on price data. Other examples could be moving average of volume
and relative strength index (RSI) to mention a few.
Fig. 3. Plotting of 20 days simple moving average
(blue line) and 20 days exponential moving average (green line). We see that
the green line react more to the price changes that occur than the blue line.
A basic moving average trading system
To see how
a moving average trading system could be used we will now design a very basic
moving average trading system consisting of two moving averages. The coding and
plotting of data shown here is done in a software called Amibroker
which is a technical analysis
software where you can plot data, program trading systems, optimize- and test-
your own trading ideas.
In this
example we will use a short 5 day simple moving average and a medium long 25
day simple moving average to form the framework for our trading system. What we
want to do next is to design our trading system to buy the stock when the 5 day
moving average crosses above the 25 day moving average and sell when the 5 day
moving average crosses below the 25 day moving average. The coding done to make
this system is seen in figure 4.
Fig. 4. Amibroker code for the moving average trading
system
When we plot
these two moving averages we see why we want to buy the stock when 5 day moving
average crosses above the 25 day moving average and sell when the opposite
occur. Basically what we want is to be on the “right” side as the stock price
moves upwards or downwards (Fig. 5).
Fig. 5 We want to own stocks in this company when the
blue line is higher than the green line, and sell (or short) the stock when the
blue line falls below the green line. The light blue bars seen in the lower
part of the chart is the trading volume for the different days.
From the
plot it looks like this system is quite promising with regard to being
profitable but to make sure that it is actually profitable we need to do some
more testing. What we want is a trading system that will perform well over time
and in all kinds of market conditions. Although the trading system seems
promising at a first glance the testing of this system shows something else. As
seen from the test report produced by Amibroker the system performance was
rather poor over the test period from mid June 2004 to mid June 2008. With a
win percent of 33.3 this is probably a trading system that we should leave and
not trade as is today. Although the trading system does not perform as wanted
the overall idea for the system might still be something to build further upon
(Fig. 6).
Fig. 6. Profit distribution for our trading
system. We see that we have a few nice returns of investment here but when we
just have a few winners we choose not to go further with this system. What we
want is a much more even profit distribution that could be e.g. 20 winners in
the 5% to 10% range rather than one winner of 100%. Only then can we say that
we have a more robust trading system.
It has to
be said that the testing done here is very simple and
stocktradersbulletin will look deeper into testing of
trading systems in an article at a later stage. Also it should be noted that
the testing here was done on one stock which is not a good enough foundation
for validating trading systems. 
Conclusion
Moving
average is a tool that could be used in a meaningful way if it is applied correctly.
From our
analysis in the previous section we can say that using moving average alone for
your trading will probably not give you the profit you would like to see in the
long run. You will simply see too many false signals for when to buy and sell.
To minimize the false signals you should use moving average in conjunction with
other technical analysis tools. What tools and how you want to do that is
entirely up to you but what you should remember to do if you have the chance is
to test, test and test your system and make sure that you are not just seeing
wishful things before you go ahead and do actual trading with real money.
Final note
What you
have read here is just one method of how you could use a moving average. As we
have seen the method presented in this article is not a very profitable one but
the intention here is to give you some information about moving average and
possibly also give you some inspiration from where you can continue with your
own ideas and development of trading systems. 
Posted by Judy Romero in Stock, Stock Market
How To Sell Stocks

How To Sell Stocks

Learning How To Sell Stocks properly is essential to profitable investing because buying a stock with a clear exit strategy is the only way to prevent huge losses from decimating your portfolio.

Many investors manage to select the right stocks that are increasing in price at the time of purchase.  The stock continues to increase in value creating a nice paper profirt.  Then the same stock suddenly returns to the purchase price or lower resulting in close to zero profit or a loss.  Unfortunately that same investor will hold onto the position with the anticipation of more price increases.

What usually happens in cases like this is that the stock continues its downward slide leading to even further losses until emotions take over and the stock is sold.  Then you can guess what happens next – the stock shoots right back up sometimes moving into positive territory again.

Stocks

How can this roller-coast ride be avoided?

First, an assessment of the overall market timing needs to be performed.

In general, new long positions should never be entered unless the overall market is either in an uptrend or recovering from an extreme bottoming out process.  The key objective for any market timing analysis is to identify the best time to own stocks, not to identify the extreme top or bottom of a trend.

Patience should be employed to make certain the overall market is supporting generally higher stock prices before new long positions should be entered.  Read more on how to buy stocks.

Most stocks will follow the general market trend and pullbacks should be expected and welcomed in a market showing bullish tendencies.  Market pullbacks are healthy for the market and in turn create many buying opportunities for those who know what to look for.

Second, an uptrending stock you own becomes a sell candidate if it no longer performs appropriately for an up trending stock.

An uptrending stock should be expected to make higher-highs and higher-lows within a fairly predictable amount of time – usually by following a key indicator such as the MACD.

The following chart shows the characteristics of an uptrending stock.

Characteristics of an Uptrending Stock

This stock is making higher-highs and higher-lows on a consistent basis.  When a stock fails to make a higher-high when expected it should be added to a sell list because that is an unexpected action.  Assuming the stock was purchased correctly the position should at least have some profits and action should be taken to preserve those profits before they turn into losses.

When a stock makes a lower-low it is a sign that at least for now the stock has either changed its trend from up to down or is transitioning to a new down trend.  This sort of action usually trips a stop loss order that is in place to prevent or minimize trading losses as much as possible.

A stop-loss order is entered at the preestablished exit price as soon as the position is in the account. This single action alone would prevent many small losses from turning into portfolio damaging positions.

Third, a new long position is never entered until the first exit point is established.

Examine the chart below to see where the optimal stop loss would be for an uptrending stock

For a stock in an uptrend the stop-loss order should be placed just under the prior reaction low.  Depending on market conditions and stock volatility you might want to consider the prior reaction low – but never lower.

This stop loss order would remain in place until the stock makes a higher-high and then a higher-low.  The stop order is then moved up under the new low.  Stop orders are NEVER moved down in price..

How To Sell Stocks – Stop orders for a base break out

For a stock breaking out from a new base, the stop-loss order should be placed just under any of the the lows prior to the breakout move.  Preference of course should be given to the highest low as that approach would preserve the greatest profits or reduce losses if the break out fails.

As in an uptrending stock, the stop-loss order should be moved up when the stock makes a higher-low after making a higher-high from the breakout move.

Again, Stop orders are NEVER moved down in price.

Real life example of how to sell stocks for profitable investing.

For a real life example of how to sell stocks we’ll examine the performance of Apple Computer – symbol AAPL – between November of 2011 and the end of 2012.  Click on the AAPL chart and follow along in a new window.  We’ll ignore the market timing aspect for this analysis.

Selling Stocks

How To Sell Stocks – Apple Computer – AAPL

In mid December of 2011, AAPL changed from market performance to leading the market; AAPL was now performing better than the market as a whole and so became a candidate for investing consideration.

The first real buy signals appeared when AAPL was just under $400 a share as the stock price moved into new highs.  Once the price moved above $400 there was no stopping its performance until May of 2013.

A purchase of AAPL below $400 and the appropriate stop loss order placements  would have kept you in this position until stopped out at around $580.  This would have provided a $45% profit with almost no downside risk when using this stop loss strategy.

As AAPL increased in price the appropriate stop loss levels where located at $400, $480, $510, and then two very close orders around $580.  The last stop order would have been exercised as AAPL refused to make a new high, made a lower low, and then moved into a market perform phase.  Market perform means that AAPL was no longer leading the market and therefore did not deserve our investing dollars – at this time there are better investments to be had.

AAPL continued to perform with the market until August of 2013 when it once again began to lead the market in price performance.  APPL could once again be purchased as higher highs were being established with the optimal stop level at about $550.

This time the leadership of AAPL did not last long, only until October of 2013 when it started severely under performing the market.  The last stop of this two month phase would have sold this position with a smaller profit – but nevertheless a profit – just as the stock rolled over and promptly lost almost 30% of its value.

An under performing stock does not deserve your investment dollars and so AAPL would go on the back burner until it starts to outperform the market again.

This simple example shows the benefit of being invested in only stocks that are out performing the market.  AAPL is certainly a good company but this strategy will allow you to earn profits in leading stocks, sell and take profits when the stock is out of favor, and buy back in when the stock once again leads the market.

Posted by Judy Romero in Stock
Learn Stock Trading

Learn Stock Trading

If you seriously want to learn stock trading then you are in luck because with today’s technology its easier than ever before. The internet not only transformed the way we trade but it transformed the way we learn things. There are a number of great ways to learn how to trade stocks and I will quickly look at each one of these and how it can help you to become a lucrative trader as quickly and as painlessly as possible.

So, what are the best ways to learn to trade? Here are some ideas to get you off to a flying start…Its important to mention that learning to trade is not that easy – especially if you have no experience with investing. More than anything, trading requires a certain mindset and this is perhaps the biggest determining factor in becoming a winning traders versus those people who fall by the way side and give up before they even have any winning trades.

1. Attending Classes
This is the closest thing to a “traditional education” and it certainly works for a lot of people. In most cities you will find night classes that are usually offered by community colleges or even by private trading institutions. Being in a structured learning environment you can help you if you lack the self discipline of home study courses. Also, having an instructor or tutor can be a massive advantage to clear up any questions you may have. This is what I like most about attending classes and learning through completing a structured course.

What I don’t like about this is the fact that many of these classes are just not very good – and there is no real way of telling before hand. Private classes are by far the best way to go since you will often get tutored by ex-traders with real world experience and success. It can be quite expensive though. It can also be slow – especially if you only do 2 or 3 hours a week.

woman-using-phone

2. Self Study
You only need to walk into a bookshop these days and find dozens and dozens of great books about trading. Books are a great way to learn because you work at your own pace. It takes a certain kind of person to be able to follow self study of any kind. Books give you direct access to some of the best traders in the world and it can be one of the best ways to learn.

What I don’t like about this is that books can often leave you with a lot of questions – and no real way of getting them answered. There are also many self study courses that you can purchases and it often comes with audio or video to accompany the course. These can be quite expensive and have been replaced by online courses for the most part. Books are great regardless of your method of study simply because it can help you to continuously expand your trading expertise.

3. Online Courses
With the advent of online trading there’s been numerous online courses that teaching virtually every aspect of trading. Having it online is not just convenient but it makes learning via live streams and video possible. Some of these courses are fantastic while many are just not worth the money. Its hard to tell before hand because you never know if the person(s) offering the course are really as good as they claim to be. One of the most powerful aspects of online courses is the fact that many of them have active forums and communities where you can interact with other traders and find personal advice and answers to your questions.

What I don’t like about it is the fact that many wannabe traders create courses and present themselves as experts. Whom you learn from is very important because learning bad habits in your trading can have a lasting effect on your results. The convenience, the way its delivered and the nature of it being online makes it one of the best ways to learn stock trading.

4. Seminars
This is by far my highest recommendation. There are numerous trading seminars that usually last for anything from 1 to 5 days. Many of them are presented by top traders and being immersed in that environment for a few days can help you learn faster than anything.

What I don’t like about seminars is the fact that the good ones are really expensive and when you are first starting out, whipping out $5000 on a course may seem excessive. I also don’t like the fact that its usually just too short and you can have a lot crammed into a few days. Regardless, its still the fastest and most effective way to get started on the right track.

5. Mentors
If there ever was a holy grail to becoming a successful trader then this is it. If you can get mentored by a successful trader you can condense years of learning into a few short months. Having someone next to you and having someone on call to show you exactly how to do it is priceless. Its probably the only way to guarantee that you success as a trader.

The hard part is finding a mentor – and finding a mentor that is willing to give you his time and expertise. If you have a family member that can be that for you, grab it with both hands. If not, try and find a way that you can give something back to whomever will be mentoring you. Do whatever you can to find a mentor. Its really worth it.

These are just 5 basic ways to learn stock trading. Its not really about choosing one because the truth is that you will likely combine many of them. When you first start out, don’t overwhelm yourself. Pick one that appeals to you and get started!
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Posted by Judy Romero in Stock, Stock Market
Binary Options Strategies – Chose Your Own Strategy

Binary Options Strategies – Chose Your Own Strategy

As binary options become increasingly popular and more widely available, the increase in binary options trading strategies is becoming more evident with each passing day. Many of these binary options strategies have been developed by investors that have used them to profit considerably from the markets. If you are looking to get your binary options trading off to the right start, you should consider choosing a solid trading strategy to follow.

The problem lies in that there are hundreds of trading strategies that you can employ. However, all successful strategies have a couple of things in common. Every profitable binary options strategy is simple to use and maximizes profits while minimizing losses. Let’s examine a few popular binary options trading strategies that have proven to be successful by traders all around the world.

Binary Options

Binary Options Strategies for Simplicity

Sometimes, the simplest strategies are the best. The Call or Put Strategy is one of the simplest and most straight forward binary options strategies. When using this strategy, you simply purchase a call option if you believe the price of an asset will increase by the trade expiration time, or you would purchase a put option if you have determined that the price will decrease during the same time period. For example, if you decide to purchase a 30 minute binary option for Apple stock, and you feel the stock will increase in value in half an hour, you would simply purchase a call option. Even if your prediction is wrong and the trade finishes out of the money, you may still be able to receive 15 percent of your investment back.

Binary Options Strategies for Damage Control

The ability to minimize losses is paramount in becoming a successful binary options trader. A great risk control strategy is the Call and Put Strategy. To use this strategy, you first simply purchase a call or put option for an asset. If you see that the trade will finish out of the money, then halfway through the trade you would purchase an option in the opposite direction. This allows you to hedge your bets and at least break even on a trade that could have resulted in a significant loss.

Binary Options Trading Strategies for Maximum Profits

Reducing risk is great, but chances are you’re interested in binary options because you want to make some serious money. Well, the Doubling Strategy can do just that. The Doubling Strategy is popular amongst experienced binary options traders who know how to squeeze as much out of the markets as possible. It is basically the exact opposite of the previous strategy. So, instead of minimizing your losses, this strategy allows you to maximize your gains. With the Doubling Strategy, you simply purchase a second contract in the same direction as the first contract if the first contract looks like it will finish in the money. This allows you to double the profits you can receive.

This is just a small sample of the seemingly countless binary options trading strategies that you can employ during your quest to become a financially secure binary options trader. Most of the strategies that are available in the marketplace have been vetted and work the majority of the time when they are used properly. However, choosing the best strategies for your trading style and financial circumstances is entirely up to you. Successful traders understand and employ multiple binary options strategies in order to profit from nearly every situation. Therefore, the more strategies that you learn to implement, the more successful of a trader you will become.

Fundamental Binary Options Trading Strategies

1. The pairing binary options strategy:

The pairing strategy can consistently yield high profits from trading a single binary option contract. This popular strategy involves pairing up a money put with an in the money call. If the spot price of the asset falls between the two chosen prices upon expiry, the nested position allows you to still make profits.

2. Hedge and double position binary options strategy:

Another popular strategy is to hedge and use a double position to pair the call with a put. This hedging strategy not only reduces risks, but it can lead to huge profits as well.

3. The betting binary options strategy:

This common trading strategy involves a trader placing a call or put option if he or she expects a big market move in a particular direction. This strategy is often successful because traders tend to base positions on widely used indicators that can cause assets to gain price momentum in a certain direction.

4. Stop-loss binary options strategy:

This strategy is by far one of the most popular amongst binary option traders. The strategy seems simple upon first glance, but experience is often needed in order to predict the perfect stop-loss time. The following factors can greatly affect the stop-loss strategy and make it difficult to implement:

• Trading vehicle – The strategy depends on which type of asset you are trading, because each type of asset requires its own stop-loss strategy. Someone trading options might use a two-dimensional strategy, while someone trading stocks will likely use a consistent stop-loss level.

• Risk tolerance – The stop-loss strategy used by a trader is determined in large part by their risk tolerance. Every trader has their own aversion to risk, and this strategy is largely dependent on a trader’s personal risk preferences.

• Trading Style – Every trader also has their own trading style, which affects the type of stop-loss strategy that they feel comfortable implementing. One trader may feel more comfortable making 10 trades a day and another may prefer to focus on making one winning trade a day. The former would utilize a tight stop-loss and the latter would more than likely choose to use a wider stop-loss strategy.

• Market mood – The mood of the market also has an impact on the stop-loss strategy used by traders. Traders tend to use wider stops in volatile markets and tighter stops in quiet markets.

Binary

As you can see, stop-loss strategies depend upon numerous factors and can be quite complex. Each trader uses a stop-loss strategy that best suits their trading style and the trading system they have chosen to implement.

The high yields and quick returns of binary options are responsible for the rising popularity of this unique trading vehicle. Binary options may be simple for beginners to learn, but binary options trading is also perfect for advanced traders that can incorporate various strategies into their trading game plan. A solid binary options strategy can be responsible for nice profit returns, but using multiple trading strategies can erase someone’s money worries for the rest of their life.

Using any of the above strategies, it is very easy to reduce risks and make considerable profits in a short amount of time trading binary options. However, like any form of trading, there is always a risk of capital when trading binary options. Fortunately, many traders have found that experience combined with the right trading strategy can lead to lucrative profits in no time at all.

Posted by Judy Romero in Stock
Beating The Stock Market

Beating The Stock Market

Why you should invest in the stock market? Simple, financial freedom. What other investment form can you start off with $500 and possibly turn it in to millions. It’s a story you heard of 1000’s of times before.

You don’t have to open a corporation, have accounts and spend $1000 of dollars to open a store front, no products to buy, no employees to hire. You simple open an account with an Investment broker and you’re on your way. But what stocks to buy? First, knowledge is power, read, read & read. There are so many investment books out there to choose from. I would say three books on learning growth stocks, three on learning earnings reports and three on learning charting. The reason I suggest three books is that it will give you a few different views in each area and from the three of them you’ll be able to put your own winning strategies together.

After you read all the books you may find that you excel in one of them better then the others, for me it was the charting. It was like wow I can see it. What a turn on to look at a chart and say this company is going up or down in just a couple of minutes. It’s a feeling I would like all of you to have and once that happened for me I went out and got as many books on charting as I could find.

I have a friend who can read an earnings report as well as I can read charts. It’s amazing to see him work as he runs through the numbers like a machine. I came to the conclusion that everyone has their own strengths and weakness’. So after you read all the books, whichever one turns you on the most, consider on buying as many books as you can (or go to the library). I love the market and I hope you will to.

coffee-and-phone

The DOW Takes Another Beating

After last week’s 512 point loss on Thursday, it was able to gain back 70 points on Friday. Standard and Poors released a report Friday night as to downgrading the United States credit rating from it’s traditional “AAA” rating down to “AA” rating with a negative outlook. S&P stated that they feel that the politicians in Washington DC have shown their incompetence towards working together and saving the deficit from getting worse. Over the weekend, S&P’s remarks about if the federal government doesn’t get a grip on it’s fiscal irresponsibility, they (S&P) may feel to lower the credit rating again within the next two years.

After all the weekend news and the lack of President Obama coming out to speak about the report, Wall Street and investors alike realize that the economy recovery that Obama has been talking about for the last two years is nothing but a charade. The DOW took an even bigger plunge today falling 632 points after it was all said and done. The DOW closed at 10,809, down 5.55% just for today’s trading period. Since July 21, just two weeks ago, the DOW has lost nearly 16%. A drop like this hasn’t been seen since the recession started almost three years ago. NASDAQ has lost over 6% just today alone and the S&P 500 shaved off 6.66%.

I’ve been talking about this day coming for almost a year. Yes there have been some great moves in the stock markets over that time, but unless you took all your money out of the markets two weeks ago, you lost all that was made during that time. There are many that think that they’re not involved in the stock market, but as they will find out soon enough, what happened on Wall Street these past two weeks has caused many people a major portion of their retirement fund and/or their pension. trillions of dollars of wealth have been lost in just a short period of time and with the actions of our politicians, who really knows how long this crap is going to go on. Japan went through the same thing almost twenty years ago and they’re just coming out of it now. The sad part about that is the fact that Japan is small when compared to the value and size of the United States of America.

We will have people, many of them part of the baby-boomer generation wanting to retire and not being able to cause to the damage to their retirement accounts. they will (in many cases) have to continue working a few more years to make up for the losses they’ve been dealt in these past few years. In turn it will make it harder for the younger generation to find employment, especially since the economy is so bad, that it will keep the unemployment rate somewhat in the same range it’s been in since Obama has been in office.

For those of you that are wondering what to do, if you’re young, keep doing what you’ve been doing as to putting money into your 401K and retirement funds. If you are within retirement age (15 yrs or less), I wish I had all the answers. Each person’s life is different and their needs during the later years differs from one to another. For the next two years (at least) I recommend buying into commodities. The U.S. dollar is going to continue to lose value as the Federal Reserve tries to save the economy with another round of quantitative easing (QE3). Gold and silver are the best hedge when face with these types of economic woes.

Gold Climbs Above $1600

Only three weeks ago I spoke about the price of gold falling below $1500 per ounce. What I said was if the economic woes continue even with all the hype of how our economy is improving, I expect gold prices to keep climbing. I also said that I don’t trust any government at this time.

Today gold prices climbed above $1600 after eleven straight days of climbing because of fears of the federal government will not be able to raise the debt ceiling. The precious metal hit an all time record high against the Euro and sterling. Gold has been strong ever since Europe has been trying to bail out Greece for the second time and to avoid the European debt crisis. Add to the fact that the Obama Administration and Congress have been unsuccessful in coming to an agreement to raising the debt ceiling.

If you didn’t think it could climb any higher, I would seriously take a look at the technical charts which seem to point to gold moving above $1700 as soon as this fall and many think a move to over $2000 per ounce isn’t too far fetched as it once was.

When you think about adjusting for inflation, gold is still not as high as it could be in relation to the price in 1980 near the end of the Carter Administration. As I said three weeks ago, I don’t have faith in the federal government to do the right thing and lower the spending and not to raise the debt ceiling. With that in mind, I still think that gold is a great investment at this point. I feel it will remain high until after next year’s election. If for some reason the government can put some sort of plan in motion to reduce the deficit, gold will take a plunge and a big one at that.

In the meantime, silver has also done well over the last three weeks when it closed at $33.59. It closed today at $40.27, topping the $40 mark for the first time since May. Silver has climbed more than 15% in just the last two weeks.

Posted by Judy Romero in Investing, Investment, Stock, Stock Market
Stock Market Games Free

Stock Market Games Free

Stock market games are a relatively new and exciting concept, and in my view provide a great way for you to learn how to trade, removing all the normal risks and allowing you to learn in a completely safe ( and risk free environment ) – all for free. To make it even better, you can even win daily weekly and monthly prizes, so there is really no excuse not to sign up. Please don’t  worry , it is completely FREE (like you, I don’t like paying for things either!) as I always advocate new traders keep their money for when they start their trading for real! The game offers you the chance to practice your trading strategies, using actual stocks and live prices, and with daily weekly and monthly prizes it really is great fun ( they even give away $100 every day at random, so you never know!)

As a new or novice trader, taking your first steps into the world of stock market trading can be a daunting experience, particularly in the current economic climate with stock prices falling one day, and rising the next. Many new traders and investors often enter the stock market with no experience and with very little understanding of what is involved, as there are few places that you can learn for free – well not any more! I am delighted to say that you can now trade in the real markets, with real news and real stocks, completely free, and have the opportunity to win cash prizes as the same time.  Having played myself for some months, I am constantly amazed at how real it all is, and if anyone were looking over my shoulder, it would be impossible for them to tell whether I were trading in the real markets or the virtual stock market game.

DIVA-ETF

I shouldn’t really tell you this, but the site is so good that I actually use it for all my trading news and data, as it has a streaming news feed, live prices on markets including currency, stocks making major market moves, and a host of world news and information which is better than most paid for services I have ever used. I am not suggesting you do the same but….  With real ticker symbols, live prices, live data charts, streaming news feeds, and real stocks to trade, it really is all you need, so why pay when you have it all here for free in your stock market games trading window? You also get the chance to compete against other traders and in addition there is an active members forum so you can chat with other traders about the latest market news, whilst testing your market strategies for trading stocks.

In order to start all you will need is an email address, decide what your trading name is going to be, and then sign up here to your stock market game – it literally takes 1 minute. Traders are welcome from around the world, so it doesn’t matter where you live. At the moment there are two competitions running, one with a $50,000 dollar portfolio and the other with $100,000. There are new games starting all the time, so you can join in at any time, and in addition there are the daily competitions for the best return in a day. All good fun! All the stocks available for trading are those listed on the New York Stock Exchange, American Stock Exchange and NASDAQ and include stock, preferred stock, and even Exchange Traded Funds, so there is plenty of choice. In order to help you identify those stocks for you portfolio, the game offers a wide range of stock screening and analysis tools, both for technical and fundamental traders. Unusually, the game also allows traders to open both long and short positions, allowing you to make money when the market is going up or down.

It is a fantastic game, and the best part of all is that it is free and cost nothing to join. So good luck and good trading in your stock market game portfolio, and even if you don’t ever play, you get all the other benefits of live charts, steaming news and technical data FREE, so what have you got to lose – the answer is absolutely nothing!

Posted by Judy Romero in Dividend Stocks, Investing, Investment, Stock, Stock Market
Stock Market Investing Or Gambling – Which One is it?

Stock Market Investing Or Gambling – Which One is it?

When talking to lay people who have absolutely no clue about stock market investing, one theme keeps coming up repeatedly – “stock market is a gamble”. Well, it is beside the point that a lot of people who are “in the market” are totally clueless as well. For now let us stick to “stocks are mysterious” kind of lay people.

“I stay away from stock market, I don’t gamble” they say. And then they almost inevitably talk about bank FDs – which is the only known investing mechanism for them. Their well meaning, but totally useless advice is “stay away from stock market”.

Then they on to relate horror stories of how their friend or relative or more likely friend’s friend or cousin’s friend’s father or friend of brother’s colleague’s father managed to run an otherwise prosperous family to utter ruin thanks to gambling in the stock market. That gentleman gambled and the family paid for it. The individual anecdotes vary but the overall theme is constant – stock market, like horse racing, is evil and one needs to avoid it like plague.

Dividend_policy

To talk about stock market investing in a manner that they would understand would be a herculean task. There was a time when I used to try explaining how “investing is not gambling”. I would talk about “value”, how buying a stock is buying a business, how it could be thought of as being similar to real estate, how one gets dividend etc.

But these days, I generally don’t even try. Everyone is entitled to their opinion (even if incorrect). Whenever I encountered such kind of people, I politely try to steer the conversation away from stock market to other relatively benign ones where complete agreement is possible and likely (eg. Weather or Sachin Tendulkar. For instance, every summer, the  best bet is to proclaim “this is the hottest summer EVER” ).

I know and you know as well, that stock market investing is NOT quite gambling.

Well, actually that is an idea I killed recently. I now think of my investing pursuits as an activity of gambling.

To me an idea or concept is not something etched in stone – its relevance is in its utility. Does the idea or concept help me become a better investor (err. sorry. I meant to say gambler)? I don’t care what academics say or think, I don’t care what the popular folklore is; I don’t care if an idea sounds bizarre – all that really matters to me is the practical utility that it brings to the table. I am slow at giving up ideas (especially the ones that have worked really well) but given data, reasoning and insight, I can make dramatic shifts quickly.

One such shift is to think of investing as gambling. Why think of investing as gambling?

It breaks the concept of any structure in the market. Like Gunther says in The Zurich Axioms (Kindle Edition): Chaos is not dangerous until it begins to look orderly.

Gambling forces you to think differently. Preexisting concepts, ideas, notions and rules melt away. The only thing that matters is “are you making money” or “are you losing money”. It is the ultimate form of zen like investing. While one might have a repertoire of ideas on how the stock market works, gambling forces you focus only on the chips (your portfolio) – everything else is extraneous, irrelevant or tangential at best. There is no loyalty to any particular idea. A good idea is one that makes money. A bad idea is one that loses money. Period. End of story. There is no psychological baggage that one has to deal with. There is no steadfast, “this is my way”.

When I say I am a “value investor”, I am taking a stand that indirectly says “value is the anchor for performance”. And with that one idea, I inherit a bunch of other ideas as well:

1. Other things being equal, lower price is better value.

2. Fall in price is a good thing.

3. If fundamentals don’t change, one should buy more if price falls.

4. The more the discrepancy between value and price, the “better” a stock is.

5. Diversification is a good thing.

I am not saying that any of the above ideas are wrong or incorrect. I am just trying to highlight the subtle cascading effect of loyalty to a particular philosophy of investing. Thinking of one as a value investor is akin saying “This is how the stock market works. It works based on value.” Nothing wrong with it per se. Actually, it is a pretty darn good way of looking at things. It has worked for me amazingly well.

But I feel that having a “value based philosophy” can have limiting side effects as well:

Value investors will sometimes avoid buying an otherwise good company because it is not “value”.
When stocks move beyond the comfort zone of “value”, value investors either sell the stock.
As the stock price keeps falling, value investors are comfortable with buying more and more. This can, in some cases, prove detrimental.

There are different types of investing, most of them are valid and can be used profitably if one understands the core idea behind it well and follows it diligently. But inevitably being loyal to a philosophy becomes like being in a cult. And the more successful one becomes, the harder it becomes to accept contrary thoughts – even valid ones.

For instance, I had a very very tough time accepting the validity of technical analysis. It took me a loooooong time to get convinced about the utility of adding technical analysis to my value based stock selection. The main reason for the delay was my core philosophy of value investing scoffs at all things technical. My value investing philosophy was very clear in its judgment – it is the stuff for charlatans. Beware the snake oil salesmen peddling technical wares!

And all this in spite of me being quite deliberately and carefully open to new ideas.

If I had come across “technical analysis” before I encountered “value investing” and if I had become successful in some form of its application, I would probably have had even greater scoff for fundamental investors. “Price is the only thing that matters” would have been my core philosophy. And anything and everything that contradicted that core belief would have been “nonsense”.

And likewise, when one thinks of oneself as a growth investor, contrarian investor or momentum investor, one is basing one’s investing activity on a core premise. One automatically inherits a bunch of related ideas. This, in turn, leads one to become closed to any idea or concept that is not supported by the core premise.

Labeling oneself a particular kind of investor is like being in an intellectual prison. One becomes comfortable only the prison inmates.

Now, one might argue that there is nothing wrong with being in an investing prison – as long as it works. Even better if it actually works well. If it ain’t broken, don’t fix it. And I would heartily agree with such a conclusion. If what works, works for you, sticking to it is the best thing.

The reason I have personally chosen to drop the complete loyalty to any particular investing theme is:

1. Markets change.

While one can practice any form of investing quite well in the long run, there are times when one works much better than others. And sometimes (but definitely always) it is easy to spot alternative investing mechanisms that work.

2. More flexibility

If you read “Market Wizards”, you will find that it is comprised of a motley of people, some of them having diametrically opposite strategies. One buys only stocks hitting 52 weeks high while another has never held a stock that made a 52 week high. But both of them have done incredibly well. Wouldn’t it expand one’s universe of investible stocks if one allowed for such paradoxically opposite strategies simultaneously?

3. Participating in Manias

I am definitely going to participate and take advantage of the next mania. It might seem crazy to talk about mania when the bear is growling right now. But trust me, a bull market will come soon (how soon, I have no idea!). A mania will come again just as well. Again, when – I have no idea. But it will come with a mathematical certainty. Every generation goes through at least two manias before realizing what they are. When such a situation presents itself and if I am intelligent enough to spot it, “I want in”.

For someone totally used to averaging down, averaging up as an valid idea is tough to fathom. Even after giving it validity, it became tough for me to accept it. Even after accepting the idea intellectually, I found it very tough to internalize it. I had a torrid time internalizing “averaging up” as a strategy. It went totally against my core, long held and well cherished belief – “lower prices are good”. The lower the price, the more the value. Buy more as price keeps falling.

I always visualize and run through my strategies mentally before applying them. I try to “break” the ideas mentally before accepting and applying them. Even just imagining about myself averaging up on a hypothetical stock was a difficult task for me. There was no way I could actually go ahead and be successful unless I was psychologically comfortable with the new way of doing it. I did not want to drop my core approach of value investing – it had worked amazing well. I just wanted to augment it with strategies that went beyond value and sometimes contrary to it.

My breakthrough came when I started thinking of my stock market activities as gambling. In one swell swoop I was able to get rid of any and all kinds of psychological limitations. I was easily and effortless able to hold diametrically opposite thoughts about the stock market simultaneously – quite naturally even.

Advantages of thinking of investing as gambling:

With gambling as the core idea one gets tremendous flexibility towards things. One is no longer bound by any one idea. One becomes more responsive to what is working and what is not working. If there is a better approach, one that might currently work better, it is accepted with ease.

While thinking of investing as gambling, one is actually being very humble. One doesn’t have the rigidity of “I know it – this is THE way stock market works”. It is like admitting “I really don’t know how things work”. I “think” what I am doing is right, but if does not prove to be so, I am equally prepared to seek what does work.

So the next time someone mentions “stock market is gambling”, I am likely to agree with them. But equally, I hope to become a very good gambler.

Posted by Judy Romero in Investing, Investment, Stock, Stock Market