If simply one ask you the question that how long would a gambling casino be able to stay in business if most of the customers won instead of losing? It is quite an engrossing question. The markets are no different. For maintaining existence, the markets must function with such technique that causes most members to lose. There would not be enough money available to pay the winners if the majority were repeatedly taking profits out of the markets.
Gambling casinos have a plus point over the markets because they are liable to set the rules of the game to assure that the house has a precise boundary. The markets cannot directly control how the individual participants will play. Most traders are intelligent, competitive individuals. There are seemingly unlimited sources of information about how to trade. There are powerful computers within everyone's reach to help conquer the markets. Why is it then that such a high percentage of traders still end up losing?
A familiar reply is that traders cannot rise above their emotions well enough to succeed. That is certainly true. Another not as much of well-understood reason is that the markets constantly send out false information .But this does not means that the markets have any desire or that there is a planning among insiders "evil" floor traders to fool the rest of us. This is something that just happens because of the nature of markets.
Every time traders are not rewarded with a beneficial trade they do something right, nor are they castigated with a loss every time they do something wrong. This makes it exceptionally difficult to figure out what is right and what is wrong. Compare this to an electric fence. Every time you walk by and do not touch it, you feel fine. Every time you touch it, you receive a painful shock. It does not take a man or animal long to learn how to relate to an electric fence.
Think how much easier learning to trade would be if you automatically took a loss every time you failed to follow correct decision-making procedures. At the same time, what if you were always rewarded with a profit when you traded correctly? You would be able to learn the correct trading rules much more easily. One important piece of misleading information send by the opponents is that the market is continuously altering its behavior so the successful trader must be cautious to change his approach to keep pace.
Have you ever observed what a stable catchphrase this is from various trading experts? It is a ordinary piece of usual astuteness that no mechanical approach can be successful very long because the markets change. You are advised, therefore, to change your system to keep in tune with recent market behavior.
It is in the expert's selfishness to sermonize this gospel. Anyone who tells you that the markets are always changing no doubt has found a "solution" to how to keep his trading method up-to-date. He probably wants to sell it to you in one form or another. If he is not selling his system, he at least can appear incredibly wise and resourceful to his audience. It is a sure thing his audience has not found such an elegant solution to beating the markets or they would be rich and would not have to listen to any experts.
One more reason experts perpetually allege the markets are forever changing is that it is a suitable excuse for poor performance. Every successful trader has various periods when his system or method does not seem to work. It is more pleasant to say the markets have changed than my system is not working right now. If your system is not working, it implies you have failed. On the other hand, if the markets have changed, that is beyond your control. You can just "fix" your system. We are not saying the markets do not change. They clearly do. There is famous saying about the markets is, "The future will be just like the past, only different." However, make an effort to change your approach to "keep up" with this change is like a dog chasing his tail.
The purpose of this market wrong information is to cause people to be apprehensiveness of successful trading methods and discard them too soon. One of the most reliable traits of professional traders is the ability to stick with their system much longer than the typical loser. We all go through losing periods, no matter what type of approach we choose. We cannot increase our chances of success by constantly changing our approach. Since there are many more losing approaches than winning ones, we actually decrease our chances of success by frequently changing our system.
The correct solution is to find a non-optimized approach that works over a long period of history in a wide variety of markets. To avoid over-curve-fitting, use the same rules for all markets. If you can trade it for an extended period in the future in a wide variety of markets, you are likely to be successful, although success in never guaranteed.
Human nature is such that we are always trying to improve. I am not suggesting that you might not be able to create a better system in the future. Just do not fool yourself into thinking that it is better because it is somehow adapting to ever-changing markets. It is better because it is more profitable over a long period or because it trades more markets profitably.
Wednesday, August 13, 2008
Get The Secrets to Buy Low - Sell High, Buy High - Sell Higher
What goes down must come up
Various investors desire to pay low for a stock and hope that its price will sooner or later get higher. However, they are unsuccessful to comprehend that sometimes it is better to pay a higher price for a stock that has the impending for a future growth. The money you will save from purchasing a down stock may not justify your investment if the stock continues to get weaker.
Normally, investors fail to distinguish that the maxim stating that what goes down must come up and the vice versa, doesn't always hold truth. There are many exceptions back in the history.
If you follow this maxim, you will probably conclude that stock X is about to decrease. On the other hand, again under the maxim stated above, an investor may conclude that stock Y is about to make its big jump since its price is low and the stock market will recognize its strengths. Both assumptions may turn out to be completely wrong.
Buy High, Sell Higher
This approach is exceptionally recommended if you expect that the stock will continue to grow in the future. Thus, you should not be petrified by the high price. A stock that provides a stable percentage of growth is worth paying its higher price today, because if it continues to grow at this rate, its price will be even higher tomorrow.
You may almost certainly be disappointed that you haven't purchased the stock several months ago before its price has not jumped to the sky. However, if you make a careful research and verify that the stock possesses good potentials for future growth, then you should not be discouraged from investing in it.
Keep in mind that the stock's price will rise and fall in the short term, but over the long term a growth stock will move upwards.
Buy Low, Sell High
Many investors like better to search for bargain, which they can later sell at a higher price. However, if you decide to apply this strategy you should be well aware that the price of the stock may not rise again.
Value investors tend to look for stocks that are disregarded and underestimate by the stock market. However, price is only one of the factors that are part of their selection process. The key consideration made is whether the stock provides steady potential for future growth.
Last Advice
Avoid making investment decisions based only on the price of the stock because a stock that is down is not obligatory to go up. Additionally, a stock that is up may come down and may not. Look at the other metrics in order to make a more educated and successful decision.
Various investors desire to pay low for a stock and hope that its price will sooner or later get higher. However, they are unsuccessful to comprehend that sometimes it is better to pay a higher price for a stock that has the impending for a future growth. The money you will save from purchasing a down stock may not justify your investment if the stock continues to get weaker.
Normally, investors fail to distinguish that the maxim stating that what goes down must come up and the vice versa, doesn't always hold truth. There are many exceptions back in the history.
If you follow this maxim, you will probably conclude that stock X is about to decrease. On the other hand, again under the maxim stated above, an investor may conclude that stock Y is about to make its big jump since its price is low and the stock market will recognize its strengths. Both assumptions may turn out to be completely wrong.
Buy High, Sell Higher
This approach is exceptionally recommended if you expect that the stock will continue to grow in the future. Thus, you should not be petrified by the high price. A stock that provides a stable percentage of growth is worth paying its higher price today, because if it continues to grow at this rate, its price will be even higher tomorrow.
You may almost certainly be disappointed that you haven't purchased the stock several months ago before its price has not jumped to the sky. However, if you make a careful research and verify that the stock possesses good potentials for future growth, then you should not be discouraged from investing in it.
Keep in mind that the stock's price will rise and fall in the short term, but over the long term a growth stock will move upwards.
Buy Low, Sell High
Many investors like better to search for bargain, which they can later sell at a higher price. However, if you decide to apply this strategy you should be well aware that the price of the stock may not rise again.
Value investors tend to look for stocks that are disregarded and underestimate by the stock market. However, price is only one of the factors that are part of their selection process. The key consideration made is whether the stock provides steady potential for future growth.
Last Advice
Avoid making investment decisions based only on the price of the stock because a stock that is down is not obligatory to go up. Additionally, a stock that is up may come down and may not. Look at the other metrics in order to make a more educated and successful decision.
Character Quality of Value Investors
To be successful investors we need to develop the ability to keep emotions from corroding the advantages brought by the Value growth framework.
The following qualities are needed:
Independence of mind: The market is full of enticing underlying principle for the current agreement view. The Stock Market crowd has an inclination to chase a few lead like manic-depressive lemmings. Don’t accept Mr. Market’s judgment of value. Think independently. Gather facts, apply tests and standards, and vitally appraise the business using sound principles.
If you do all these things you will have self-reliance and valor that comes from knowledge, experience and sober reflection. It does not matter that the popular view is different to yours. Be prepared to cut yourself off from the crowd and zig when the rest of the market is zagging. Be prepared to think and to act unconventionally--to go with your own reasoning. Be somewhere that allows you to ponder the really important issues--get away from the day-to-day stock market stimuli. Don’t be demoralized by the ’professional investor’.
Remember: the vast majority of ’professionals’ fail to surpass their indices. The Value growth investor is far superior to most Stock Market analysts.
Capacity for hard work: Value growth investing requires full commitment. A good knowledge of strategic analysis, accounting, finance and economics are required. A willingness to spend time in scuttlebutt is necessary. The rewards of the Value growth method are huge, but it asks for constant toil. The ability to make decisions with incomplete information: In investment we are making judgments about the future. Owner earnings that are yet to occur cannot be stated with any great precision and yet we must still form a view. If you are uncomfortable with analysis based on shaky numbers and ball park figures; if you require facts that are provable before you can make a decision then you will not make a good Value growth investor. Investment is a probability-based art form. The successful investors tilt the odds in their favor.
Resistance against the temptation to speculate: Discipline is needed to stick to sound investing criteria. This is especially the case in bull markets when you see speculators making vast returns. Don’t be tempted to play catch-up hoping to get your money out before the crash and return to thorough-investigation-with-a-margin-of-safety-investing later. You are more likely to go down with the rest, as Fisher and Graham discovered in 1929. You must resist emotions and gut feelings. Like the dog in Aesop’s Fable stick with what you know to be good rather than lose it trying to grab for deceptively better offerings. Buffett is content to aim for 15% annual appreciation. Why should we think we can safely aim for more than that?
Patience, perseverance, fortitude and consistency: Value growth investors are not impatient to buy stocks. Stand on the plate and let the bad pitches pass by. Do not drop your standards. Patience, perseverance and fortitude are also needed when the stock price falls after purchase. Doubts about the wisdom of the investment start to appear. If you have done your homework and you are convinced that the stock represents good value then a falling price creates buying opportunities if you hold your nerve. Market pessimism is the friend of the investor, but it takes a strong will to stand against the tide of opinion.
Don’t be impatient to sell-- hold on to good stocks. It sometimes seems ages before the market recognizes the intrinsic value of a stock. If you hold on you can benefit from both rising earnings and an increase in the price-earnings ratio. On other occasions the price can rapidly appreciate and you are showing a good rate of return. The temptation is then to cash in your chips. This often needs to be resisted too. The best part of the return may yet be to come.
The Value growth investor is consistent in his or her investment activity. Do not switch investment styles. Have a regular routine of investment following best practice. Even following Value growth investment principles there will be down years. In these periods resist the temptation to give up and try the latest fashion. Also, consistency is needed in continuing to follow the story of the company. On a regular basis investigate if the story is still strong enough for you to hold.
Willingness to admit and learn from mistakes: Mistakes are bound to occur in investment. It is impossible to be right about companies all the time. In fact, excellent performance only requires us to be right six times out of ten. When a mistake does occur doesn’t sweep it under the carpet because you can’t bear to look at it and be reminded of your’failure’. Face up to it, examine it and learn from it. In this way the quality of your investment decisions will improve. Also, learn from the mistakes of others-- ’you can’t live long enough to make them all yourself’
The following qualities are needed:
Independence of mind: The market is full of enticing underlying principle for the current agreement view. The Stock Market crowd has an inclination to chase a few lead like manic-depressive lemmings. Don’t accept Mr. Market’s judgment of value. Think independently. Gather facts, apply tests and standards, and vitally appraise the business using sound principles.
If you do all these things you will have self-reliance and valor that comes from knowledge, experience and sober reflection. It does not matter that the popular view is different to yours. Be prepared to cut yourself off from the crowd and zig when the rest of the market is zagging. Be prepared to think and to act unconventionally--to go with your own reasoning. Be somewhere that allows you to ponder the really important issues--get away from the day-to-day stock market stimuli. Don’t be demoralized by the ’professional investor’.
Remember: the vast majority of ’professionals’ fail to surpass their indices. The Value growth investor is far superior to most Stock Market analysts.
Capacity for hard work: Value growth investing requires full commitment. A good knowledge of strategic analysis, accounting, finance and economics are required. A willingness to spend time in scuttlebutt is necessary. The rewards of the Value growth method are huge, but it asks for constant toil. The ability to make decisions with incomplete information: In investment we are making judgments about the future. Owner earnings that are yet to occur cannot be stated with any great precision and yet we must still form a view. If you are uncomfortable with analysis based on shaky numbers and ball park figures; if you require facts that are provable before you can make a decision then you will not make a good Value growth investor. Investment is a probability-based art form. The successful investors tilt the odds in their favor.
Resistance against the temptation to speculate: Discipline is needed to stick to sound investing criteria. This is especially the case in bull markets when you see speculators making vast returns. Don’t be tempted to play catch-up hoping to get your money out before the crash and return to thorough-investigation-with-a-margin-of-safety-investing later. You are more likely to go down with the rest, as Fisher and Graham discovered in 1929. You must resist emotions and gut feelings. Like the dog in Aesop’s Fable stick with what you know to be good rather than lose it trying to grab for deceptively better offerings. Buffett is content to aim for 15% annual appreciation. Why should we think we can safely aim for more than that?
Patience, perseverance, fortitude and consistency: Value growth investors are not impatient to buy stocks. Stand on the plate and let the bad pitches pass by. Do not drop your standards. Patience, perseverance and fortitude are also needed when the stock price falls after purchase. Doubts about the wisdom of the investment start to appear. If you have done your homework and you are convinced that the stock represents good value then a falling price creates buying opportunities if you hold your nerve. Market pessimism is the friend of the investor, but it takes a strong will to stand against the tide of opinion.
Don’t be impatient to sell-- hold on to good stocks. It sometimes seems ages before the market recognizes the intrinsic value of a stock. If you hold on you can benefit from both rising earnings and an increase in the price-earnings ratio. On other occasions the price can rapidly appreciate and you are showing a good rate of return. The temptation is then to cash in your chips. This often needs to be resisted too. The best part of the return may yet be to come.
The Value growth investor is consistent in his or her investment activity. Do not switch investment styles. Have a regular routine of investment following best practice. Even following Value growth investment principles there will be down years. In these periods resist the temptation to give up and try the latest fashion. Also, consistency is needed in continuing to follow the story of the company. On a regular basis investigate if the story is still strong enough for you to hold.
Willingness to admit and learn from mistakes: Mistakes are bound to occur in investment. It is impossible to be right about companies all the time. In fact, excellent performance only requires us to be right six times out of ten. When a mistake does occur doesn’t sweep it under the carpet because you can’t bear to look at it and be reminded of your’failure’. Face up to it, examine it and learn from it. In this way the quality of your investment decisions will improve. Also, learn from the mistakes of others-- ’you can’t live long enough to make them all yourself’
Sunday, June 22, 2008
When and When Not To Use A Stop loss
To buy a stock a stop loss order is an uncertain "safety net" that you can put together with it. The knowledge and the ability of placing stops is marked comprehensively in many trading tutorials, but the outcome is that there is no accurate or incorrect answer, basically the fact that stop losses must be used to edge probable shortcoming disclosure when trading. Buyer or seller should also be cautious not to mystify stop losses with buy stops, which prompt an aperture spot rather than closing the trade. It is all done automatically and it is both easy to use and mandatory in our opinion.
There are many times when you make a trade and it goes not in favor of you. That is typical and it turns out to every trader. The discrepancy is that if your trade was necessarily inconsistent, you should have a set determined price that you will let that stock fall to.
For example, let us say we think the ABC Company is going to soar high because of media appraisal news and we buy 600 shares. Nevertheless, a thing happens against your wish. Now the question come that do you hold or do you. However, what if you buy a great company and because of market conditions or whatever. You are faced with your stock falling on you that is where stop loss orders come in.
On every trade, the use of stops is recommended. The reason that you were acquainted with the "standard" daily range of a stock seems to go high or low.
However, there some other things that stop losses order will not solve. The first thing is that if company announces something bad news about the stock then you will sell it out at that low. At this instance, it is better to cancel your stop loss and hope that it rebounds.
There for eternity will be a conflict between simply holding on to a stock and expecting to recuperate your losses with time. It almost certainly best to keep tight stops, as we trade we must take small losses along the way and gain profits on ones that move for us. We will simply keep moving the stop up. There is no limit to how many times you can move a stop loss order and we often will move the point up on an hourly basis if the stock is moving up well. Stops in actual fact do work, and after "crisis” the numbers of getting stopped out against the risks of holding on getting stopped out makes more financial logic as far as having cash to trade with.
There are many times when you make a trade and it goes not in favor of you. That is typical and it turns out to every trader. The discrepancy is that if your trade was necessarily inconsistent, you should have a set determined price that you will let that stock fall to.
For example, let us say we think the ABC Company is going to soar high because of media appraisal news and we buy 600 shares. Nevertheless, a thing happens against your wish. Now the question come that do you hold or do you. However, what if you buy a great company and because of market conditions or whatever. You are faced with your stock falling on you that is where stop loss orders come in.
On every trade, the use of stops is recommended. The reason that you were acquainted with the "standard" daily range of a stock seems to go high or low.
However, there some other things that stop losses order will not solve. The first thing is that if company announces something bad news about the stock then you will sell it out at that low. At this instance, it is better to cancel your stop loss and hope that it rebounds.
There for eternity will be a conflict between simply holding on to a stock and expecting to recuperate your losses with time. It almost certainly best to keep tight stops, as we trade we must take small losses along the way and gain profits on ones that move for us. We will simply keep moving the stop up. There is no limit to how many times you can move a stop loss order and we often will move the point up on an hourly basis if the stock is moving up well. Stops in actual fact do work, and after "crisis” the numbers of getting stopped out against the risks of holding on getting stopped out makes more financial logic as far as having cash to trade with.
What Successful traders are skilled about Investing in Stocks?
"The four most dangerous words in investing are 'This time it's different.”
Successful trader revered personalities in stock investing. Successful trader’s supreme teaching is all surrounded by superior investing ideas if we open our eyes to the possibilities. A trader, whose success touches the feet, always figures that behind every great stock is a great company.
Therefore, it always recommended by them that pay attention to which companies are doing the most business. Which store is crowded what restaurant chain has long lines when you go there Think of a company that moves to your town and dominates the local competition. Successful trader analysis that these types of companies are the ones that grows into the big winners on Stock market. In addition, companies that go from tiny seeds to huge multinationals make their investors rich. Mainly the conflict in investing is discovering the best companies and putting the money into them when they are just beginning to grow.
Mostly successful traders love growth stocks. They had their biggest gains when they invested in stocks of companies that were hot at the time. As they ascended into the highest arc of their growth phase, their share price also sizzles. They always follow their own advice and often hit huge returns on several stocks that would save their entire portfolio return for the year.
If you are in no doubt you are on top of a winner’s list, then you need to hang for the hurdle when your time at the serving dish occurs. Companies that have rapidly speeding up profit margins and increasing sales have stocks that rise along with them. As the business expands, the company's share price rises accordingly. If you can find a micro-cap company that ends up becoming a large cap during the period you hold it, you will have substantial returns.
Concentrating on a portfolio of growth stocks has worked for others, and it may just work for you!
Successful trader revered personalities in stock investing. Successful trader’s supreme teaching is all surrounded by superior investing ideas if we open our eyes to the possibilities. A trader, whose success touches the feet, always figures that behind every great stock is a great company.
Therefore, it always recommended by them that pay attention to which companies are doing the most business. Which store is crowded what restaurant chain has long lines when you go there Think of a company that moves to your town and dominates the local competition. Successful trader analysis that these types of companies are the ones that grows into the big winners on Stock market. In addition, companies that go from tiny seeds to huge multinationals make their investors rich. Mainly the conflict in investing is discovering the best companies and putting the money into them when they are just beginning to grow.
Mostly successful traders love growth stocks. They had their biggest gains when they invested in stocks of companies that were hot at the time. As they ascended into the highest arc of their growth phase, their share price also sizzles. They always follow their own advice and often hit huge returns on several stocks that would save their entire portfolio return for the year.
If you are in no doubt you are on top of a winner’s list, then you need to hang for the hurdle when your time at the serving dish occurs. Companies that have rapidly speeding up profit margins and increasing sales have stocks that rise along with them. As the business expands, the company's share price rises accordingly. If you can find a micro-cap company that ends up becoming a large cap during the period you hold it, you will have substantial returns.
Concentrating on a portfolio of growth stocks has worked for others, and it may just work for you!
Novice investors choose their investment from various types of stocks
Many beginner investors face very tough time for choosing their investment among many different types of stocks. Mostly investors ask for the help from someone whom they trust. We are not saying that this is a bad idea, but one should become expertise to choose the different type of stock for oneself because it is your money.
Separately from basic kinds of stocks for example growth stock, value stock, preferred stock there are also some complex stocks. There is a difficult stock know as convertible preferred stocks, which started as preferred stock, however it can be transformed into a common stock. Moreover, this causes the convertible preferred stock will answer to the growth of the company over a regular preferred will.
A recurring stock is paired rather closely with what is happening in our country's economy, and sometimes even in those overseas. You will see steel companies and original equipment manufacturers. It takes a bit of financial knowledge to be able to trade in cyclical stocks. You must also take the time to watch the economic indicators. You will generally see these stocks increasing with growth. If the economy is not doing well, you will not see the earnings you wish.
All of the Cap stocks stand for capitalization stocks of different sizes. The different sizes equal different returns, in general. Micro-caps are companies with Rs100 crore or less in revenue. Small-caps are companies with revenues between Rs100 crore and Rs 500 crore. The majority of publicly traded companies are small-cap. Mid-caps are those with revenues between Rs500crore and Rs3 crore.
Blue-chip stocks are the largest cap stocks out there. They are the top of the heap. You have to know that all blue-chip stocks are large-cap stocks, but not all large-cap stocks are blue chip. There are several advantages to blue-chip stocks, including liquidity, earnings and reside power.
The key is in meaningful the pros and cons. You have to know the risk. And they all have risks. Keep in mind, if you choose shrewdly and invest for the long haul, the stock market is a brilliant place for your money to breed. All it takes is time and knowledge.
Separately from basic kinds of stocks for example growth stock, value stock, preferred stock there are also some complex stocks. There is a difficult stock know as convertible preferred stocks, which started as preferred stock, however it can be transformed into a common stock. Moreover, this causes the convertible preferred stock will answer to the growth of the company over a regular preferred will.
A recurring stock is paired rather closely with what is happening in our country's economy, and sometimes even in those overseas. You will see steel companies and original equipment manufacturers. It takes a bit of financial knowledge to be able to trade in cyclical stocks. You must also take the time to watch the economic indicators. You will generally see these stocks increasing with growth. If the economy is not doing well, you will not see the earnings you wish.
All of the Cap stocks stand for capitalization stocks of different sizes. The different sizes equal different returns, in general. Micro-caps are companies with Rs100 crore or less in revenue. Small-caps are companies with revenues between Rs100 crore and Rs 500 crore. The majority of publicly traded companies are small-cap. Mid-caps are those with revenues between Rs500crore and Rs3 crore.
Blue-chip stocks are the largest cap stocks out there. They are the top of the heap. You have to know that all blue-chip stocks are large-cap stocks, but not all large-cap stocks are blue chip. There are several advantages to blue-chip stocks, including liquidity, earnings and reside power.
The key is in meaningful the pros and cons. You have to know the risk. And they all have risks. Keep in mind, if you choose shrewdly and invest for the long haul, the stock market is a brilliant place for your money to breed. All it takes is time and knowledge.
Get Profit from a Falling Stock
To know most basic principals to get profit out of falling stock read the following article. In this, we have discussed shorting stock versus buying "put" options.
For an illustration, you are just selling a stock, taking in the cash for the sale, and "buying back" or covering the sale at a cheaper price. As a result, if you "short" of ABC Company at 60 Rs and you sold 1000 shares, you took in 60,000 Rs. At this instant if, ABC falls to 50, and you "Cover" you are buying it back cheaper. In this case, you will spend 50,000 Rs. The difference between where you sold and what you spent, 10000 Rs. is your profit.
That really is as easy and it is no more risky than going long as long as you use stops to protect yourself. Ever since the market is volatile and goes up and down, if you only opt for the long-term games then you are losing countless income possibilities.
However, you will face some troubles with this strategy. Firstly, you will require a margin account to do it. All short sales are through margin. Second, it consume your buying influence since when you go short, you are investing that position with margin that will fasten your money.
The other game in stock market is a put option. Anybody is able to and must use call and put options as a trading strategy. In this, the risk is limited, and the returns can be unusual because of the advantage innate in options. You are placing a gamble with a put option, which the stock is going to fall. If you win the bet, you will win large point, and if you lost the bet, your loss is limited to how much you bet.
For an illustration if you short ABC at 100 and it falls to 60 fantastic, you made 40 points and 40%. However, if you buy put options for 1.75 and they go to 10.00, the percentage will be over 500%. The cost is next to nothing, to get such a shot at big returns.
For an illustration, you are just selling a stock, taking in the cash for the sale, and "buying back" or covering the sale at a cheaper price. As a result, if you "short" of ABC Company at 60 Rs and you sold 1000 shares, you took in 60,000 Rs. At this instant if, ABC falls to 50, and you "Cover" you are buying it back cheaper. In this case, you will spend 50,000 Rs. The difference between where you sold and what you spent, 10000 Rs. is your profit.
That really is as easy and it is no more risky than going long as long as you use stops to protect yourself. Ever since the market is volatile and goes up and down, if you only opt for the long-term games then you are losing countless income possibilities.
However, you will face some troubles with this strategy. Firstly, you will require a margin account to do it. All short sales are through margin. Second, it consume your buying influence since when you go short, you are investing that position with margin that will fasten your money.
The other game in stock market is a put option. Anybody is able to and must use call and put options as a trading strategy. In this, the risk is limited, and the returns can be unusual because of the advantage innate in options. You are placing a gamble with a put option, which the stock is going to fall. If you win the bet, you will win large point, and if you lost the bet, your loss is limited to how much you bet.
For an illustration if you short ABC at 100 and it falls to 60 fantastic, you made 40 points and 40%. However, if you buy put options for 1.75 and they go to 10.00, the percentage will be over 500%. The cost is next to nothing, to get such a shot at big returns.
Monday, May 26, 2008
There are eight modes to become a best trader
is a human nature to make blunder in stock market. Though, there always a chance to learn from your mistakes and get better yourself for the long run. Here are some ways to turn into an enhanced trader.
1. Set Stop Losses and Take Profits - “Set and forget” trading is usually profitable. When you place each trade, keep in mind to place your exit and stop loss, and then let the market be your guide. Have a preset limit of how much you are keen to win and how much you can lose. Technical analysis will tell you the best price for selling and the best place for buying. Support and resistance points are the best places to put limit orders.
2. Stick to Your Weapons - Do not try to run from the market. The only way to bigger in trading profit is to stay in the game and keep trading. Running from the trades and the action will keep you beyond the market, whether it is hot or cold. Glue to your trading plan and ratify trading discipline are the keys to producing profits.
3. Eliminate high chance for trading - You would not imagine making consistent profits at the roulette wheel, and you should not do the same with your investments. The active, professional trader only takes quality trades opposed to quantity of trades.
4. Don’t watch Minute-to-Minute - Swing traders should be keen to avoiding the minute-to-minute movements. It is easy to set an exit point that will not be hit for three weeks, but then close a potentially profitable trade due to minute-by-minute movements. There is no reason to get out of a trade for quick profits if you are in for the long haul. Small difficulties create temporary stress and can reduce swing traders to day traders. Niche trading works because you are specialized in your own area.
5. Accept That Full-Time Day trading is rough - The vicissitude of full-time day trading is very stressful. Find something you can do each day to wind down and get rid of your stressful day-to-day anxiety. Stress will make you think differently and trade another way. A professional trader will need to find ways to vent their aggravation as bad days do happen to the best of traders.
6. Pick Swing Traders or Day Traders - Know exactly what kind of trader you want to be. It is difficult to be great at swing trading while next the short term movements of day trading. Describe what kind of strategy you want to follow and stick with it.
7. Don’t be attached - You are out to make money, not be married to a stock. Even if you have the feeling that this stock is “the one,” you should be ready to put it when the price is right.
8. Talk to Additional Traders - Talk to other traders with more or different experiences. Getting a feel for the markets is supreme to producing profits. If you can get trading losing to a point where it just comes logically to you, all the better.
1. Set Stop Losses and Take Profits - “Set and forget” trading is usually profitable. When you place each trade, keep in mind to place your exit and stop loss, and then let the market be your guide. Have a preset limit of how much you are keen to win and how much you can lose. Technical analysis will tell you the best price for selling and the best place for buying. Support and resistance points are the best places to put limit orders.
2. Stick to Your Weapons - Do not try to run from the market. The only way to bigger in trading profit is to stay in the game and keep trading. Running from the trades and the action will keep you beyond the market, whether it is hot or cold. Glue to your trading plan and ratify trading discipline are the keys to producing profits.
3. Eliminate high chance for trading - You would not imagine making consistent profits at the roulette wheel, and you should not do the same with your investments. The active, professional trader only takes quality trades opposed to quantity of trades.
4. Don’t watch Minute-to-Minute - Swing traders should be keen to avoiding the minute-to-minute movements. It is easy to set an exit point that will not be hit for three weeks, but then close a potentially profitable trade due to minute-by-minute movements. There is no reason to get out of a trade for quick profits if you are in for the long haul. Small difficulties create temporary stress and can reduce swing traders to day traders. Niche trading works because you are specialized in your own area.
5. Accept That Full-Time Day trading is rough - The vicissitude of full-time day trading is very stressful. Find something you can do each day to wind down and get rid of your stressful day-to-day anxiety. Stress will make you think differently and trade another way. A professional trader will need to find ways to vent their aggravation as bad days do happen to the best of traders.
6. Pick Swing Traders or Day Traders - Know exactly what kind of trader you want to be. It is difficult to be great at swing trading while next the short term movements of day trading. Describe what kind of strategy you want to follow and stick with it.
7. Don’t be attached - You are out to make money, not be married to a stock. Even if you have the feeling that this stock is “the one,” you should be ready to put it when the price is right.
8. Talk to Additional Traders - Talk to other traders with more or different experiences. Getting a feel for the markets is supreme to producing profits. If you can get trading losing to a point where it just comes logically to you, all the better.
Buying Company that is down
Many investors like to buy companies when they are down. However, here the question arises that why we as investors purchase a company that is out or the company, which is doing fine. The answer can be many reasons that follow:
Dividend: Company that is losing usually has a long history of productivity. If the company is not in risk of going out of business, then it can keep on to paying its dividend to shareholders. Buying company that is on downward will give you advanced dividend yield because of the drop in the share price. In contrast, company that is out cannot afford to pay off dividend to shareholders.
Low-priced: The Company, which is losing or going downwards usually, sells at a discount. When the company announces bad news its fundamental part of stock market that the share price will drop as a result. If the company is firm then the company that is down can be bought at a cheaper price than other similar companies can.
High Potential Return: This is one cause that the investors should invest in companies that are in downward. The miserable share price will have a chance to get well once its short-term problem is reformed. Company that is downward usually has a low down P/E ratio, many in the single digits.
Take Over Potentials: Companies would love to pick up further companies at a low assessment. Company that is down normally have depressed share price even as its core business remains intact. This is appealing to potential competitors. Many big investors and companies buy company on the contemptible.
It is critical to know whether a company is down or out. There are many companies selling at single digit P/E ratio, giving dividends and yet their survival is in question. These are companies that is out and not down. Even as, it might be difficult to identify, I can give you several examples of companies that are down pharmaceutical companies, banking industry and companies selling hard drives. The demand for their business remains intact despite the short-term downturn in the industry. Though, every company as well an industry is different as well. Please use the guidelines mentioned on the past article to differentiate company that is down and out.
Dividend: Company that is losing usually has a long history of productivity. If the company is not in risk of going out of business, then it can keep on to paying its dividend to shareholders. Buying company that is on downward will give you advanced dividend yield because of the drop in the share price. In contrast, company that is out cannot afford to pay off dividend to shareholders.
Low-priced: The Company, which is losing or going downwards usually, sells at a discount. When the company announces bad news its fundamental part of stock market that the share price will drop as a result. If the company is firm then the company that is down can be bought at a cheaper price than other similar companies can.
High Potential Return: This is one cause that the investors should invest in companies that are in downward. The miserable share price will have a chance to get well once its short-term problem is reformed. Company that is downward usually has a low down P/E ratio, many in the single digits.
Take Over Potentials: Companies would love to pick up further companies at a low assessment. Company that is down normally have depressed share price even as its core business remains intact. This is appealing to potential competitors. Many big investors and companies buy company on the contemptible.
It is critical to know whether a company is down or out. There are many companies selling at single digit P/E ratio, giving dividends and yet their survival is in question. These are companies that is out and not down. Even as, it might be difficult to identify, I can give you several examples of companies that are down pharmaceutical companies, banking industry and companies selling hard drives. The demand for their business remains intact despite the short-term downturn in the industry. Though, every company as well an industry is different as well. Please use the guidelines mentioned on the past article to differentiate company that is down and out.
Stock Trading Secrets?
The Professional Stock Brokers didn’t want to disclosed you all these trading secrets with you, then how the companies move toward or individuals selling you these products are harshly to renounce these “Never before revealed” techniques?
Is it may be for the reason for they have don’t work, or are their products just the basic rules of trading rewritten (once again) in a new and thought infuriating way? Otherwise, if you deemed to everything you read, is it some highly classified and clandestine methods for trading stocks that is being SOLD here?
“Stock Trading Secrets Revealed”
On given below there is the simple form of real trading secrets of institutes and professional traders are set on at least on of these areas:
• To know which trading strategies are best to work in which market.• A well developed trading system that has established itself gainfully work repetitively in real-life trading.• How to take advantage of margin?
• What are the trading indicators are usually reliable?
• The position of Market Makers and how they use their power of to organize the control the market and how you can utilize this advantage for yourself.
• Which trading patterns are worth using and when?
• Right Money Management techniques, Money Management, and Money Management.
Now as the result of opposing is what u thinks..??? What are they selling you? Well, but I am also not saying you that all of these trading products out there promoting unknown trading secrets are not worth the money, other than quite the opposite. If they are offer you with faithful suggestions about any above areas and then these suggestions are not simply easy to get or shown you their products are might be give you much benefit of your trading result.
Though, if they are purely selling you generalized trading information that you can learn from any basic trading book, maybe your money is superior spent somewhere else. Buyer bewares. Frank Solar is a booming trader and Registered Investment Advisor. His company, Soler Investments, provides trading advisory services for stock traders and currency traders. Visit SolerInvestments.com today to realize how he can help you turn into a booming trader.
Is it may be for the reason for they have don’t work, or are their products just the basic rules of trading rewritten (once again) in a new and thought infuriating way? Otherwise, if you deemed to everything you read, is it some highly classified and clandestine methods for trading stocks that is being SOLD here?
“Stock Trading Secrets Revealed”
On given below there is the simple form of real trading secrets of institutes and professional traders are set on at least on of these areas:
• To know which trading strategies are best to work in which market.• A well developed trading system that has established itself gainfully work repetitively in real-life trading.• How to take advantage of margin?
• What are the trading indicators are usually reliable?
• The position of Market Makers and how they use their power of to organize the control the market and how you can utilize this advantage for yourself.
• Which trading patterns are worth using and when?
• Right Money Management techniques, Money Management, and Money Management.
Now as the result of opposing is what u thinks..??? What are they selling you? Well, but I am also not saying you that all of these trading products out there promoting unknown trading secrets are not worth the money, other than quite the opposite. If they are offer you with faithful suggestions about any above areas and then these suggestions are not simply easy to get or shown you their products are might be give you much benefit of your trading result.
Though, if they are purely selling you generalized trading information that you can learn from any basic trading book, maybe your money is superior spent somewhere else. Buyer bewares. Frank Solar is a booming trader and Registered Investment Advisor. His company, Soler Investments, provides trading advisory services for stock traders and currency traders. Visit SolerInvestments.com today to realize how he can help you turn into a booming trader.
Friday, May 16, 2008
10 simple methods for making further productive trading day
It can take your entire life to become a successful trader. By following these steps, you can make certain that your mind, body, and portfolio are enjoying a more productive trading day.
1. Turn Off the TV - Turning ON the TV possibly will endow with some financial information however, it can be very distracting. Therefore, turning off the TV will help you to concentrate on day trading. The things you are hearing without you even knowing can easily affect your trading style.
2. Communication - Skill-building actions will help you continue in the state of mind you want to be gainful. An online home study course is a great tool to acquire away from the stresses of trading and to learn more about trading. Leveraging your down time into something productive will yield better results.
3. The clandestine of profitable traders can only study by networking. Certainly in the financial market saying, “It is not what you can do but who you know” at rest reign true.Expert traders more often than not to know somebody who trades and talks to them to bounce off trading thoughts and strategies.
4. Take a Lunch - Do not keep yourself tied down to your trade station. Begin again with the normal activities, for example taking a lunch then a brief break, will make life more normal. Day trading is stressful, and you need the retreat to unwind.
5. Look for Excellence Trades – The steady profits do not originate from taking every single trade. You require forcing yourself to make only quality trades to decrease on commissions and the stress that comes with a lot of open positions.
6. Build up the Trading Plan - Build up a trading plans in markets. It is always shrewd to have your trading plan down on paper so that you directly see it and act accordingly. If you have additional time, fine-tune your strategy with a trading plan planner market circumstances. The time investment above pays off in your portfolio returns.
7. Day Trading Is Not Investing - You are not buying for the long term so plan your investments approximately the existing time. Keep away from worrying circumstances by selling earlier than the market close. Holding positions during the night is a quick way to destroy your trading capital.
8. Trade With the Market - Only take place that go with the generally market. If the decliners were outpacing the advancers, it most likely would not be a superior time to go long, in spite of of how great the trade looks.
9. Avoid the News – The entire trading plan should stroke on topics for example news events and other big market movers. Though, keep away from the daily news will keep chance variables from hurting your capital and make you an additional productive trader.
10. Take Days Off - If you require to, take a day off from trading to relax. Worrying traders are not dynamic traders.
1. Turn Off the TV - Turning ON the TV possibly will endow with some financial information however, it can be very distracting. Therefore, turning off the TV will help you to concentrate on day trading. The things you are hearing without you even knowing can easily affect your trading style.
2. Communication - Skill-building actions will help you continue in the state of mind you want to be gainful. An online home study course is a great tool to acquire away from the stresses of trading and to learn more about trading. Leveraging your down time into something productive will yield better results.
3. The clandestine of profitable traders can only study by networking. Certainly in the financial market saying, “It is not what you can do but who you know” at rest reign true.Expert traders more often than not to know somebody who trades and talks to them to bounce off trading thoughts and strategies.
4. Take a Lunch - Do not keep yourself tied down to your trade station. Begin again with the normal activities, for example taking a lunch then a brief break, will make life more normal. Day trading is stressful, and you need the retreat to unwind.
5. Look for Excellence Trades – The steady profits do not originate from taking every single trade. You require forcing yourself to make only quality trades to decrease on commissions and the stress that comes with a lot of open positions.
6. Build up the Trading Plan - Build up a trading plans in markets. It is always shrewd to have your trading plan down on paper so that you directly see it and act accordingly. If you have additional time, fine-tune your strategy with a trading plan planner market circumstances. The time investment above pays off in your portfolio returns.
7. Day Trading Is Not Investing - You are not buying for the long term so plan your investments approximately the existing time. Keep away from worrying circumstances by selling earlier than the market close. Holding positions during the night is a quick way to destroy your trading capital.
8. Trade With the Market - Only take place that go with the generally market. If the decliners were outpacing the advancers, it most likely would not be a superior time to go long, in spite of of how great the trade looks.
9. Avoid the News – The entire trading plan should stroke on topics for example news events and other big market movers. Though, keep away from the daily news will keep chance variables from hurting your capital and make you an additional productive trader.
10. Take Days Off - If you require to, take a day off from trading to relax. Worrying traders are not dynamic traders.
Ready to buy blue chips?
Blue-Chip Stocks are reputed stocks with high value and these are the only stocks performing well from past records. They are expensive yet they are reliable though they do not present instant profit. People refer “Blue Chips” most valuable and stable stocks on the stock market. The “Blue-Chip” derived from people who used the blue chip as the highest bidding chip in the game of poker. In the investing game, blue chip stock is still referred as highest bidding chips.
Blue chip Stocks are a very high quality investment involving a lower-than-average risk of loss of principal or reduction in income. The term is generally used to refer to securities of companies having a long history of sustained earnings and dividend payments. Blue- Chip stocks are a security from a well-established and financially sound company that has demonstrated its ability to pay dividends in both good and bad times.
Blue Chip share in India are Reliance, Wipro, Infosys, Bombay Dyeing, Hindustan Lever etc.
How to invest in blue chip stocks?
There are several ways that an investor can acquire shares. He can buy blue chip througha broker, a direct stock purchase plan or a dividend reinvestment plan. Many mutual funds specializes in blue chip stocks, an investor can also purchase such mutual funds.
Is investing in Blue chips is safe?
The answer is not really. An expensive blue chip share today could become a useless tomorrow. Always remember that there is always a risk related with stocks no matter whether it is blue chip or not. In addition, investing in stock is gamble and just the blue chip is the safer stake.
Blue Chips have a large market capitalization. The result is market capitalization when the number of shares in a company is multiplied by its current price. A large market cap indicates a liquid stock. The share of blue chips is among the largest companies in their relevant regions.
The most important advantage of their size, they are more stable than the other stocks. Hence, they are not very unstable to great extent as if others are. That is why they are favorite with conservative investors.
From time to time you will need to review your strategy and may wish to adjust the ratios you originally assigned to your investments.
Blue chip Stocks are a very high quality investment involving a lower-than-average risk of loss of principal or reduction in income. The term is generally used to refer to securities of companies having a long history of sustained earnings and dividend payments. Blue- Chip stocks are a security from a well-established and financially sound company that has demonstrated its ability to pay dividends in both good and bad times.
Blue Chip share in India are Reliance, Wipro, Infosys, Bombay Dyeing, Hindustan Lever etc.
How to invest in blue chip stocks?
There are several ways that an investor can acquire shares. He can buy blue chip througha broker, a direct stock purchase plan or a dividend reinvestment plan. Many mutual funds specializes in blue chip stocks, an investor can also purchase such mutual funds.
Is investing in Blue chips is safe?
The answer is not really. An expensive blue chip share today could become a useless tomorrow. Always remember that there is always a risk related with stocks no matter whether it is blue chip or not. In addition, investing in stock is gamble and just the blue chip is the safer stake.
Blue Chips have a large market capitalization. The result is market capitalization when the number of shares in a company is multiplied by its current price. A large market cap indicates a liquid stock. The share of blue chips is among the largest companies in their relevant regions.
The most important advantage of their size, they are more stable than the other stocks. Hence, they are not very unstable to great extent as if others are. That is why they are favorite with conservative investors.
From time to time you will need to review your strategy and may wish to adjust the ratios you originally assigned to your investments.
Wednesday, April 23, 2008
Understanding the Different Types of Stock
The most complicated side of the stock market understands the stock market and its various types. There are several different types of stock to choose from:
Income stock is that stocks that companies that are stable issue income stocks. This implies that the company will not regularly invest a surplus of their earnings back into the company every year. As the profits not reinvested by the company they give out to the shareholders as dividend. If anyone interested to get dividend income and capital-gratitude then you must look forward to income stock.
Growth stocks: Growth stocks are issued by those companies that are looking for expansion. There is usually negligible dividend income from growth stock. The majority of mentors of stock market think about growth stocks a good choice for those looking to make a nice return over a long period. Annual returns usually run around 11% over ten years. The idea is that growth stocks will grow given time.
A value stock is a stock that has gone down in price. It is usually considered to be a good buy. Value stocks are based more on the company's assets than the earning potential. The growth of the company is not the issue at hand with a value stock. Investors buy value stocks for shares of a solid company at a good price and that in time the price will reflect the stability of the company. Then the price of the stock will go up.
Speculative stocks are like the new stocks on the block. They are the riskiest stock available. You can either make a lot of money or lose it all quite easily. You have to gauge your own risk level. These are usually brand new companies or unknown companies. This category would include all those dot-coms.
Preferred stock happens when a company issues different classes of stock. The company could have a common stock and then have a preferred stock. The preferred stock has a higher claim to company earnings, such as dividend payments. The amount of the dividend payment is fixed, unlike the common stock, and will be paid before common stocks are. If you own a preferred stock in a company that is not doing well, you will still get your fixed payment. You will also share in the assets in the case of a bankruptcy before those holding common stock will.
These are the most commonly thrown around stock types. You have probably heard of them around the water cooler at work or on the news. There are several other types of stocks that are also available, including convertible preferred stocks and blue-chip stocks. It is essential that you understand the different types of stocks when looking to invest. They all have different benefits and drawbacks. What type of stock you invest in depends on what you want to see from your investment. Are you looking for a quick way to make a lot of money or are you wanting to invest money and simply let it grow over time Ask yourself these questions when looking at what type of stock works for your financial goals.
Income stock is that stocks that companies that are stable issue income stocks. This implies that the company will not regularly invest a surplus of their earnings back into the company every year. As the profits not reinvested by the company they give out to the shareholders as dividend. If anyone interested to get dividend income and capital-gratitude then you must look forward to income stock.
Growth stocks: Growth stocks are issued by those companies that are looking for expansion. There is usually negligible dividend income from growth stock. The majority of mentors of stock market think about growth stocks a good choice for those looking to make a nice return over a long period. Annual returns usually run around 11% over ten years. The idea is that growth stocks will grow given time.
A value stock is a stock that has gone down in price. It is usually considered to be a good buy. Value stocks are based more on the company's assets than the earning potential. The growth of the company is not the issue at hand with a value stock. Investors buy value stocks for shares of a solid company at a good price and that in time the price will reflect the stability of the company. Then the price of the stock will go up.
Speculative stocks are like the new stocks on the block. They are the riskiest stock available. You can either make a lot of money or lose it all quite easily. You have to gauge your own risk level. These are usually brand new companies or unknown companies. This category would include all those dot-coms.
Preferred stock happens when a company issues different classes of stock. The company could have a common stock and then have a preferred stock. The preferred stock has a higher claim to company earnings, such as dividend payments. The amount of the dividend payment is fixed, unlike the common stock, and will be paid before common stocks are. If you own a preferred stock in a company that is not doing well, you will still get your fixed payment. You will also share in the assets in the case of a bankruptcy before those holding common stock will.
These are the most commonly thrown around stock types. You have probably heard of them around the water cooler at work or on the news. There are several other types of stocks that are also available, including convertible preferred stocks and blue-chip stocks. It is essential that you understand the different types of stocks when looking to invest. They all have different benefits and drawbacks. What type of stock you invest in depends on what you want to see from your investment. Are you looking for a quick way to make a lot of money or are you wanting to invest money and simply let it grow over time Ask yourself these questions when looking at what type of stock works for your financial goals.
You can be hurt in Two Ways by Selling in Down Market
You Receive a Bad Price for Stock and Generate Trading Expenses
It is universal fact to get tense for the investors to look for the exit when stocks are in a drop. It is best to put money if you have placed your portfolio with the accurate combination of stocks, bonds, and cash for your age and risk profile.
A falling market is usually not the time to sell the stock even if you are not located where you want to be with your asset combination.
During a falling market, two reasons to limit in trading are:
Firstly, selling stocks at low If you are selling on a stock’s recession, it implies that you are not supposed to get a good price. If the stock in the present and was in the past a stinker, it might be an advantage taking your loss and the cash when times were good. By selling into a down market, you are making a bad situation worse.
Secondly, in a falling market one must avoid unnecessary trading. This will engender further expenses, which further exhaust your portfolio.
What can be great Stock Bargains?
If you find some great bargains then there can be exemption and this can included to an accessible situation or can pick up some stocks that look like they will impersonation when the market swings back up. Buy on the upswing and selling low is not a superior approach and this will neither generate extra commissions.
It is universal fact to get tense for the investors to look for the exit when stocks are in a drop. It is best to put money if you have placed your portfolio with the accurate combination of stocks, bonds, and cash for your age and risk profile.
A falling market is usually not the time to sell the stock even if you are not located where you want to be with your asset combination.
During a falling market, two reasons to limit in trading are:
Firstly, selling stocks at low If you are selling on a stock’s recession, it implies that you are not supposed to get a good price. If the stock in the present and was in the past a stinker, it might be an advantage taking your loss and the cash when times were good. By selling into a down market, you are making a bad situation worse.
Secondly, in a falling market one must avoid unnecessary trading. This will engender further expenses, which further exhaust your portfolio.
What can be great Stock Bargains?
If you find some great bargains then there can be exemption and this can included to an accessible situation or can pick up some stocks that look like they will impersonation when the market swings back up. Buy on the upswing and selling low is not a superior approach and this will neither generate extra commissions.
Answer these Questions before investing
One must ask himself three most important questions and search for their answers before one buy a stock. Many people buy a stock because of their intuition. It not at all harms to decide your investments wisely. One must require each stock in one’s portfolio to execute fine. Or else, the investor is losing his/her future money.
The following questions to be asked by one before you purchase a stock:
What exactly does this company do?
One should possess knowledge about the company information that even you can explain this company does in a few sentences. Feel like that you are explaining this about to other and they should understand the company after you describes it.
Several companies have further complicated business representation. On the contrary, there are ample of companies that are easy and undemanding and recommend vast investment prospective.
Is the company moving upwards?
Several shareholders fail to notice the very important revenue. If income is not increasing more rapidly or else at the constant speed as earnings, one must research for the reason. Remember it could be an indication of falling revenues in the future. One must observe an expansion in earnings, a continued growth record and returns growth.
A number of circumstances can become a clue by rising revenue and dilapidated earnings. The management could be having trouble. Maybe the company cannot actually participate and be advantageous and beneficial. Researches should be made and must notice what the growth is and why it is.
Most important question: What will you pay?
After all the researches, you may be willing to buy the stock. Still one should make positive that the stock could be close to a soaring point or carrying out on a hot market. One must identify where the stock price should be.
One will be benefited from a slight persistence if the genuine price of the stock were superior to where it should be. Hang around in anticipation of it to correct it before you buy. Observe the market for an awful day when the entire thing is downward. If the stock is much lower than you anticipated it would be, it might be a good time to buy. However, you ought to make an effort to hit upon a reason why the price is under its accurate value. Do not be scared to take a second look if necessary. It is better to be sure than to lose money.
The following questions to be asked by one before you purchase a stock:
What exactly does this company do?
One should possess knowledge about the company information that even you can explain this company does in a few sentences. Feel like that you are explaining this about to other and they should understand the company after you describes it.
Several companies have further complicated business representation. On the contrary, there are ample of companies that are easy and undemanding and recommend vast investment prospective.
Is the company moving upwards?
Several shareholders fail to notice the very important revenue. If income is not increasing more rapidly or else at the constant speed as earnings, one must research for the reason. Remember it could be an indication of falling revenues in the future. One must observe an expansion in earnings, a continued growth record and returns growth.
A number of circumstances can become a clue by rising revenue and dilapidated earnings. The management could be having trouble. Maybe the company cannot actually participate and be advantageous and beneficial. Researches should be made and must notice what the growth is and why it is.
Most important question: What will you pay?
After all the researches, you may be willing to buy the stock. Still one should make positive that the stock could be close to a soaring point or carrying out on a hot market. One must identify where the stock price should be.
One will be benefited from a slight persistence if the genuine price of the stock were superior to where it should be. Hang around in anticipation of it to correct it before you buy. Observe the market for an awful day when the entire thing is downward. If the stock is much lower than you anticipated it would be, it might be a good time to buy. However, you ought to make an effort to hit upon a reason why the price is under its accurate value. Do not be scared to take a second look if necessary. It is better to be sure than to lose money.
Tuesday, April 22, 2008
Wednesday, April 2, 2008
6 Best times for stock trading
1. Let's say a stock increase 5 pct or additional through the opening and there's no news about it. Usually, the stock will go down off after 30 minutes of trading. Why Market makers might be trying to open the stock at an artificially high price to sell off excess inventory they've get the day before. Though, if the stock doesn't drop after 30 minutes of trading, it's liable to go on rising for the rest of the day. Tactic: Buy at 1/16 above the day's high after the opening. Set a stop at 1/16 under the days low.
2. The conflicting of the above strategy. When a stock opens lower on no news, it could be that sell orders from nervous investors have piled up since the close of trading the day' before. Occasionally market makers open the stock falsely low, to draw in more panic sellers. This allows them to accrue shares, because market makers as a rule buy on price declines and sell on price increases. After 30 minutes, the stock usually recovers in price and normal trading begins. The market makers profits by selling the inventory they've accrue at the lower price. However, if the stock goes on to drift lower after 30 minutes, chances are it'll decline more during the course of the day. Tactic: Sell short at 1/16 below the low of the day; set a stop at 1/16 above the day's high.
3. Suppose you buy at 1/16 above the bid. Sell at 1/16 below the ask. The strategy works best with non-volatile stocks where the spread is at least 3/8 of a point. When winning, you make a quarter points per trade, or $250 on 1,000 shares. You can also short the spread by selling short at 1/16 below the ask and covering at 1/16 above the bid. Problem is, it's not always possible to get in and out at these levels. Market makers may easily spot what you're doing and adjust prices so they blow you out. Often day traders try this tactic several times during the day before they succeed.
4. An additional fairly simple tactic. Follow the message threads at, forInstance, Silicon Investor for a particular stock. When everyone is screaming that the stock is going to make a move, leap in with the crowd. Be satisfied with a 1/8 or 1/4 point.
5. With this contrarian’s policy, you buy into weakness and sell into force. That is, you buy stocks with small percentage turn down relative to the market. You're hoping they'll gain when the market reverses. Hold off buying until the stock trades above its opening. Reason: earlier buyers of the stock will sell to prevent loss, thus driving the price down in the short term.
6. Stocks a lot relieve off their highs of the day during the last hour of trading. Why because day traders and market makers seek to exit their positions and lock in profits. A price downturn often occurs during the last hour of trading as many seek to exit their positions. This downward impetus can create some lucrative short-selling chances.
2. The conflicting of the above strategy. When a stock opens lower on no news, it could be that sell orders from nervous investors have piled up since the close of trading the day' before. Occasionally market makers open the stock falsely low, to draw in more panic sellers. This allows them to accrue shares, because market makers as a rule buy on price declines and sell on price increases. After 30 minutes, the stock usually recovers in price and normal trading begins. The market makers profits by selling the inventory they've accrue at the lower price. However, if the stock goes on to drift lower after 30 minutes, chances are it'll decline more during the course of the day. Tactic: Sell short at 1/16 below the low of the day; set a stop at 1/16 above the day's high.
3. Suppose you buy at 1/16 above the bid. Sell at 1/16 below the ask. The strategy works best with non-volatile stocks where the spread is at least 3/8 of a point. When winning, you make a quarter points per trade, or $250 on 1,000 shares. You can also short the spread by selling short at 1/16 below the ask and covering at 1/16 above the bid. Problem is, it's not always possible to get in and out at these levels. Market makers may easily spot what you're doing and adjust prices so they blow you out. Often day traders try this tactic several times during the day before they succeed.
4. An additional fairly simple tactic. Follow the message threads at, forInstance, Silicon Investor for a particular stock. When everyone is screaming that the stock is going to make a move, leap in with the crowd. Be satisfied with a 1/8 or 1/4 point.
5. With this contrarian’s policy, you buy into weakness and sell into force. That is, you buy stocks with small percentage turn down relative to the market. You're hoping they'll gain when the market reverses. Hold off buying until the stock trades above its opening. Reason: earlier buyers of the stock will sell to prevent loss, thus driving the price down in the short term.
6. Stocks a lot relieve off their highs of the day during the last hour of trading. Why because day traders and market makers seek to exit their positions and lock in profits. A price downturn often occurs during the last hour of trading as many seek to exit their positions. This downward impetus can create some lucrative short-selling chances.
TO WATCH IN THE MARKETS
Buy and Hold Strategy
The buy and holding approach gathers shares of a company for long-term development profit and positive assets, resources, investment gains tax on profits. This strategy implies an investment motion, which includes the investor to hold the stock for maximum period in spite of begin involved in day trading. One of the main advantage of a buy and hold strategy is the patience of the process. Investors adopt the buy and hold strategy generally with the stocks and shares from renowned company
Times gone by has demonstrated that a buy and hold strategy do better efforts to time the market in absolute returns.
The buy and hold strategy needs be seated on a place for long time with the anticipation that the share price will appreciate.
Share and Market Price
Share: The share symbolizes an investor's possession in a "division or share" of the profits, losses, and assets of a company. It is produced when a business shape itself into section and put up for sale them to shareholder in substitute for cash.
Market Price: The market price the final stated price of a share at which it was put up for sale on the stock exchange.
Market Cap
If you buy increasingly share of stock in a company then the sum total of money you would have to pay is called the Market Cap. The formula to calculate market cap is to multiply the number of shares by the price per share.
Financial Terms
Earnings per Share: Earning per share is the sum total of profit to which each share is unrestricted.
Going Public: It is a colloquial speech for when a company is preparing of an IPO.
IPO: It is as abbreviation for Initial Public Offering. It is when a company sells stock in itself for the first time is called an IPO.
Liquidity
Liquidity is the state of having hard cash, or possessing assets, this hard cash and assets can be further promptly transformed into cash. Yet, at incidental prices, almost any asset can be turned into cash. At its fair market price to have high liquidity, an asset must be exchangeable into cash.
The buy and holding approach gathers shares of a company for long-term development profit and positive assets, resources, investment gains tax on profits. This strategy implies an investment motion, which includes the investor to hold the stock for maximum period in spite of begin involved in day trading. One of the main advantage of a buy and hold strategy is the patience of the process. Investors adopt the buy and hold strategy generally with the stocks and shares from renowned company
Times gone by has demonstrated that a buy and hold strategy do better efforts to time the market in absolute returns.
The buy and hold strategy needs be seated on a place for long time with the anticipation that the share price will appreciate.
Share and Market Price
Share: The share symbolizes an investor's possession in a "division or share" of the profits, losses, and assets of a company. It is produced when a business shape itself into section and put up for sale them to shareholder in substitute for cash.
Market Price: The market price the final stated price of a share at which it was put up for sale on the stock exchange.
Market Cap
If you buy increasingly share of stock in a company then the sum total of money you would have to pay is called the Market Cap. The formula to calculate market cap is to multiply the number of shares by the price per share.
Financial Terms
Earnings per Share: Earning per share is the sum total of profit to which each share is unrestricted.
Going Public: It is a colloquial speech for when a company is preparing of an IPO.
IPO: It is as abbreviation for Initial Public Offering. It is when a company sells stock in itself for the first time is called an IPO.
Liquidity
Liquidity is the state of having hard cash, or possessing assets, this hard cash and assets can be further promptly transformed into cash. Yet, at incidental prices, almost any asset can be turned into cash. At its fair market price to have high liquidity, an asset must be exchangeable into cash.
Monday, February 25, 2008
Discover to Make Money on the Stock Market Yourself
The Market is the center of the Universe. Look no further for the answers to the secret of life. Being in the Market is such a living breathing experience that I cannot imagine a world without a Market place.
It is an ongoing part of the cosmic life of all Peoples for we are all influenced by the workings of the World Economy and it has caused the rise and fall of empires throughout time. How to make money and hold on to it has been the sacred quest of every family leader since the invention of responsibility.
Learning the Market is really learning how to guess what to do in any given circumstance. If you are a Market Professional and have learned how to make money and also that if you don't make the money, no one else will do it for you.In life, making a mistake will always cost something. When in the Market, the mistakes you make will cost you money. But what is life about besides "managing risk"?
So, you keep doing your homework, picking your stocks, buying and selling and watching how the Market people react to news. According to your indicators, the Market is getting negative, so you must get ready for the opportunities that will reveal themselves at the turn. If you have done your homework, you will know what to do. When the time comes, you will take the chance that you are right and buy that stock I've always wanted.
So, let the Universe spin and the Market move and I shall make for myself a glorious ride, the work is not hard when the reward is the thrill of survival.
It is an ongoing part of the cosmic life of all Peoples for we are all influenced by the workings of the World Economy and it has caused the rise and fall of empires throughout time. How to make money and hold on to it has been the sacred quest of every family leader since the invention of responsibility.
Learning the Market is really learning how to guess what to do in any given circumstance. If you are a Market Professional and have learned how to make money and also that if you don't make the money, no one else will do it for you.In life, making a mistake will always cost something. When in the Market, the mistakes you make will cost you money. But what is life about besides "managing risk"?
So, you keep doing your homework, picking your stocks, buying and selling and watching how the Market people react to news. According to your indicators, the Market is getting negative, so you must get ready for the opportunities that will reveal themselves at the turn. If you have done your homework, you will know what to do. When the time comes, you will take the chance that you are right and buy that stock I've always wanted.
So, let the Universe spin and the Market move and I shall make for myself a glorious ride, the work is not hard when the reward is the thrill of survival.
Monday, February 18, 2008
Policies to contract with a downward Market
During a down market many investors assume the next strategy. They transfer their stocks into cash and wait until the market starts to stir up again. They do this in order to defend their capital. Despite the fact that this strategy sounds as a good association on the part of investors, it conceals its risk and might not work for each one.
One of the troubles of cash out is that you not at all recognize for certain that the market is really going down in a steady fashion. The decrease might be a provisional occasion, which might not proceed for an extended time.
Consequently you might finish up selling your stocks to purchase them back when the market corrects itself subsequent to a short period of time. This will result in paying high prices. What you actually have done is selling at prices that were lessening and purchasing back at prices that are going in front.
Doesn't sound financially logical, right?
Problem 2
Still though you were right that the market is suitable bearish, you cannot know for certain when it will get better back to its healthy condition. There might be several false beginnings of recovery previous to the market really starts to right itself.
Preceding reports demonstrate that the first 12 months are the ones throughout which the profits from a down market are experienced. Though you cannot be sure that you will not stop working to see some of these months and as a result lose some of the gains.
We advise inaction during such conditions if you have some time until the money you have locked in stocks is needed. You can do this by transferring a portion of your assets into protective stocks, which offer a certain degree of protection during such conditions.
These industries productively manage to withstand the pessimistic effects of a bear market. Though your investment possibilities are significantly lessened if you will soon need the money you have invested in stocks. Thus, you are facing the bad alternative of selling while the market is down. But you should not be hasty and try to find an investment solution that will provide the needed protection.
If you are near your retirement years you can consider transferring your assets into defensive stocks. The closer you come to retirement the more you should think the transference of assets to fixed income securities. Lastly no matter in what situation you are when the down market hits, try to be a passive observer and wait for the market to correct itself.
One of the troubles of cash out is that you not at all recognize for certain that the market is really going down in a steady fashion. The decrease might be a provisional occasion, which might not proceed for an extended time.
Consequently you might finish up selling your stocks to purchase them back when the market corrects itself subsequent to a short period of time. This will result in paying high prices. What you actually have done is selling at prices that were lessening and purchasing back at prices that are going in front.
Doesn't sound financially logical, right?
Problem 2
Still though you were right that the market is suitable bearish, you cannot know for certain when it will get better back to its healthy condition. There might be several false beginnings of recovery previous to the market really starts to right itself.
Preceding reports demonstrate that the first 12 months are the ones throughout which the profits from a down market are experienced. Though you cannot be sure that you will not stop working to see some of these months and as a result lose some of the gains.
We advise inaction during such conditions if you have some time until the money you have locked in stocks is needed. You can do this by transferring a portion of your assets into protective stocks, which offer a certain degree of protection during such conditions.
These industries productively manage to withstand the pessimistic effects of a bear market. Though your investment possibilities are significantly lessened if you will soon need the money you have invested in stocks. Thus, you are facing the bad alternative of selling while the market is down. But you should not be hasty and try to find an investment solution that will provide the needed protection.
If you are near your retirement years you can consider transferring your assets into defensive stocks. The closer you come to retirement the more you should think the transference of assets to fixed income securities. Lastly no matter in what situation you are when the down market hits, try to be a passive observer and wait for the market to correct itself.
PARSVANATH can give good returns from this stage
“The company is planning to invest up to USD 5-6 billion over 5-7 years to develop its land bank and special economic zones (SEZs). The company is having land bank of 191 million sq. ft. which includes 57 million sq. ft. in six SEZs. The company with strong execution capabilities is expected to move ahead of its peers. The company together with Indiabulls Real Estate has coupled to bid for ten prime location plots, which are offered by Indian Railways for commercial development across various cities. There is about 700 acres of railway land in 107 sites across the country that has been short listed for development. This will provide altogether generate new line of revenues for the company. The stock at the current market price of Rs 270 will trade 11.55 times to its earnings and 2.83 times to its book value and has great upside potential in medium to long - term. Therefore expecting the target price of Rs 482, which is approximately 75% up from the current market price of Rs 270. “.
GMR Infra looking good to buy
"If one look at the whole crackdown that has happened in GMR Infrastructure, one thing which has clearly got established over the last 6 months of data is that Rs 135 seems to be a good support. It’s heartening to see the same scenario happening since the last one month as well. If one is above Rs 135, which I think there is no problem staying invested in that stock. We have been positive and up beat on the stock from a long term outlook."
"If you are looking at a stock for over one year, you would be expecting to even see new life highs in the counter. So definitely even a buy at these levels is justified. From a short-term point of view, you will still take a whole lot more in terms of time to consolidate and getting past Rs 180 is not going to be all that simple for that stocks. So it’s got to be all the patience and for at least a month you will be stuck in the volatility and once the market favors it, this would catch on pretty well."
"If you are looking at a stock for over one year, you would be expecting to even see new life highs in the counter. So definitely even a buy at these levels is justified. From a short-term point of view, you will still take a whole lot more in terms of time to consolidate and getting past Rs 180 is not going to be all that simple for that stocks. So it’s got to be all the patience and for at least a month you will be stuck in the volatility and once the market favors it, this would catch on pretty well."
Thursday, February 14, 2008
Day Trading Signals
With the help of day trading signals, day traders sell all long positions and cover all short positions at the end of a working, trading day. In day trading, you usually finish the day with cash in hand, to avoid holding any risks. One of the benefits of day trading is that since the positions are closed at the end of the trading day, any sudden news of events doesn't affect the opening prices of trading.
In day trading, different shares are bound to undergo different resistance and support levels. As the name indicates, resistance is basically a price level of a stock or perhaps an average that finds it difficult to break through. The support is a price level where the stock or average tends to hold above. The day trading signals are the signals obtained when stocks bounce off of support levels or sometimes even off resistance, if required.
These day trading signals are created watching the moving averages of shares. These moving averages, have trend lines similar to moving averages. A day trading signal depends on the number of times a stock tends to hit a particular trend line. The more faith there is in the trend line, the better it acts as a support for you. The longer the stock stays at a particular level; the better is the day trading signal of support.
The Internet boasts of many websites having bulletins where day trading signals are broadcast the whole day through. With these continuous day trading signals, it makes it rather easy for the day trader to predict how the share market will move. So day trading signals play an integral part in making profits in the share market and in having an interesting day of trading.
Article source: http://ezinearticles.com/?Day-Trading-Signals&id=353339
In day trading, different shares are bound to undergo different resistance and support levels. As the name indicates, resistance is basically a price level of a stock or perhaps an average that finds it difficult to break through. The support is a price level where the stock or average tends to hold above. The day trading signals are the signals obtained when stocks bounce off of support levels or sometimes even off resistance, if required.
These day trading signals are created watching the moving averages of shares. These moving averages, have trend lines similar to moving averages. A day trading signal depends on the number of times a stock tends to hit a particular trend line. The more faith there is in the trend line, the better it acts as a support for you. The longer the stock stays at a particular level; the better is the day trading signal of support.
The Internet boasts of many websites having bulletins where day trading signals are broadcast the whole day through. With these continuous day trading signals, it makes it rather easy for the day trader to predict how the share market will move. So day trading signals play an integral part in making profits in the share market and in having an interesting day of trading.
Article source: http://ezinearticles.com/?Day-Trading-Signals&id=353339
Winning traders are patient !
Patience is necessary, and one cannot reap immediately where one has sown
Timing is everything in trading. Winning traders is always patient .They having the knowledge how to control their desires so as to act positively on trading signals.
In spite of acting on an impulse, they cautiously follow the trading rules. Discipline is the key to successful trading. It is constructive to verify where you stand on this mannerism, and if you're impetuous, developing psychological strategies to compensate for it will allow you to trade profitably.
Depending upon whether you are a day trader, swing trader or longer term trend trader, discounting a delayed reward can be a problem. For a long-term investor, for example, it is necessary to buy-and-hold long enough for one's long term strategy to play out. There may be minor fluctuations during the waiting period, but seasoned investors have learned to wait it out.
Most beginner investors, in comparison, impulsively sell as the masses panic and buy the stock back at a top, which usually results in a losing trade. If you are a long-term investor, it is necessary to be able to control your impulse and strictly follow our BUY/SELL trading signals so as to allow the price to rise over time.
Even shorter-term traders, such as a swing trader, must fight the urge to sell early. Although trades are held for much shorter windows, a swing trader must know how to wait patiently for the optimal time to sell. Selling a winner too early is not going to allow one's account balance to increase exponentially at an ideal rate.
The day trader is at the contradictory end of the continuum. Most day traders feel an overpowering need to take a quick profit as soon as they can get it. To some extent, it may be wise for a person who has trouble patiently waiting for the price of an investment instrument to increase to become a day trader. It is useful to take other steps to work around one's inclination to sell prematurely. Follow the levels we provide in our day trading newsletter to enter and or exit a trade.
It has often been said that looking at one's screen during the trading day is like sitting in front of a slot machine and trying to resist gambling. It's hard. Just as the one armed bandit tempts recreational gamblers, the constant stream of quotes on a computer screen tempt seasoned and novice traders alike to make hasty trading decisions.
It is also useful to objectify the trade. The more you can learn to view the trade objectively, as if you just don't care what happens, the more you'll be able to resist the temptation to close out a trade prematurely. A cold, rational approach to trading, along with our range of profitable trading newsletters, is the best defense against impulsive trading decisions.
Patience is a virtue when attempting to trade profitably. It is useful to remember that humans have a strong, natural tendency to avoid risk and loss at all costs. This tendency often protects us from harm, but there are times when it can compel us to act impulsively.
We are naturally inclined to avoid losses at all costs, even if it means selling a potentially winning trade before it reaches fruition. Unless one can let winners increase in price sufficiently, profits won't balance out losses. The ability to control one's impulses and wait for larger, delayed rewards is vital for long-term survival. It's worth developing this ability.
Timing is everything in trading. Winning traders is always patient .They having the knowledge how to control their desires so as to act positively on trading signals.
In spite of acting on an impulse, they cautiously follow the trading rules. Discipline is the key to successful trading. It is constructive to verify where you stand on this mannerism, and if you're impetuous, developing psychological strategies to compensate for it will allow you to trade profitably.
Depending upon whether you are a day trader, swing trader or longer term trend trader, discounting a delayed reward can be a problem. For a long-term investor, for example, it is necessary to buy-and-hold long enough for one's long term strategy to play out. There may be minor fluctuations during the waiting period, but seasoned investors have learned to wait it out.
Most beginner investors, in comparison, impulsively sell as the masses panic and buy the stock back at a top, which usually results in a losing trade. If you are a long-term investor, it is necessary to be able to control your impulse and strictly follow our BUY/SELL trading signals so as to allow the price to rise over time.
Even shorter-term traders, such as a swing trader, must fight the urge to sell early. Although trades are held for much shorter windows, a swing trader must know how to wait patiently for the optimal time to sell. Selling a winner too early is not going to allow one's account balance to increase exponentially at an ideal rate.
The day trader is at the contradictory end of the continuum. Most day traders feel an overpowering need to take a quick profit as soon as they can get it. To some extent, it may be wise for a person who has trouble patiently waiting for the price of an investment instrument to increase to become a day trader. It is useful to take other steps to work around one's inclination to sell prematurely. Follow the levels we provide in our day trading newsletter to enter and or exit a trade.
It has often been said that looking at one's screen during the trading day is like sitting in front of a slot machine and trying to resist gambling. It's hard. Just as the one armed bandit tempts recreational gamblers, the constant stream of quotes on a computer screen tempt seasoned and novice traders alike to make hasty trading decisions.
It is also useful to objectify the trade. The more you can learn to view the trade objectively, as if you just don't care what happens, the more you'll be able to resist the temptation to close out a trade prematurely. A cold, rational approach to trading, along with our range of profitable trading newsletters, is the best defense against impulsive trading decisions.
Patience is a virtue when attempting to trade profitably. It is useful to remember that humans have a strong, natural tendency to avoid risk and loss at all costs. This tendency often protects us from harm, but there are times when it can compel us to act impulsively.
We are naturally inclined to avoid losses at all costs, even if it means selling a potentially winning trade before it reaches fruition. Unless one can let winners increase in price sufficiently, profits won't balance out losses. The ability to control one's impulses and wait for larger, delayed rewards is vital for long-term survival. It's worth developing this ability.
Wednesday, January 30, 2008
Simplex Infrastructure expecting good growth ahead
Simplex Infrastructure has over the past few years successfully built pre-qualifications for new verticals like roads, ports (marine), urban infrastructure, civil and industrial construction, the company’s growth from a piling and power sector focused construction player to new verticals. Simplex Infrastructure has an order book position of Rs 8,300 crore comprising: building and housing – 26 per cent, roads – 23 per cent, industrial construction – 22 per cent, urban infrastructure – 12 per cent, marine – 10 per cent, and power – 7 per cent. Private sector constitutes 65 per cent of the company’s current order book; short project execution cycle leads to better margins in a continued tight industry scenario; superior return ratios (RoE and RoCE) versus peers; and focus on faster project execution - has one of the largest fleet of equipment. This sites the company looks to a strong growth in future.
Saturday, January 26, 2008
Stock Market Success - Smart Money Moves
The stock market can be a tricky and certainly risky venture to get into. But the opportunity for making large sums of money is incredible alluring and, if you do it right, definitely worth it. Doing the stock market right means doing it safe, by making smart stock market moves. Here's how:
1. Invest small at first. Dabble in the market, don't go full throttle all at once. What separates the beginning winners from the crash and burn losers, are the amount of money they invest. The losers will bet the whole boat in a matter of a few weeks. And then they'll disappear, never to resurface in the stock market again. The smart investors and future winners will be the ones who throw a small amount here, and a small amount there. Testing the waters and never throwing down more than their willing to lose. Once they invest small and begin to win some, and perhaps lose some, then they will have the knowledge to go bigger. And once they have the knowledge to go bigger, the money can really begin to roll in big time.
2. Get a program to do your work and increase efficiency. The old time investors are still in the dark ages when it comes to stock market programs and the efficiency that they can provide. The new, cutting edge investors are utilizing and actually designing programs to make investing faster and much more profitable. They can find several great, highly profitable stocks in half the time it would take the normal person to discover them, all with the help of software or automated robot programs which do the majority of the work. Find a good program to aid in your investing, and your not only looking at higher profits, but higher profits in a very short amount of time.
Source: http://ezinearticles.com/?Stock-Market-Success---Smart-Money-Moves&id=874120
1. Invest small at first. Dabble in the market, don't go full throttle all at once. What separates the beginning winners from the crash and burn losers, are the amount of money they invest. The losers will bet the whole boat in a matter of a few weeks. And then they'll disappear, never to resurface in the stock market again. The smart investors and future winners will be the ones who throw a small amount here, and a small amount there. Testing the waters and never throwing down more than their willing to lose. Once they invest small and begin to win some, and perhaps lose some, then they will have the knowledge to go bigger. And once they have the knowledge to go bigger, the money can really begin to roll in big time.
2. Get a program to do your work and increase efficiency. The old time investors are still in the dark ages when it comes to stock market programs and the efficiency that they can provide. The new, cutting edge investors are utilizing and actually designing programs to make investing faster and much more profitable. They can find several great, highly profitable stocks in half the time it would take the normal person to discover them, all with the help of software or automated robot programs which do the majority of the work. Find a good program to aid in your investing, and your not only looking at higher profits, but higher profits in a very short amount of time.
Source: http://ezinearticles.com/?Stock-Market-Success---Smart-Money-Moves&id=874120
Friday, January 25, 2008
Sesa Goa positioned to ride
"Sesa Goa is India’s largest private iron-ore miner and exporter. The company is well positioned to ride the current boom in the iron-ore market on the back of an output of approx 10mtpa, which it is planning to increase to 15mtpa over the next three years. Further, Sesa Goa is mulling increasing its spot sales to 50% by approx CY10E from 24% at present, given that the current differential between the spot and the contract markets is more than 100%. The company has access to resource & reserves of approx 207mnte (i.e. 20 years of mining life) of iron ore. At Rs 2,618/share, Sesa Goa is currently trading at FY09E and FY10E P/E and EV/EBITDA of 7.9x & 6.9x and 4.4x & 3.3x respectively. Initiate BUY with a target price of Rs 3,990/share,"
Wednesday, January 23, 2008
Stock Investing Instruction Stock Market in Young Age
“An investment in knowledge always pays the best interest”
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.
On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.
On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
Stock Market Crash
What Really occur When The Stock Market Crashes?
The market is known as a bull market, when the market hit the highest point and investors are buying and making profits, then. However, as many economists point out, bad times always follows the strong economic times. Whenever the stock market pitch s high and profits are good, economic recession eventually happens.
Sometimes, stock markets crash because of a specific economic or political situation. What we say that a market crashes, what we mean is that the value of stocks drops spectacularly across the board. Somewhat than just one corporation being affected, the stocks of many or all corporations fall noticeably. This, in turn, causes investor panic and many people rush to sell their stocks. The more people try to sell their stocks lower stock value falls, making the problem worse
Who Is Involved In A Stock Market Crash?
Many people are involved in a stock market slump. Involvement is of, shareholders or those who own stocks who are most involved. In many cases, it is investors themselves can add to a crash. Investors may borrow money to buy stocks or may invest in stocks without thoroughly understanding the stock market. Investors who are undisciplined and who do not understand the market may be among the first panic and try to sell their stock, pushing a temporary downturn into an actual crash.
More significantly, however, investors are often part of assumption. This means that they buy stock in the hopes that it will increase in profit. When some sort of economic news seems to suggest that they will lose money, again, they often rush to sell their stock, driving stock prices down. Companies selling stock are also involved in the stock market crash. As their stock values drop, many companies will tightly curled and reduce spending. Often, this can lead to job cuts and other types of decrease which can affect the economy overall and can reduce customer and investor confidence.
Investments and finance professionals also involved in a crash. They are the ones that not only report the incidents to the media and explain it to reporters, but they are also the ones that people frequently consult when their stocks fall.
Who Exactly Affected By A Crash?
In short, everyone is affected by a crash. When the stock market takes a downturn, job loss, slow (Gross Domestic Product) GDP growth, slow economic growth, and overwhelmed consumer confidence are often the results. Investors and companies are making less money, companies are closing, and therefore people are buying less. This affects virtually every aspect of the economy and causes overall economic depression. Since the crash often follows a bull market, many people are panicked by the sudden economic downturn and may become even more cautious with their money, which can further hinder financial growth.
The market is known as a bull market, when the market hit the highest point and investors are buying and making profits, then. However, as many economists point out, bad times always follows the strong economic times. Whenever the stock market pitch s high and profits are good, economic recession eventually happens.
Sometimes, stock markets crash because of a specific economic or political situation. What we say that a market crashes, what we mean is that the value of stocks drops spectacularly across the board. Somewhat than just one corporation being affected, the stocks of many or all corporations fall noticeably. This, in turn, causes investor panic and many people rush to sell their stocks. The more people try to sell their stocks lower stock value falls, making the problem worse
Who Is Involved In A Stock Market Crash?
Many people are involved in a stock market slump. Involvement is of, shareholders or those who own stocks who are most involved. In many cases, it is investors themselves can add to a crash. Investors may borrow money to buy stocks or may invest in stocks without thoroughly understanding the stock market. Investors who are undisciplined and who do not understand the market may be among the first panic and try to sell their stock, pushing a temporary downturn into an actual crash.
More significantly, however, investors are often part of assumption. This means that they buy stock in the hopes that it will increase in profit. When some sort of economic news seems to suggest that they will lose money, again, they often rush to sell their stock, driving stock prices down. Companies selling stock are also involved in the stock market crash. As their stock values drop, many companies will tightly curled and reduce spending. Often, this can lead to job cuts and other types of decrease which can affect the economy overall and can reduce customer and investor confidence.
Investments and finance professionals also involved in a crash. They are the ones that not only report the incidents to the media and explain it to reporters, but they are also the ones that people frequently consult when their stocks fall.
Who Exactly Affected By A Crash?
In short, everyone is affected by a crash. When the stock market takes a downturn, job loss, slow (Gross Domestic Product) GDP growth, slow economic growth, and overwhelmed consumer confidence are often the results. Investors and companies are making less money, companies are closing, and therefore people are buying less. This affects virtually every aspect of the economy and causes overall economic depression. Since the crash often follows a bull market, many people are panicked by the sudden economic downturn and may become even more cautious with their money, which can further hinder financial growth.
Stock Investing Instruction Stock Market in Young Age
“An investment in knowledge always pays the best interest”
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
Sunday, January 20, 2008
The Effect The Current Subprime Loan Crisis Has On Global Markets
Submitted By: Ricky Schmidt
Dear Fellow-Investor.
"Why is it, that this subprime loan crisis has such a rippling effect on many sectors of the economy?"
"Why are even companies outside the USA also affected by the U.S. mortgage crisis?"
In the last 7 days I received lots of emails from my subscribers asking me questions like these, and I'd like to take the opportunity to explain what this housing, mortgage,subprime loan, credit crisis - whatever you want to call it - and the present situation is all about.
Between 2002 and 2004 the interest rates in the United States were as low as never before. At least as far as I can remember. I'm not that old yet! The effect of such low interest rates was a real-estate boom in the U.S. often financed with so-called subprime loans. These are loans given to borrowers who do not qualify for the best market interest rates because of their deficient credit history.
Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself.
But banks didn't worry too much about this because interest rates were low and simultaneously, real-estate prices were rising continuously in the 90's.
So back in 2002/2004, anyone that could count to 3 was given a loan. Many people in America were suddenly able to afford expensive single family homes and other kind of real-estate that they couldn't before.
But in 2006 the U.S. interest rates had tripled and now, especially the subprime borrowers couldn't pay their monthly installments anymore. So more and more of these subprime loans started to crumble.
But that's not all. Some banks and other financial institutionals converted millions of these subprime loans into bonds. These were then sold for billions of dollars to banks, insurance companies and mutual funds that assumed this to be a secure investment because bonds usually are. That's why they're also considered a safe haven in stormy times.
And not only were these bonds sold to U.S. institutionals, but International ones too. You see, in a nutshell, everyone invests everywhere. America invests in Europe, and Europe invests in America, etc, etc.!
So you can imagine what happened when these loans started to crumble and the practice of converting them into bonds backfired. It all swept over the borders of America into other countries as well. The German industrial bank IKB invested 13 billion dollars in these bonds and now they are looking at a $5 billion loss.
For years this subprime game turned out all right and gigantic amounts of cash were invested into real-estate in Florida, Delaware or Texas by U.S. and international equity markets. No one thought that so many borrowers would go broke at the same time.
According to the U.S.Federal Reserve, loans of up to 100 billion dollars could bounce. At the same time, this seems to just be a drop in the ocean considering the effect it could have on international capital markets.
These bad loans could be the biggest single risk for the global economy. In the past, many in America spent their money stout-heartedly thus, stimulating and cranking up the economy. Their houses became worth more and more and banks literally threw loans at customers with low interest rates.
This could all backfire now putting a lot of pressure on the U.S. economy, because the money that was spent so generously is now being held back. Also because borrowers that are now up to their ears in financial troubles can't spent anymore money because there simply is none left to spend. This, in turn, takes a lot of liquidity out of the markets.
Also companies and corporations that have nothing to do with the current real-estate turmoil are drawn into the subprime crisis. If they want new capital from banks, they have to pay higher interest rates as an additional premium for risk. Or, taking things into extremes, they won't get a loan at all making it difficult for companies to grow, especially if a company wants to merge with another which often costs billion of dollars. This all drops out now thus, reducing earnings and profit outlooks.
And there's another, equally bad effect on all companies. whether attached to any real-estate or not. Hedge funds bought these converted mortgage bonds by the millions and very often using margins i.e. buying on borrowed money. And now they are sitting on a huge heap of losses and debt. In order to pay back those debts they have to sell stocks, commodities and other equity. And this obviously pushes prices down. Also stock prices. It's like a chain reaction.
And that's basically the reason why the markets around the world are in such shambles right now.
Back at the trading floor, for Bullish trading the best hope for continued long trading is in turnarounds and bounce backs. Rather than hold your breath and open new long trades why not take the Bearish pat and trade puts or stand on the side lines for a time?
Is my trading bias still Bullish? In the short-term no. In the mid and long-term, yes. So I'm definitely not opening any new long trades right now. But in the future, we'll be looking at plenty long trade opportunities. That's the good side of it all!
Yours in Successful Trading,
Ricky Schmidt
Dear Fellow-Investor.
"Why is it, that this subprime loan crisis has such a rippling effect on many sectors of the economy?"
"Why are even companies outside the USA also affected by the U.S. mortgage crisis?"
In the last 7 days I received lots of emails from my subscribers asking me questions like these, and I'd like to take the opportunity to explain what this housing, mortgage,subprime loan, credit crisis - whatever you want to call it - and the present situation is all about.
Between 2002 and 2004 the interest rates in the United States were as low as never before. At least as far as I can remember. I'm not that old yet! The effect of such low interest rates was a real-estate boom in the U.S. often financed with so-called subprime loans. These are loans given to borrowers who do not qualify for the best market interest rates because of their deficient credit history.
Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself.
But banks didn't worry too much about this because interest rates were low and simultaneously, real-estate prices were rising continuously in the 90's.
So back in 2002/2004, anyone that could count to 3 was given a loan. Many people in America were suddenly able to afford expensive single family homes and other kind of real-estate that they couldn't before.
But in 2006 the U.S. interest rates had tripled and now, especially the subprime borrowers couldn't pay their monthly installments anymore. So more and more of these subprime loans started to crumble.
But that's not all. Some banks and other financial institutionals converted millions of these subprime loans into bonds. These were then sold for billions of dollars to banks, insurance companies and mutual funds that assumed this to be a secure investment because bonds usually are. That's why they're also considered a safe haven in stormy times.
And not only were these bonds sold to U.S. institutionals, but International ones too. You see, in a nutshell, everyone invests everywhere. America invests in Europe, and Europe invests in America, etc, etc.!
So you can imagine what happened when these loans started to crumble and the practice of converting them into bonds backfired. It all swept over the borders of America into other countries as well. The German industrial bank IKB invested 13 billion dollars in these bonds and now they are looking at a $5 billion loss.
For years this subprime game turned out all right and gigantic amounts of cash were invested into real-estate in Florida, Delaware or Texas by U.S. and international equity markets. No one thought that so many borrowers would go broke at the same time.
According to the U.S.Federal Reserve, loans of up to 100 billion dollars could bounce. At the same time, this seems to just be a drop in the ocean considering the effect it could have on international capital markets.
These bad loans could be the biggest single risk for the global economy. In the past, many in America spent their money stout-heartedly thus, stimulating and cranking up the economy. Their houses became worth more and more and banks literally threw loans at customers with low interest rates.
This could all backfire now putting a lot of pressure on the U.S. economy, because the money that was spent so generously is now being held back. Also because borrowers that are now up to their ears in financial troubles can't spent anymore money because there simply is none left to spend. This, in turn, takes a lot of liquidity out of the markets.
Also companies and corporations that have nothing to do with the current real-estate turmoil are drawn into the subprime crisis. If they want new capital from banks, they have to pay higher interest rates as an additional premium for risk. Or, taking things into extremes, they won't get a loan at all making it difficult for companies to grow, especially if a company wants to merge with another which often costs billion of dollars. This all drops out now thus, reducing earnings and profit outlooks.
And there's another, equally bad effect on all companies. whether attached to any real-estate or not. Hedge funds bought these converted mortgage bonds by the millions and very often using margins i.e. buying on borrowed money. And now they are sitting on a huge heap of losses and debt. In order to pay back those debts they have to sell stocks, commodities and other equity. And this obviously pushes prices down. Also stock prices. It's like a chain reaction.
And that's basically the reason why the markets around the world are in such shambles right now.
Back at the trading floor, for Bullish trading the best hope for continued long trading is in turnarounds and bounce backs. Rather than hold your breath and open new long trades why not take the Bearish pat and trade puts or stand on the side lines for a time?
Is my trading bias still Bullish? In the short-term no. In the mid and long-term, yes. So I'm definitely not opening any new long trades right now. But in the future, we'll be looking at plenty long trade opportunities. That's the good side of it all!
Yours in Successful Trading,
Ricky Schmidt
Traders worst enemy "Emotional trading"
Schwager wrote: "In our experience, investors are truly their own worst enemies. The natural instincts of many lead them to do precisely the wrong thing at the wrong time--with uncanny persistence…
Proletarian can feel high with the trading or investing excitement. At the short interval of time nobody can get high and make money. Voracity and panic are bound to destroy any trader or investor. Instead of trading on gut feeling, one needs to use their intelligence. Road to untold riches can be open by conquering our emotions of fear and greed.
It’s a human’s natural inclination to follow the crowd. But when it comes of trading, following the crowd can often be make extreme effects. The shrewd trader knows how to look forward to the trend and they also makes sure that he or she sells before the style reverses, and the masses start selling
To become victorious, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior. In the markets, it is sometimes useful to be conventional. For example, for long term investing, it is wise to put your money in stocks that don't have a great deal of instability and by all indications, have solid fundamentals that will push the stock up consistently for several years. If a large enough crowds believes strongly that the company will produce profits for decades, it would be to your advantage to follow them, if you want a safe investment.
Even though following the crowd isn't bad all the time, there are times when a trader should not follow the crowd. Traders are looking for instability and a good chance for making a big profit. Most of the time that means going your own way. It requires that one think like contrarians, where you are trying to guess what the crowd will do next and trying to capitalize on it. The key is to know when to follow the crowd and when to go against it. The crowd is usually right, until a turning point occurs. When virtually everyone has taken the position that the market is headed in a particular direction, there are almost no traders left to push the trend further. At that point, a countertrend initiates and moves the market in the opposite direction.
The challenge is predicting when that turning point will occur, anticipating it, and developing a trading plan to capitalize on it. Now, this all sounds easy in theory, but in practice, it is difficult to implement a trading strategy to capitalize on this cycle. How can one predict the turning point? Some say it is almost impossible. All you can do is develop a sound method that works most of the time but also admit that it may fail. Whether you use technical indicators or you are lucky enough to use the media news to your advantage, you must temporarily believe in your method, put money on the line, and work under the assumption that overall, luck will be in your favor should you make enough trades.
Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others. One must creatively study the markets and try to devise an innovative trading plan. It takes a great deal of experience and thought, but by using the proper perspective, gaining extensive experience, and honing your trading skills, you can break away from the masses, and trade consistently and profitably.
The human body and mind operate much like a machine in that they need preventative maintenance. Just as you wouldn't drive a car without routinely changing the oil or checking the tire pressure, you shouldn't over-stress your mind or body without taking a rest so as to allow yourself to rejuvenate. Trading is a stressful business. Traders continually must cope with uncertainty and endless setbacks, and these factors tax the mind and body to the point that they can no longer function efficiently. Make sure you do preventive psychological maintenance so that you can always trade in a peak performance state.
Trading is intrinsically motivating. It's fun and exciting, but any activity can become boring and tedious if you have to do it over and over again, and do it quickly and under pressure. Trading is fun when you first start, and if you trade as a hobby, but the professional winning trader must persist under less than ideal conditions. Many times a trader must make trade after trade to allow the law of averages to work in his or her favor. The search for winning trading strategies is endless and a challenge. Even the most passionate trader eventually finds trading stressful and tedious. The long-term ramifications of a tedious and anxiety provoking profession can be severe. The mind and body have limited resources, and when these resources are depleted, one cannot continue to function efficiently. Eventually, one needs to take a rest and allow mental and physical abilities to recuperate.
In the long term, it is vital that you take vacations from trading. If you trade month after month without a break, you'll get burned out, and the activity you are passionate about will turn into something that you hate. By taking a vacation, you'll not only get some important rest and relaxation, but you will get a new perspective. You'll see trading in a new light and remember why you like trading so much. When you return, you'll trade with renewed vigor and that will help you trade efficiently over the long haul.
Winning traders execute and monitor their trades while in a peak performance mindset, a mindset where one is calm, logical, and determined. When you are stressed out and worn out, however, you can't cultivate this mindset. It is vital to take rests so that your mind and body can rejuvenate. By doing preventative maintenance, you can trade with a mindset that ensures consistent profitability.
Proletarian can feel high with the trading or investing excitement. At the short interval of time nobody can get high and make money. Voracity and panic are bound to destroy any trader or investor. Instead of trading on gut feeling, one needs to use their intelligence. Road to untold riches can be open by conquering our emotions of fear and greed.
It’s a human’s natural inclination to follow the crowd. But when it comes of trading, following the crowd can often be make extreme effects. The shrewd trader knows how to look forward to the trend and they also makes sure that he or she sells before the style reverses, and the masses start selling
To become victorious, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior. In the markets, it is sometimes useful to be conventional. For example, for long term investing, it is wise to put your money in stocks that don't have a great deal of instability and by all indications, have solid fundamentals that will push the stock up consistently for several years. If a large enough crowds believes strongly that the company will produce profits for decades, it would be to your advantage to follow them, if you want a safe investment.
Even though following the crowd isn't bad all the time, there are times when a trader should not follow the crowd. Traders are looking for instability and a good chance for making a big profit. Most of the time that means going your own way. It requires that one think like contrarians, where you are trying to guess what the crowd will do next and trying to capitalize on it. The key is to know when to follow the crowd and when to go against it. The crowd is usually right, until a turning point occurs. When virtually everyone has taken the position that the market is headed in a particular direction, there are almost no traders left to push the trend further. At that point, a countertrend initiates and moves the market in the opposite direction.
The challenge is predicting when that turning point will occur, anticipating it, and developing a trading plan to capitalize on it. Now, this all sounds easy in theory, but in practice, it is difficult to implement a trading strategy to capitalize on this cycle. How can one predict the turning point? Some say it is almost impossible. All you can do is develop a sound method that works most of the time but also admit that it may fail. Whether you use technical indicators or you are lucky enough to use the media news to your advantage, you must temporarily believe in your method, put money on the line, and work under the assumption that overall, luck will be in your favor should you make enough trades.
Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others. One must creatively study the markets and try to devise an innovative trading plan. It takes a great deal of experience and thought, but by using the proper perspective, gaining extensive experience, and honing your trading skills, you can break away from the masses, and trade consistently and profitably.
The human body and mind operate much like a machine in that they need preventative maintenance. Just as you wouldn't drive a car without routinely changing the oil or checking the tire pressure, you shouldn't over-stress your mind or body without taking a rest so as to allow yourself to rejuvenate. Trading is a stressful business. Traders continually must cope with uncertainty and endless setbacks, and these factors tax the mind and body to the point that they can no longer function efficiently. Make sure you do preventive psychological maintenance so that you can always trade in a peak performance state.
Trading is intrinsically motivating. It's fun and exciting, but any activity can become boring and tedious if you have to do it over and over again, and do it quickly and under pressure. Trading is fun when you first start, and if you trade as a hobby, but the professional winning trader must persist under less than ideal conditions. Many times a trader must make trade after trade to allow the law of averages to work in his or her favor. The search for winning trading strategies is endless and a challenge. Even the most passionate trader eventually finds trading stressful and tedious. The long-term ramifications of a tedious and anxiety provoking profession can be severe. The mind and body have limited resources, and when these resources are depleted, one cannot continue to function efficiently. Eventually, one needs to take a rest and allow mental and physical abilities to recuperate.
In the long term, it is vital that you take vacations from trading. If you trade month after month without a break, you'll get burned out, and the activity you are passionate about will turn into something that you hate. By taking a vacation, you'll not only get some important rest and relaxation, but you will get a new perspective. You'll see trading in a new light and remember why you like trading so much. When you return, you'll trade with renewed vigor and that will help you trade efficiently over the long haul.
Winning traders execute and monitor their trades while in a peak performance mindset, a mindset where one is calm, logical, and determined. When you are stressed out and worn out, however, you can't cultivate this mindset. It is vital to take rests so that your mind and body can rejuvenate. By doing preventative maintenance, you can trade with a mindset that ensures consistent profitability.
Short-term Trading Papularity, Principles, Capital Allocation, Profit booking
There are primarily three types of traders/investors in the stock market:
Investors: Those who expect minimum 30-40% appreciation and are willing to hold between two months to a few years. They enter only long positions and usually select a scrip based on fundamental analysis. Medium-long term investors can utilise technical analysis to time their entry and profit booking better.
Day traders: Day traders enter long/short trades to square up the same day. They usually base decisions on technicals, information or at times, gut feel.
Short-term traders: Short-term traders expect 5-20% returns within 2 days to 3 weeks. They enter long as well as short positions. These include:
1. Position trading, where one either buys a stock and holds for the required appreciation, or sells from an existing long (or borrowed) position to cover at a lower level.
2. Futures & options trading
The popularity of Short-term trading, is on the rise due to the following reasons:
It provides an opportunity to make substantial profits in a short period and ensures continuous rotation of capital.
As against long-term investment, short-term trading has limited downside because of strict stoplosses.
Short-term trading has less demand on the traders time, while day trading requires full-time attention at the terminal. Hence, even those who pursue other professions can do short-term trading.
One can leverage on margin in case of short-term trading in futures.
Short-term trading in options requires smaller investment and has limited risk.
Like every discipline, short-term trading also has its Dos and Donts. These are not well understood by all. This article outlines these rules, which would make short-term trading a relatively safe and satisfying experience.
Basic Principles of Short-term Trading: The first principle is to do few trades. At any point, one should not have more than 6 trades outstanding. A good number is 3-5.
Equal capital allocation: Divide your short term trading capital equally into each trade. Ideally if one has Rs 1 lac of capital, one should put around Rs 20,000 in each trade.
Clear Targets and profit booking: While entering a trade, one should be clear about the target price he expects to achieve. Once the target is reached, profits should be booked promptly. Here, some traders often fall to the greed-syndrome and hold on for more profits. This, more often than not, leads to losses in the long run.
Strict stoplosses: No strategy, however good, can ensure 100% success. A strategy that yields above 65% success rate is reasonably good.
But there is a catch here! 65% success means you achieve your targets in 2 out of every 3 trades. But how much do you lose in the third? This is what determines your overall profitability.
The following example illustrates this: Suppose one invests Rs 10,000 in each of the 3 trades. The 2 successful trades fetch a profit of RS 1000 (RS 500 each) at 5%. Now, if the stoploss on the third unprofitable trade were also around 5% (including brokerage), he would lose RS 500 on it. Thus, his net profit across the 3 trades is RS 1000 RS 500 = RS 500. This is around 1.67% net return on the total capital of RS 30000. And considering that this is short term trading, the average holding period may be a fortnight. Therefore, the annualised return would still amount to 1.67% x 26 (26 fortnights in a year) = 43% per annum. Not a mean achievement by any standards.
But in the same example, if the trader does not have a stoploss, he continues to hold the loss-making trade. Finally, when he realises that he is in an irretrievable situation, he squares up the trade at say 15% loss. (In my experience, this is what happens to many traders when market suddenly turns bearish). In this case, he makes RS 1500 loss on this trade, which eats the RS 1000 profit he has made in the other two. Thus, he ends up with a net loss of RS 500 (-1.67%) on his 3 trades. At this rate, he would wipe out his entire capital in 2.5 years.
That should forever, put to rest the doubt whether stoplosses are needed in short-term (or for that matter in any type of) trading! Trading is like a war, you need to lose small battles to see another day and eventually win the war!
Dont "buy time": Often traders mix up various types of trading. For example, a trader entering a day trade carries his position overnight if the trade turns against him. Or, a short-term trader does not exit at a stoploss and converts it to a long-term investment. He hopes some day it will fetch him profit. These traders are just "buying time". Unfortunately, this works as rarely as you would find refrigerator in an igloo. Stick to your trading style and importantly; dont convert trades from one type to another.
Track your performance: A trader should monitor performance on every trade, as well as, across all trades. Remember, if trading is your business, run it like a business. Rigorously perform the forecasting, planning and monitoring that goes into it.
In a nutshell
Short-term trading has its advantages when compared with day-trading and long-term investment. It is suited for both full-time and part-time traders. When performed in accordance with the basic principles, it can be an engrossing and potentially lucrative activity/profession
Investors: Those who expect minimum 30-40% appreciation and are willing to hold between two months to a few years. They enter only long positions and usually select a scrip based on fundamental analysis. Medium-long term investors can utilise technical analysis to time their entry and profit booking better.
Day traders: Day traders enter long/short trades to square up the same day. They usually base decisions on technicals, information or at times, gut feel.
Short-term traders: Short-term traders expect 5-20% returns within 2 days to 3 weeks. They enter long as well as short positions. These include:
1. Position trading, where one either buys a stock and holds for the required appreciation, or sells from an existing long (or borrowed) position to cover at a lower level.
2. Futures & options trading
The popularity of Short-term trading, is on the rise due to the following reasons:
It provides an opportunity to make substantial profits in a short period and ensures continuous rotation of capital.
As against long-term investment, short-term trading has limited downside because of strict stoplosses.
Short-term trading has less demand on the traders time, while day trading requires full-time attention at the terminal. Hence, even those who pursue other professions can do short-term trading.
One can leverage on margin in case of short-term trading in futures.
Short-term trading in options requires smaller investment and has limited risk.
Like every discipline, short-term trading also has its Dos and Donts. These are not well understood by all. This article outlines these rules, which would make short-term trading a relatively safe and satisfying experience.
Basic Principles of Short-term Trading: The first principle is to do few trades. At any point, one should not have more than 6 trades outstanding. A good number is 3-5.
Equal capital allocation: Divide your short term trading capital equally into each trade. Ideally if one has Rs 1 lac of capital, one should put around Rs 20,000 in each trade.
Clear Targets and profit booking: While entering a trade, one should be clear about the target price he expects to achieve. Once the target is reached, profits should be booked promptly. Here, some traders often fall to the greed-syndrome and hold on for more profits. This, more often than not, leads to losses in the long run.
Strict stoplosses: No strategy, however good, can ensure 100% success. A strategy that yields above 65% success rate is reasonably good.
But there is a catch here! 65% success means you achieve your targets in 2 out of every 3 trades. But how much do you lose in the third? This is what determines your overall profitability.
The following example illustrates this: Suppose one invests Rs 10,000 in each of the 3 trades. The 2 successful trades fetch a profit of RS 1000 (RS 500 each) at 5%. Now, if the stoploss on the third unprofitable trade were also around 5% (including brokerage), he would lose RS 500 on it. Thus, his net profit across the 3 trades is RS 1000 RS 500 = RS 500. This is around 1.67% net return on the total capital of RS 30000. And considering that this is short term trading, the average holding period may be a fortnight. Therefore, the annualised return would still amount to 1.67% x 26 (26 fortnights in a year) = 43% per annum. Not a mean achievement by any standards.
But in the same example, if the trader does not have a stoploss, he continues to hold the loss-making trade. Finally, when he realises that he is in an irretrievable situation, he squares up the trade at say 15% loss. (In my experience, this is what happens to many traders when market suddenly turns bearish). In this case, he makes RS 1500 loss on this trade, which eats the RS 1000 profit he has made in the other two. Thus, he ends up with a net loss of RS 500 (-1.67%) on his 3 trades. At this rate, he would wipe out his entire capital in 2.5 years.
That should forever, put to rest the doubt whether stoplosses are needed in short-term (or for that matter in any type of) trading! Trading is like a war, you need to lose small battles to see another day and eventually win the war!
Dont "buy time": Often traders mix up various types of trading. For example, a trader entering a day trade carries his position overnight if the trade turns against him. Or, a short-term trader does not exit at a stoploss and converts it to a long-term investment. He hopes some day it will fetch him profit. These traders are just "buying time". Unfortunately, this works as rarely as you would find refrigerator in an igloo. Stick to your trading style and importantly; dont convert trades from one type to another.
Track your performance: A trader should monitor performance on every trade, as well as, across all trades. Remember, if trading is your business, run it like a business. Rigorously perform the forecasting, planning and monitoring that goes into it.
In a nutshell
Short-term trading has its advantages when compared with day-trading and long-term investment. It is suited for both full-time and part-time traders. When performed in accordance with the basic principles, it can be an engrossing and potentially lucrative activity/profession
Thursday, January 17, 2008
Sub-Prime Effect and Emerging Markets
What is Sub-prime?
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it. One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it. One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Wednesday, January 16, 2008
Larsen & Toubro expecting strong growth by earnings and orderbook
I put overweight rating and a 12-month price target of Rs 5,010 citing expectation of strong earnings and order book growth. “Expecting an earnings CAGR (compounded annual growth rate) of 45% over FY07-10 and ROE (return on equity) of 31% in FY08E (adjusted for investments in subsidiaries),” the investment bank said. Expects the company’s order book to grow 40%, on a compounded basis, toll 2009-10. “Expect L&T Infotech, L&T Finance and certain manufacturing subsidiaries to record growth in excess of 30% over the next three years. Value discovery in some of the subsidiaries is a strong possibility over the next three years, in a view.”
Tuesday, January 15, 2008
Jaiprakash Associates expansions more promissive in long term
Jaiprakash is expanding its capacity by 15MMT over the next 3 years at the end of which it will emerge as one of the largest cement players in north india with a capacity of 22MMT. The company is the largest private sector hydropower player and is currently sitting on a huge construction order book of Rs.7,200 crore. Taking cognisance of the government's target of achieving 50,000 MW in hydropower electricity by 2012, expecting order book to maintain its current momentum. The taj express way project coupled with the company's real estate business (taj green) will add value to the company's shareholders. This makes clear picture about companies future. Buy this stock in every dip to make higher returns in medium to long term.
Monday, January 14, 2008
reliance communication looks for a big move by a big order
Reliance Communications has floated an order for 80 million to 100 million lines for GSM mobile services. The company recently received spectrum from the government to launch GSM services in 14 service areas under a controversial new cross-over technology policy. The company’s shares are likely to witness some action on the news.
Sunday, January 13, 2008
Locating a wealth creator
The first rule to investing is ‘Don’t lose money’. The second rule to investing is ‘Don’t forget rule no. 1’! It is essential to stick to these rules when it comes to investing, in order to avoid the possibility of capital erosion.
To apply these rules successfully and to create wealth through equity investing, Raamdeo Agrawal, Director & Co-founder, Motilal Oswal Financial Services identifies five parameters that you must evaluate. They are:
1. Assess the entry barriers created by a company Entry barrier should be preferably intellectual in character
Remember, a stock is nothing but a stake in the company’s business. So, observe the company’s business and the entry barriers created by it. The entry barrier should be more ‘intellectual’ in character rather than ‘physical’. This is because while it is next to impossible to compete with a strong brand (an intellectual barrier), competitive advantage associated with a piece of land (a physical barrier) disappears when a competitor acquires one as well.
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-à-vis its competitors for long time to come.
Entry barrier should be long-lasting
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-à-vis its competitors but its strong brand continuously earns money for it.
Buy into such companies at the earliest
As an investor, buy into such businesses ahead of the crowd. If an entry barrier has been established very recently, it may not yet be exploited by the business. Accordingly, the market would not have valued it in the company’s share price.
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential delivers best appreciation. “Though difficult to practice think ahead of the crowd”.
2. Management should be competent and passionate
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential. “The definition of a great company is one that will remain great for many years”.
3. Management should have integrity
Integrity is the most crucial quality that a company’s management must have. Such companies not only run their businesses in an honest manner, but, are honest to all their stakeholders, whether they are employees, the government or the shareholders.
If honesty is part of a company’s DNA, it will be fair to its smallest stakeholders – the minority retail shareholders. Companies such as Tata and Infosys have this quality, which has added to their growth and market attractiveness immensely. “Without management integrity, no margin of safety can be high enough”. The above-mentioned three characteristics (long lasting intellectual entry barrier, competent and passionate management and integrity) must all be simultaneously present in a company that you choose to invest in.
4. buy low
The price that you pay for a stock determines your rate of return. So, it is essential that you get your purchase price right. While some companies come out on top with respect to all the first three parameters, the returns falter when it comes to the purchase price.
For instance, HLL comes on top with respect to all the first three parameters but has not delivered as much as far as its stock goes. Its stock delivered a CAGR of approximately just 3 per cent over the last 5 years, when the market delivered a CAGR of approximately 44 per cent over the same period.
The quote - “In the bible it is said that love takes care of a lot of sins. In investments, purchase price takes care of a lot of mistakes” – is very apt. You can make mistakes on assessing the first three parameters, since they are subjective in nature, but getting the right purchase price covers up for all your mistakes. Hence, estimate the expected value / intrinsic value of the company and keep an adequate margin of safety in the purchase price. “It is much more important to buy cheap than to sell dear”.
5. Have Ptience
When you buy a house you don’t expect it to appreciate overnight. You look at its appreciation over a long period. The same goes with equity. After having bought a company that conforms to all the above four criteria, you need to have patience. Investing in equities is often driven by two emotions – greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It’s like a fertiliser to the investment process. “In reality, patience is crucial, but it is a rare commodity”.
End Note
Investing is laying out today’s money for more in the future. Its about performance of the underlying assets. Success in investing is the outcome of a disciplined approach.
Happy Investing.
To apply these rules successfully and to create wealth through equity investing, Raamdeo Agrawal, Director & Co-founder, Motilal Oswal Financial Services identifies five parameters that you must evaluate. They are:
1. Assess the entry barriers created by a company Entry barrier should be preferably intellectual in character
Remember, a stock is nothing but a stake in the company’s business. So, observe the company’s business and the entry barriers created by it. The entry barrier should be more ‘intellectual’ in character rather than ‘physical’. This is because while it is next to impossible to compete with a strong brand (an intellectual barrier), competitive advantage associated with a piece of land (a physical barrier) disappears when a competitor acquires one as well.
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-à-vis its competitors for long time to come.
Entry barrier should be long-lasting
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-à-vis its competitors but its strong brand continuously earns money for it.
Buy into such companies at the earliest
As an investor, buy into such businesses ahead of the crowd. If an entry barrier has been established very recently, it may not yet be exploited by the business. Accordingly, the market would not have valued it in the company’s share price.
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential delivers best appreciation. “Though difficult to practice think ahead of the crowd”.
2. Management should be competent and passionate
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential. “The definition of a great company is one that will remain great for many years”.
3. Management should have integrity
Integrity is the most crucial quality that a company’s management must have. Such companies not only run their businesses in an honest manner, but, are honest to all their stakeholders, whether they are employees, the government or the shareholders.
If honesty is part of a company’s DNA, it will be fair to its smallest stakeholders – the minority retail shareholders. Companies such as Tata and Infosys have this quality, which has added to their growth and market attractiveness immensely. “Without management integrity, no margin of safety can be high enough”. The above-mentioned three characteristics (long lasting intellectual entry barrier, competent and passionate management and integrity) must all be simultaneously present in a company that you choose to invest in.
4. buy low
The price that you pay for a stock determines your rate of return. So, it is essential that you get your purchase price right. While some companies come out on top with respect to all the first three parameters, the returns falter when it comes to the purchase price.
For instance, HLL comes on top with respect to all the first three parameters but has not delivered as much as far as its stock goes. Its stock delivered a CAGR of approximately just 3 per cent over the last 5 years, when the market delivered a CAGR of approximately 44 per cent over the same period.
The quote - “In the bible it is said that love takes care of a lot of sins. In investments, purchase price takes care of a lot of mistakes” – is very apt. You can make mistakes on assessing the first three parameters, since they are subjective in nature, but getting the right purchase price covers up for all your mistakes. Hence, estimate the expected value / intrinsic value of the company and keep an adequate margin of safety in the purchase price. “It is much more important to buy cheap than to sell dear”.
5. Have Ptience
When you buy a house you don’t expect it to appreciate overnight. You look at its appreciation over a long period. The same goes with equity. After having bought a company that conforms to all the above four criteria, you need to have patience. Investing in equities is often driven by two emotions – greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It’s like a fertiliser to the investment process. “In reality, patience is crucial, but it is a rare commodity”.
End Note
Investing is laying out today’s money for more in the future. Its about performance of the underlying assets. Success in investing is the outcome of a disciplined approach.
Happy Investing.
Sub-Prime Effect and Emerging Markets
What is Sub-prime?
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it.One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it.One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
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