Investment Basics » Stock Market

3 Tips For Selecting Profitable Stocks

GuestPoster — Mon, 01 Nov 2010 08:10:10 +0000

Choosing stocks is a complicated process. Every investor goes about it a different way, some choose a penny stock broker and other go it alone. But if you want to be able to select profitable stocks from an over-the-counter market having some general steps to follow is important and helps you minimize risk. So let me outline three possible steps you could take.

Step 1. The first step is to establish a time frame and strategic direction for your investing. Getting this strategy in place is what is going to dictate the shares you purchase.

For example, long term investors would establish a strategy around finding shares in companies with long term competitive strengths and a history of stability when it comes to growth. Because they are buying with the long term in mind they would look at historical trends over past decades and analyze the businesses strengths and weaknesses.

Shorter range investors might consider some of these alternatives:

a. Trading on Momentum: looking for stocks that have increased in price and volume recently. This is a common and supported strategy for investing. It is underpinned by locating stocks with smooth rises in price with the goal of riding the trend upwards as the price continues to increase.

b. Using Contrarian Strategies: Contratrian strategies look for stock market over-reaction. The stock market is not efficient and so the value of a stock isn’t always a true representation of the value of the company. In a situation where a company makes an announcement, particularly when the news is bad, panic selling ensues and it isn’t uncommon for the price to fall below fair value. Contrarian strategies involve finding stocks that have had recent sharp falls and analyzing the possibility of a reversal. Candlestick analysis is often used in this strategy.

Step 2. Using research software or services that enable you to filter stocks according to your timeline and price. Many online programs are available to do this. They are very helpful in enabling you to screen out those stocks that aren’t going to meet your strategy.

Step 3. Ensure you diversify your portfolio sufficiently from the stocks you have analyzed and found match your strategy. A Markowitz analysis is one way of doing this. It will tell you the ratios in which you should buy different stocks to fill your portfolio. Diversification is a risk reduction strategy and essential for successful stock trading.

These are just preliminary steps to getting started trading in the stock market. They are principles only and should be expanded upon. You need to continually improve your knowledge of financial markets and trading strategies. Following these steps and advancing your education will improve your confidence and success as a trader.

Dividend Paying Stocks

GuestPoster — Thu, 14 Oct 2010 00:50:03 +0000

There are three very important dates to remember when regarding dividend paying stocks. Those dates are the declaration date, date of record, and payment date. By knowing these dates, you will have an edge on the market by knowing the best stocks to invest in.

The declaration date is when the board of the company decides when they are going to pay the shareholders. This date is then set in stone and they are liable to pay the stockholders on that date. They are required to pay on that date after it is declared.

The second very important date dealing with dividend paying stocks is the date of record. The date of record is the date at which you have to own a share of stock in order to be paid a dividend. If you purchase stock after this date you will not be paid a dividend.

The third and final important dividend payment date is the dividend payout date. The dividend payout date is when you get paid from dividend earnings. The dividend earnings are based upon the company’s distributed earnings. Shareholders get a certain percentage that was agreed upon by the board members.

It is important to know that dividend payouts are taxed just like your regular income as capital gains. There are many options to choose from when choose this form of investing basics. You could spread out the risk with a mutual fund, invest in foreign securities, or you simply purchase the individual stock.

Remember to pay attention closely to the three dates regarding your stocks. If the date of record effects your purchase of a share negatively avoid this company until the following year. Declaration dates are happening all the time so watch the news and find out what would benefit you best in the longer term.

Consider Penny Stocks for Solid Returns

GuestPoster — Sat, 21 Aug 2010 18:59:03 +0000

The type of stocks referred to as penny stocks and are also known as micro caps can be an excellent investment for many people. Penny stocks are very cheap to own and can do much for diversifying your portfolio since you can own so many of them at one time. Even though the name “penny stocks” probably evokes images of stocks selling for $0.99 or less, these types of securities are really made up of all stocks that are less than $5.

Micro caps are often perceived as a solid investment due to the fact that you can buy them for such low prices and then, if the stock’s price moves up just a little, you can see a very high return. As an illustration, if you buy a micro cap for $0.25 a share and then the price shoots up to $1.00, your money has quadrupled! It’s very different for the higher valued stocks. For example, a $0.75 price increase for a stock that’s now selling for $60.00 a share is not very impressive. Inexpensive stocks can realize high returns on seemingly insignificant price increases. Micro caps see price fluctuations like these all the time.

Identifying a micro cap that is in a pattern known as a rolling stock is a very easy way to trade these stocks. A stock that is in a rolling pattern is very easy to identify. This is merely a stock that trades month after month between two price points. Essentially, the stock will rise in price for awhile until it reaches the upper price point. It will then decrease in price until it reaches the lower price point. The stock gets its name because it looks on a chart like it’s casually rolling along. Rolling stocks are very easy to identify on a chart. Once you have located a penny that’s in a rolling pattern, trading it is very easy. You just buy it when it’s at the low point in its range and sell it when it reaches the top of its range. This is a very simple strategy to implement. You can profit from a rolling stock by trading it over and over again.

While it’s true that you can profit from a penny stock multiple times, there are some potential negative aspects of these securities that you should be aware of. To start, micro caps are usually affordable for a good reason. Micro caps are usually cheap because they are either new to the market or they are companies that were higher priced at one time and have decreased substantially in value due to a negative event. Since there could very well have been a negative event in a company’s history that has caused its price to drop, you will want to research the company to see if it is something that is only a temporary setback. Take the time to review a company’s history and investment basics before investing to see if it has a promising future.

A penny stock’s trading volume is another aspect you should take the time to review. If the penny stock has inadequate trading volume, you might not be able to sell it if you are in a position where you need to quickly do so. With sufficient volume though, you can usually quickly sell the stock.

Dynamic, affordable and profitable have all been used to describe the penny stock market. Before launching your penny stock trading journey, be sure you are fully aware of the potential pitfalls of trading these securities.

Stock Market Basics For Newbies

GuestPoster — Tue, 17 Aug 2010 20:11:08 +0000

If there is an old and tried investment, stock market stands at the center. It is one of the best investment ideas around. Just carrying out some research will show you people are making thousands of dollars every month, others every day. You can make it one of your best investments in 2010. However, prior to putting your funds into stock, understand the basics that govern this market. Learning amicable stock market basics will definitely put one in a level many only wish for. In fact, any people are doing poorly in the stock market because of poor mastery of the basics.

If you want to learn to trade stocks like a pro, don’t ignore the basic knowledge. Stock is basically an ownership stake in an organization or company. Companies raise funds by floating shares to their investors. By owning stocks of a particular company, you are entitled to the profits of that company which is termed as dividends and also a fair share of risks as well. Success of the company leads to your own. To increase a percentage of ownership, you only need to buy more stock. Don’t forget owning a company’s stock does not mean you become a part of the everyday staff; nevertheless, shareholders have a chance to elect such people by voting in annual general meeting.

To know how to find the best investments in the stock market, understand the two stock types, preferred and common. The most traded stock and in abundance is what is known as common stock. It is also what most investors refer to when they talk of ‘stock’. Apart from giving one a percentage of company ownership, it has no special benefits.

On the other hand, preferred stock has many benefits. The stakeholders who hold preferred stock might not get voting rights but they mostly get their dividends fixed in the entire life of a particular company. For common stockholders, theirs is just an occasion dividend but hardly equals what a preferred stockholder gets. When a company is under liquidation, the only stockholder with few worries is one holding preferred stocks, since in debt repayment they get their percentage first. They are better placed to receive their funds back in case a company has limited money for debt repayment.

As you learn to trade stocks and understand the stock market basics, don’t forget demand and supply makes the price of stocks to either shoot up or go down. The price goes up if there are so many people to buy while the shares are less. If there are many investors unloading their stock with few buyers available, price shoots down.

Stock Market Charts

GuestPoster — Sat, 07 Aug 2010 05:26:03 +0000

Stock charts are a commonly used visual aid used by traders in the stock market.

Stock charts, in the form of relatively easy to interpret graphs, show the range of fluctuating prices of a stock or a stock index that have occurred over a selected period of time in the past until the current date, useful information for the stock market trader.

The value of the stock chart to the trader is based on the assumption that the patterns of trading activity of the past are likely to be repeated frequently in the future and if those patterns can be recognized as they begin to develop they can provide actionable evidence for stock trading decision making. The expectation being that whatever outcome occurred previously is likely to occur again, a matter of history repeating itself.

At a glance, the trend of the stock or the market in general can be seen, important to know when following the standard advice of “Do not trade against the trend”. Also, other important relationships such as those between changing trading volumes and changing stock prices are also instantly recognizable.

More detailed examination and interpretation of charts, commonly known as Technical Analysis, has become a specialized skill and takes into account many more indicators and variables than those mentioned here. Through the analysis of the stocks portrayed, the trader looks for chart patterns that can signal the point when the time is right to enter or exit a trade. The stock chart can often do that quite well and often with ample prior build-up time to plan carefully and be ready to make the move.

A vocabulary of names of the various formations has developed among analysts and traders and an unofficial set of ground rules establishes the attributes attached to them. The names of some of the many formations, some of which are very similar, include, Flags and Pennants, Ascending and Descending Triangle, Saucers, Measured Moves, Breakaway Gaps, Wedges, Head and Shoulders, and there are many others. There are also indicators that use combinations of factors related to price and volume and convergence or divergence and crossovers of lines of moving averages. For a sample chart and a further introduction check out this link: Looking at the Charts.

For those wishing to learn how to trade stocks or to study stock charts in greater depth, reference books on technical analysis are available from the better bookstores and many local public libraries have them for general circulation. There are many internet resources that deal in depth with the subject and anyone prepared to spend the time can soon become familiar with the half dozen or so that consistently lead to profitable decision making.

After the easy to recognize trend lines and the support and resistance levels, those I recommend to watch for are: saucer formations, breakaway and exhaustion gaps, triangles and pennants, and measured moves. If those can be recognized and traded, the odds of making profitable trades are increased.

But do not forget to ALWAYS USE STOPS to manage risk.

Penny Stock Pumpers and Bashers

GuestPoster — Sun, 18 Jul 2010 21:34:04 +0000

A penny stock is more susceptible to manipulation because of the relative low value compared to the available wealth of individuals or small investment teams. In addition, the markets are less regulated so there isn’t as much chance of negative consequences for those who game the system. One style of these cheaters are the pumpers and bashers. Before contemplating which penny stocks to buy, you should be aware of these types of individuals and the effect they can easily have on penny stock prices.

A pumper is a person who uses phones, magazines, email, websites, and online forums to encourage others to purchase a penny stock. Conversely, a basher is a person who uses these same forms of communication to encourage others to sell a penny stock. Using these styles of contact and many new ones (social media, text messaging, blogs) thousands of potential traders and investors can be reached. If even a small percentage of these victims are convinced to listen to the pumper or basher it would greatly influence the normal trading volume for that particular penny stock.

A person pumping a stock has long already purchased the penny stock at cheap prices quietly over a long period of time. Now they want to encourage others to start purchasing as well in order to raise the price. Their hope is enough investors will buy in to fool the traders into thinking the penny stock is actually on the move. If this happens there will be a second great surge for the scam artists to sell their stock into. Then the investors and inexperience traders are left with truly worthless penny stocks.

A penny stock basher is someone who knows the value of a company and attempts to encourage others to sell through the use of fear tactics and blatant false claims. There hopes is that the penny stock will dip in price long enough for them to scoop up a bunch of shares at cheap prices. Again, the main reason this type of manipulation is possible, is due to penny stocks being so illiquid.

To avoid such scams, a good rule of thumb is to remember that no one cares about your finances like you do. So don’t take their word on what you should invest in. Unless you are paying the person for their advice, as in the case with financial advisors or penny stock brokers, they are likely attempting to make their money off your misfortune.

Stock for Dummies

admin — Mon, 11 Jan 2010 23:21:50 +0000

If you look forward to investing in the stock market but you are uncertain where you should begin, what you need is a guide known as stock for dummies. However, due to the traders not first learning the stock market investing basics and the overflowing information about the stock market online, searching for relevant information can get a little frightening and overpowering. Don’t allow this feeling discourage you in pursuing your trading career. Stock trading is a beneficial investment option, and you should learn how you can make the most out of it.

Beginners Guide to Trading Profits

When you look at a listed stock, two prices will be presented. The price that is lower is the bid amount while the higher price is referred to as the ask price. The bid amount is the highest price an investor will most likely purchase the stock while the ask price is the lowest amount the investor will market or sell the stock for. The spread is the difference between the bid amount and the ask price. If the spread is smaller, the more advantageous it is for the investor. You should keep in mind that a high bid-ask spread delineates that the stock has low liquidity, making it more difficult to look for a buyer when you are trying to sell the stock.

Other trading jargons in stock for dummies that you should familiarize yourself with are limit orders and market orders. A market order is about purchasing or selling a stock at the most beneficial price available in the market during the order. When purchasing a stock, a market order will normally be the ask amount quoted except when the stock price is moving abruptly. On the other hand, when you sell a stock, a market order will frequently be the bid amount.

A limit order permits you to discover what price you will have to purchase or sell a stock. For instance, if a stock’s last trading price is $30.25, you may desire to place a limit order to purchase it for $30. If your limit order can be closed at $30 or lower, the order will be filled. If the stock will not be bought on your limit price or better, then it will not be purchased. You can place a limit order as GTC or day order, which is considered good until it becomes a cancelled order. Note that a day order will expire at the trading day’s end while a GTC order will still be open until a cancel order is positioned.

If you want to protect your trading capital, you should also learn about a stop order. It is a strategy utilized to guard your funds against immense losses. For instance, you have purchased a stock at $40 per share but you would like to release the stock it if plummets below $38 per share, you should then place a stop order at $38. Thus, if the stock drops to $38, your shares will be sold automatically. While this technique is a very efficient money saving tool against unwanted losses, you should not position them too near to the existing price.

Stock Trading for Dummies

Stock for dummies guide will help you become comfortable and adept in executing your trades. This will allow you to trade on the right track even if you’re just a novice trader. See some additional stock market investing tips for dummies.