There are two important aspects to stock trading: choosing stocks and managing the stock portfolio. Choosing of stocks is indeed a tough task. But the work of an investor does not end with it. He/she should be able to constantly maintain the stock portfolio and manage the risks associated with investments. When an investor adjusts the stock portfolio it is called “rebalancing” in order to minimize risk and maximize returns. One should also manage the risk portfolio to manage stocks effectively.
Understanding investments: An investor should know the stock market inside out and understand each kind of investment and the risks associated with it thoroughly. This can be done by reading the newspaper, analyst reports, stock trading websites and keeping track of the stock market on television.
Diversifying investments: Diversification is a very good way to cushion against the fluctuations in the stock market. It is always wise to spread the investment over a large number of companies, rather than investing a large proportion in the same company.
Managing risks: The kind of risks affecting stocks can be market risk or the fluctuation in the value of the financial markets and inflation risk or the risk of rising prices of goods and services over time. Before investing, an investor must decide on the amount to invest and the amount that he/she can is willing to lose. Besides, it important to determine the liquidity of the stocks, the “cut-loss” level (usually should not be more than 10% of the capital invested), and the profit targets. Stocks should also be bought at an acceptable price level by using a limit order. In case an investor recognizes that the stocks are losing, he/she should act promptly to close the stock portfolio and prevent further losses.
Avoiding tendency to gain more profit in the short term: Chasing market trends to buy the “hot stocks” and ignoring the results of stock research to assess the fundamentals of a stock should be avoided under all circumstances. An investor should determine the financial goals and stick to them. Buying a stock or investing much more than the worth in a stock can lead to huge losses.
Avoiding overreaction: At times the stock market overreacts to some negative circumstances leading to huge fluctuations in the stock prices. However, an investor should not panic under such situations and just stick to the fundamentals of stock management. Under such market conditions, an investor can invest in the long term on stocks that can yield good returns over 5 years and not affected by the current market trends much. Under such situations, “selloffs” can provide a good opportunity to buy stocks at a low price. However, this should be researched before making any decision.
Rebalancing: The stock portfolio of an investor must be rebalanced to suit the changing financial goals. It can be to favor income over growth or a major event in the life of the investor. Also, an investor should reduce the stock risks during a market downturn or invest more during a bullish market condition.
All these aspects and more can help an investor to make prudent decisions about the stock portfolio management and remain safe over the long term.
The balance between supply and demand sets stock prices. When demand is high and supply is low, prices rise.
When supply is high and demand is low, prices fall. Stock prices are driven by the relationship between buyers and sellers.
Attractive stocks have more buyers than sellers, which drives up prices, while less attractive stocks feel the reverse effect. Investors are buying future growth when they invest in stocks.
Yet, the stock’s price may float up or down based on some broad market or economic factors that may only indirectly affect the company. The Fed is the single most important federal agency for stock market investors because its actions directly affect the markets.
To “trade” means to buy and sell in the jargon of the financial markets. How a system that can accommodate one billion shares trading in a single day works is a mystery to most people.
No doubt, our financial markets are marvels of technological efficiency. Yet, they still must handle your order for 100 shares of Acme Kumquats with the same care and documentation as another person’s order of 100,000 shares of MegaCorp.
You don’t need to know all of the technical details of how you buy and sell stocks; however it is important to have a basic understanding of how the markets work. There are two basic ways exchanges execute a trade: on the exchange floor and electronically.
There is a strong push to move more trading to the networks and off the trading floors; however this push is meeting with some resistance. Most markets, most notably the NASDAQ, trade stocks electronically.
The futures’ markets trade in person on the floor of several exchanges, but that’s a different topic. Trading on the floor of the New York Stock Exchange (the NYSE) is the image most people have thanks to television and the movies of how the market works.
When the market is open, you see hundreds of people rushing about shouting and gesturing to one another, talking on phones, watching monitors, and entering data into terminals. It could not look any more chaotic.
Yet, at the end of the day, the markets workout all the trades and get ready for the next day. The first step in the execution of a simple trade on the NYSE starts with you telling your broker to buy 100 shares of Acme Kumquats (or any other share) at market.
Your broker’s order department sends the order to their floor clerk on the exchange. Then the floor clerk alerts one of the firm’s floor traders, who finds another floor trader willing to sell 100 shares of Acme Kumquats.
This is easier than is sounds, because the floor trader knows which floor traders make markets in particular stocks. The two agree on a price and complete the deal.
The notification process goes back up the line and your broker calls you back with the final price. The process may take a few minutes or longer depending on the stock and the market.
A few days later, you will receive the confirmation notice in the mail. Of course, this example was a simple trade, complex trades and large blocks of stocks involve considerable more detail.
In this fast moving world, some are wondering how long a human-based system like the NYSE can continue to provide the level of service necessary. The NYSE handles a small percentage of its volume electronically, while the rival NASDAQ is completely electronic.
The electronic markets use vast computer networks to match buyers and sellers, rather than human brokers. While this system lacks the romantic and exciting images of the NYSE floor, it is efficient and fast.
Many large institutional traders, such as pension funds, mutual funds, and so forth, prefer this method of trading. For the individual investor, you frequently can get almost instant confirmations on your trades, if that is important to you.
It also facilitates further control of online investing by putting you one step closer to the market. Your broker accesses the exchange network and the system finds a buyer or seller depending on your order.
Ronald Pedactor is a former stock broker and has worked as a stock trading trainer for the last 19 years helping individuals determine the best daily stock picks. He has been a financial trainer and a guest lecturer for over 11 years.
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The stock market at present could be difficult for the unskilled trader, and it can be absolutely devastating to their market account. Trading must be addressed as a profession and those who do not treat it in this method will be separated from their cash very quickly. Trading can be disappointing at certain times. However, trading stocks is without question a great way to earn money, and a lot people are successful making money trading in the stock market.
Trading involves risks and by any means, those stock traders who fail, do not have a specific plan or strategy of entering or exiting the markets without reason. They will enter a position and will not exit the position until the losses are painful causing serious hardships to their trading accounts. These traders who lose fall into one of the several typical patterns, as they are unwilling to let a position be stopped out using a stop-loss order. These types of stock traders are conditioned to avoid the current pain of taking a loss by moving a stop-loss order to a lower price or removing it completely. This type of trading plan plays on the emotions of hope that frequently turns into fear. Successful stock market traders have disciplined themselves to stay in control and not allow their emotions of hope, fear, or greed take over them.
Successful traders have methods that allow them to watch until the trade comes to them, they do not force the trade, nor do they rush to cut profits. However, the unsuccessful stock traders time and again scalp the profit as soon as it appears, as they fear that the price could change against their position. Usually unsuccessful traders will enter a position placed on emotions; while successful traders try to find new ways to manage their emotions when they start to trade the stock market.
Successful traders understand foremost that they will experience losses and they overcome fear by making changes to their positions by adapting to the stock markets.
Wealthy traders always have a plan, and they follow it, without exceptions as they wait until the trade comes to them. Once these profitable traders enter upon a position, they do not rush to cut profits. They are unlike the other traders who often scalp the profit as soon as it appears. A profitable trader employs strategies and find additional ways to cope with their emotions when they begin to trade stocks. By ruling their emotions, successful investors choose the right amount of risk for their profit/loss goals. They become aware of that risk management is one of the most important factors in a trade.
To gain success a trader should know before entering a trade or adding to a trade, what the stop-loss will be, what trailing stop they will use, and most importantly their exit strategy before they even enter a position. Once these types of traders place a trade, they are prepared to forget about it as far as the pre-determined exit strategy is met. Until these unsuccessful traders develop a disciplined program along with risk management to obtain their financial goals, then possibly these traders should consider subscribing to some of the newsletters to aid them in their trading decisions. There are several newsletters and stock market pick services out there. However, these services are like discovering a trading system or strategy that fits your personality or goals and that alone can be challenging in itself. I wish you success and good luck.
Scroll through the day’s “most active” and also the day’s “biggest gainers” on the NASDAQ and DOW. Links are provided within the Resource Section of this article. Find the stocks that are currently trading around the one dollar range $ 1.00.
2. Research companies
Research the companies with penny stock investing offerings that you find interesting. This can be done by clicking on the stock symbol and viewing charts or heading towards the company website.
3. Start investing
Start a merchant account by having an online brokerage firm; these are typically less expensive for trades than a local broker. You can also choose only to purchase stocks from companies with direct purchase options. This option can help you avoid brokerage fees.
Go to the website and print a regular purchase form or request one to be mailed. Read the requirements for example minimum purchases, complete it, fasten a check, and mail it. Never invest a lot more than you can afford to lose think of this as a state lottery where One in millions of win.
4. Disseminate your investment funds
Purchase penny stocks from several companies. You never know if these businesses will succeed or fail, so not invest your eggs into one basket, diversify. Have fun with purchasing small cap stocks, sort of like playing “Life” or “Monopoly.”
For some reason, it seems rather difficult for most people to perform, but you do not worry because there are more creative methods to do it.
Small cap stocks allow those who are reluctant to risk much and people with no lot of spare money to purchase the stock market.
It can be fun scrolling through the day’s biggest winners and biggest losers. Who knows, you might choose the best penny stock and get rich. The chance of losing neglect the is excellent. Therefore, use a similar strategy when purchasing penny stocks that you use when choosing Lotto tickets. Spread out your purchases and buy a few of each kind of penny stock that you like.
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Stock market—the very word sets many a million hearts racing with increased flow of adrenalin. Stock market is a public market and is a medium for buying and selling of company stocks. This business of trading in stocks can bring about a huge profit for the individuals staking large amounts on stock with a view to incur huge profits as the stock price increases and they are able to sell off their stocks at the increased price.
We find novices staking their life’s income and wise young service holders risking huge sums in the stock market with the sole intention of doubling and tripling their money. Stock market is looked upon as a medium of incurring monetary gains in an easy way. But obviously, what people tend to forget is that it is a very volatile market and it is very much susceptible to the economic ups and downs; and putting money in the stock market is no less than a gamble involving unprecedented risks.
Stocks are traded and trading information is distributed by professionals through stock exchanges. These stock exchanges thus can be labeled as market places facilitating the exchange of securities and providing real time stock prices. These markets can be real or virtual. The New York Stock Exchange is a good example of a physical exchange while NASDAQ is an example of virtual listed exchange.
A few years ago, stock markets did not enjoy this inadvertent popularity as it does today. Somehow the global economy has played a vital role in calling a considerable amount of attention for the stock market concept. Now you would find stock traders in almost every nook and corner; be it a metropolitan or a small sleepy township; be it an MNC employee earning in lakhs per month or a petty government service holder struggling to make two ends meet; whether a retired professional investing huge amount of time and effort in studying the market upheavals or full-time workers hooked on to computers busily e-trading via Internet even during peak office hours.
Nowadays, you will find mobile alerts with trading advice in individual’s cell phones every morning as soon as the stock market opens, you will also find banks facilitating the opening of d-mat accounts for its clients through which you can trade in stocks, also special TV channels dedicated to market studies and even financial experts airing special programs guiding the laymen as to which company shares should be given priority over which others.
Recently, there had been quite a bit of hue and cry over market collapse and sudden economic crash resulting in huge fall in stock prices and shares nose-diving underwater.
Millions of people lost huge sums of money. But it is heartening to see that the economy is reviving and stock markets are coming back to life, gradually. The present scenario spells a bit of stability for the stock market. But while the stock market is still recuperating from its shocking crash, the stock holders are still going through a wary phase and are even now pretty much unsure about whether to put in more money in stocks, and are also uncertain about issues like where to put their money and how much to put.
In other words, the stock market concept, with all its pros and cons, have successfully extended its fangs in almost every household and is luring more and more people into its grip everyday by extending a tantalizing feel of generating easy money.
American Express cards are accepted at thousands of retailers, including department stores, airlines, petrol stations, and major hotels – but you will come across places that refuse payment by Amex.
Many small businesses won’t accept American Express, and the reason for this is simple: Amex charge high merchant fees.
All credit cards charge their merchants processing and administration fees for accepting their cards, but Amex is known for charging a higher fee than other credit cards.
Generally with most cards, this fee is around 1-1.5%, but with Amex, it can be as high as 3-4%. For some small businesses, their profit margins are so small that they find it’s not worth the time, expense and paperwork to accept Amex.
In the past, Amex justified their higher merchant charges by positioning themselves as a corporate card for business clients, rather than a card designed for everyday consumers. They offered terms and features that were attractive to businesses, such as detailed data on the nature of card transactions, allowing for easy monitoring and attribution of company expenses. It was a service that, until recent years, their competitors didn’t provide, and it helped Amex to build a large corporate client base.
Businesses traditionally make use of higher credit card limits than regular consumers, so merchants were willing to accept higher fees from Amex, as business customers would usually spend more money. A company credit card with several cardholders can easily clock up tens, if not hundreds of thousands of dollars worth of airline charges, hotel stays, meals and other business expenses in an average month.
By comparison, research from debt education charity Credit Action shows that UK consumers are carrying an average debt of £4,508 on their credit cards.
However, it’s not just businesses that refuse Amex – occasionally, Amex elects not to extend its service to certain merchants.
Amex in the UK have taken steps to prevent their customers from using their cards to gamble online, over fears that people might run up bad debts, and that it may open up more opportunities for fraud to be committed. It’s difficult to monitor as the internet is a global marketplace, but a similar policy exists with Amex in the United States.
Peter Carville is a freelance article writer who writes for Financial Facts about the current financial news and the credit crunch.