STOCK MARKET STRATEGIES

HOME

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 13:33:00 +0000

The investment jungle is a dangerous place in which only the fittest survive and prosper. The average investor who attempts to profit without the assistance of a professional, competent adviser or money manager is, all too often, grist for the mill.

This website offers all investors, whether experienced or new to the markets, powerful tools for success, all presented in a down-to-earth, and clear fashion.

Read on all the articles to have clear knowledge. Please feel free to ask questions or post comments.

8 Common Investor Mistakes

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 13:27:00 +0000

Below we have listed a few common investor mistakes. Try to avoid making these mistakes with your investments.

1) Falling in love with a position. An account has limited capital, so ask yourself if the position is the best one to be in here. Are you tying up capital that can be put to better use elsewhere? Don’t get
sucked into the fundamental story—that is, don’t hold on to a stock whose technical picture has deteriorated just because you are intoxicated with the reasons for your choice.

2) Buying the stock right, but forgetting to sell it right. There are two foul shots to make successfully with respect to investing. You must buy the stock right, and then you must sell the stock correctly. Therefore, once you buy a stock you must review it on a regular basis; don’t just forget about it. Attempt to sink both foul shots.

3) Not having a game plan for investing. Investors will haphazardly, especially in a strong market, pick stocks to buy, thinking that the stock market is easy to beat. They fail to realize there is risk, not only reward. Therefore, it is essential to have a game plan that helps dictate what stocks to buy and when, and also tells you when to sell or play defense.

4) Buying stocks that are extended. When you buy a stock that is up on a stem, it increases your risk and diminishes your potential reward. Rather, it is best to buy a stock when it pulls back closer to
support, thereby increasing the potential upside reward, and diminishing the risk to the stop-loss point.

5) Taking small gains, but not being willing to take small losses. Be willing to take small losses by adhering to your stop-loss points. Avoiding large losses will keep you in the game. You will not be
right on every trade, so be willing to bail out and take the small loss when the technical picture so dictates.

6) Buying a stock that is trending down, thinking that it is cheap, or a value. Often, these types of stocks become an even better value because they continue to fall in price. Ideally, it is best to stick
to stocks that are in an overall uptrend, trading above their bullish support line and exhibiting positive relative strength. These are the stocks that are in demand and should be considered for purchase.

7) Acting on poor advice, tips, and financial media hype. Many investors try to get rich quick without doing their homework. They rely on the TV or financial media to tell them what to buy. Instead,
take the time to educate yourself, to arm yourself with a game plan. Then you will be able to make sound, informed decisions. Take responsibility for your own success. Don’t rely on get-rich-quick
schemes and rumors. Do your own research.

8) Getting emotional and not being able to stay objective. Any investor knows that emotions can be your worst enemy. Try to stay objective. The point and figure chart helps you accomplish this
because a picture paints a thousand words. When looking at the chart, cover up the name of the stock. Make your decision on what the chart is telling you, therefore taking the emotion out of knowing the name of the stock.

Risk

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 13:25:00 +0000

Many people think of stock investments as no more than gambling away money. That’s because most people have no real understanding of choices. They think of labor as the only means of making money and winning money by chance, strategy, or even by decision-making skills is nothing more than a risk, and therefore, not worth it. Of course, fear is always the first reaction to something we don’t understand.

One thing you must understand is that there are methods and strategies to solving problems and finding successful solutions. History is filled with incidents where leaders and common citizens alike have been faced with decision-making that involved some type of risks. Not all risks are negative, actually you make certain decisions in hopes of risking a positive outcome, knowing there may be a
sacrifice in the long run..

Each time you use your home as collateral for a loan, you are risking the very home you live in. Every time you fill out an application for a new credit card, you are taking a risk that nothing will happen to keep you from paying back that loan.

Based on all these risk taking scenarios in our lives, why is it that we seemed to cringe more at the thought of entering the stock market for the first time, or taking more of an active role with higher risks, even as a day trader? Think about it.

One possible reason is money. Stock trading is perceived as gambling since the risk is real capital. Another common aspect is the concealment of emotion. Unlike gambling which only requires dumb luck, stock trading involves technical knowledge of the investment markets, emotional control, strategic maneuvers, ability to make historical predictions, and above all experience.

Psychology factor

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 13:22:00 +0000

You can have all the resources, tools, knowledge and experience at your disposal, but if you cannot get a grip on your emotions, most likely you won’t do very well in the stock market. You must learn to manage your own psychological reactions to risks, winning, loosing and continuous temptations. Controlling your emotions in an illogical manner isn’t something you learn over night. Emotions are natural reactions to other stimulus in our lives. For example, if someone pulls a gun on you, your first inclination might be fear, panic, holding your hands up, yelling “don’t shoot”, and possibly all of those things. It’s natural to feel that way. You are not likely to say something such as, “Hold on a minute. I need a good cup of coffee first.” That would be a calm, unworried response.

When you’ve lost thousands of rupees you have invested, the last thing you want to do is remain calm, unworried, and run home to tell your spouse the not so lucky news. Your first inclination might be to get it back as quickly as possible, which leads people into unwarranted, rash decisions that could possibly turn out to be even worse. Get a grip. Be patient. Weigh the possible outcome risks with your next available choices. Don’t make a bad or unlucky decision create a domino effect of other misguided choices. If the temptation to do something quickly is still floating among your brain cells, get away from the stock market. Take a break until you feel more relaxed and level headed, even if it takes several days. Do not make another move until your emotions are in check.

The first step is to recognize the limitations and tolerance while taking the risk and then accepting the possible results of the risk. This is easier to do if you are trading with a stash of money you have set aside specifically for this purpose. However, if you are trading with your life savings, bill money or your retirement money, the outcome of losing it would be much worse than losing money you don’t need to live on. This greatly increases your emotional stresses, thereby, greatly increasing your chances of making the wrong decisions and losing it anyway.

Strategic Tips

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 13:18:00 +0000

1) If news that could potentially affect the price of a stock is announced on TV, don’t run with all the amateurs, giving it an upward throttle. The more experienced market makers and traders will sit in a corner, biding their time until the stock is right for shorting it and driving it back down. As the stock price plummets, these amateurs that purchased it at the highest price of the day now have no one to sell it to.

2) Don’t ever trade with money that you can’t afford to lose such as bill money, retirement money, or any other finances that could affect your living style if you were to lose it. Only trade with a stash of money that you have saved up for the specific purpose of trading. Just as a few people have been very successful at the stock markets, there are even more who have failed, losing homes, cars and furniture, and nearly evreything. Don’t be one of them!

3) Never get into a trade that has a poor risk-to-reward ratio. You should only consider trades that will bring you a decent profit, otherwise, the risk isn’t worth it.

4) Get out of the trade as soon as you realize the odds are against you. The longer you wait, hoping that the tide will turn again in your favor, the more money you could be losing. Plus, you might find it very difficult to sell.

The Television Investment Guru

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 12:35:00 +0000

If you’re new to investing or trading and uncertain as to which method(s) of stock selection to use, then financial analysts, market gurus, and stock pickers on business television will likely impress you with their vast amounts of wisdom, giving you and a lot of other people their “moneymaking” advice free of charge. Don’t let the Dalal Street, business-suited baboons fool you! More often than not you’ll pay a heavy price for taking their “free” market advice.

Why? The simple fact is that they will often be as wrong as they are right. In other words, their batting average may be about the same as what you can achieve by random selection. What’s wrong with this picture? Aren’t there any real experts out there? Don’t any of them know what they’re talking about? If they’re not real experts then how did they get on television? Isn’t it illegal to represent yourself as an expert if you’re not?

If you look a little closer at the names of TV analysts, you’ll notice that they are actually stockbrokers, fund managers, or other people who have control over a large amount of money. So it’s only logical that they will take whatever chance they can to make those stocks they’ve chosen to invest in move a little more. The problem with doing what the analyst says is that as soon as the stock’s price is jacked up enough, the big guys get out.

The hard-earned bananas of the individual chimp are sacrificed to make the portfolios of fund manager baboons look that much better. In the end, the individual trader learns nothing from following the advice of the big guys other than not to listen to them. You always learn better if you
make your own mistakes; then you’ll know just why you made those mistakes.

Also, watch out for apes and gorillas that go on TV claiming to be independent. Always be wary of what they say. They may be recommending stocks because they are somehow affiliated with those companies.

We would not imply that these people are doing anything illegal by touting these stocks; however, it is always good to be aware that there could be any number of reasons that a stock is promoted to a general audience.

Investing for Growth

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 12:32:00 +0000

What’s the number one reason people invest in stocks? To grow their wealth. Investors seeking growth would rather see the money that could have been distributed as dividends be reinvested in the company so that a greater gain is achieved by seeing the stock’s price rise or appreciate. People interested in growing their wealth see stocks as one of the convenient ways to do it.

Growth stocks tend to be riskier than other categories of stocks, but they offer excellent long-term prospects for making the big bucks. If you don’t believe me, then just ask Warren Buffett, Peter Lynch, and other successful investors. Although someone like Warren Buffett is not considered a “growth” investor, his long-term, value-oriented approach has been a successful growth strategy. If you’re the type of investor who has enough time to let somewhat-risky stocks trend upward, or who has enough money so that a loss won’t devastate you financially, then growth stocks are definitely for you. As they say, no guts, no glory. The challenge is to figure out which stocks will make you richer quicker.

Short of starting your own business, stock investing is the best way to profit from a business venture. I want to emphasize that to make money in stocks consistently over the long haul, you must remember that you’re investing in a company; buying the stock is just a means for you to participate in the company’s success (or failure).

What does it matter that you think of stock investing as buying a company versus buying a stock? Invest in a stock only if you’re just as excited about it as you would be if you were the CEO and in charge of running the company. If you’re the sole owner of the company, do you act differently than one of a legion of obscure stockholders? Of course you do. As the owner of the company, you have a greater interest in the company. You have a strong desire to know how the enterprise is doing. As you invest in stocks, make believe that you’re the owner, and take an active interest in the company’s products, services, sales, earnings, and so on. This attitude and discipline can enhance
your goals as a stock investor. This approach is especially important if your investment goal is growth.

KEY TO SUCCESSFUL INVESTING

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 12:27:00 +0000

Be the one to make the decisions

Although it is important to take the advice of stockbrokers or portfolio managers, ultimately only you can make the decisions about your investments. After all it is your investment. Be in control of your own investment.

Educate yourself

We recommend that you read as widely as possible about financial markets. Financial Market reports published by a number of stockbrokers or portfolio managers is always a good place to start. You can also request to be put on the mailing lists of many brokers and even receive daily stock market prices. You can also access latest stock market information on the websites of the stock market you are interested in.

Be Patient

The stock market is hardly a get rich quick scheme. Investors who are preoccupied with short-term returns often put themselves under pressure to sell often selling too quickly and missing good returns

Diversification

Spread your risk by spreading your investment across a number of counters.

Always invest in quality

Blue chips counters should always be part of your portfolio to provide investors with a defence against market volatility.

Take profits

Once in a while take profits if you have made a reasonable return. When your shares are also in the red and there are no reasonable prospects of an upswing don’t be afraid to cut your losses, revalue your portfolio and pick up shares on the cheap again.

How to select a stock

noreply@blogger.com (STOCK MASTER) — Fri, 07 Mar 2008 12:22:00 +0000

Stock selection for your trading strategy is relatively easy. The fundamental analysis is done for you free. Yes, all the hard work has been done for you by the many experts employed by the large trading houses. You only need to know the name of the stock. You do not have to worry yourself about earnings, results, what your broker or wife thinks about the stock or even what the company makes. You can apply this principle to any of the stocks that make up the parent index. It is these stocks that will be actively traded by the trading syndicates and market makers.

Any stock that is one of the constituents of an Index will have a active professional interest. That is, these stocks are actively being traded by market makers and professional institutions. This is good news for us because we can see the results of their activity. This is the key to stock selection. It is not necessary for you personally to have go into detailed fundamental analysis of these stocks. We assume that the fundamentals are in place and are being reflected in the current price levels. You are then looking for a stock that has a high 'perceived value' to professional traders that are active in the stock.

To select this stock you need a bench mark, something to compare it with. The parent Index is your bench mark. As the parent Index falls, most stocks will fall with the Index to some extent. However, you will notice that some of the stocks are reluctant to fall, resisting the decline especially near the lows of the market. This hints that these stocks are potentially bullish. Professional money that is active in the stock is telling you directly "yes, this is a good stock because we are not selling it, in fact, we are buying it". This is why the stock is refusing to fall with the Index.

Weak stocks will have no support from the major players and will fall easily, while at the same time are reluctant to go up with the index. You will see this principle at work constantly. Few people seem to be aware of this simple approach.