Stock trading aritcles and tips

noreply@blogger.com (Quang) — Mon, 11 May 2009 03:25:00 +0000

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A Discussion of Stock Picks

noreply@blogger.com (Quang) — Wed, 29 Oct 2008 14:52:00 +0000

Stock Picks are a great way to find new investment ideas, hot stocks and hot industries. Some stock plays are penny stocks, some are stock trades that could have a huge amount of potential. Investors should never invest in a stock pick unless they can afford to lose their entire investment.

Stock investing isn’t without its fair share of risk and investors should consider their own risk tolerance level and always consult their financial advisor. When finding stock ideas its important to screen stocks and make a list of stocks to start watching. Some of the best stocks are found by completing your own due diligence and learning as much as you can on stocks through books and other media. Experience in the stock market is also very important. Experience comes with stock trading and stock research.

Stock news is important to pay attention to when you find a stock pick and want to follow the stock. Also, investment newsletters usually follow stock picks and stock ideas. Investing in stocks requires attention to detail and what industries are hot and which ones are not. As they say, a rising tide can lift all ships, this goes the same for stocks sometimes. Stocks in an industry that is hot become hot stocks as a group and many of them begin to move within that industry. This can be small cap stocks, cheap stocks, value stocks or others.

Penny Stock Picks require investment research and there is not as much stock information on them. Remember, to always complete your own stock analysis on penny stock picks. NASDAQ and AMEX stocks are also popular in the stock market.

It is important to look at a stocks balance sheet, income statement and cash flow statement. Usually a stock pick profile will cover one if not all of these financial statements. There are also key ratios that investors can use as tools to consider a stocks value when completing investment research.
A ratio that is one of the most well known is the P/E ratio, known as just the PE ratio or Price to Earnings ratio or even known as the “earnings multiple” / “multiple”. A higher P/E ratio means that investors are paying more for each unit of income. A P/E ratio of a stock is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. The P/E ratio is calculated by dividing the stock price of a share by the annual earnings per share. Annual earnings per share is known as EPS. Generally, stocks with higher earnings growth will have a higher P/E and those with lower earnings growth will have a lower P/E.
Some investors like to do daytrading, also known as swing trading. There are a lot of good stocks that are free stock picks out there that give new stock ideas to those not finding as many new stocks as they’d like. Market timing can be very important as well.

Your Stock Market Addiction is Costing You a Fortune

noreply@blogger.com (Quang) — Wed, 29 Oct 2008 14:47:00 +0000

If you are stock day trading out of addiction, you are unintentionally flushing your money down the toilet. You might not realize it, rationalizing your "investment" options as you watch your wealth dwindle with each trade.

Regardless of your investment style, you must rein in emotion if you expect long-term profitability in investments.

In this article, I'm going to share with you the similarities between typical addictions and stock market addictions. Recognizing these characteristics is your first step to conquering the addiction, and will result in greater profitability, addiction or not.

Active trading has a higher degree of perceived control than passive trading, and this can be dangerous. It's one of the arguments traders make against using mutual funds. The argument is that by active trading, one can nimbly trade around market circumstances that funds cannot. Forget that the fund manager is more qualified than the trader 99 times out of 100.

This is similar to gambling where a gambler has control over each individual wager, rather than ownership in the casino.

Active trading is exciting. With great risk comes the potential for great reward, and this reward is usually met with the release of the chemical dopamine in the trader's brain. The presence of this chemical means that trading is more than just a psychological addiction—it can actually border on a physical one. These are the same characteristics of a gambler.

Another similar characteristic between trading and gambling is the potential for a quick buck, or easy return of money. Exacerbating this is the fact that it's possible to receive a disproportionate amount of return through the use of margin and leverage.

Another problem with addictions like trading and gambling is perpetuation, a form of passive enablement. With each passing trade, the addiction is reinforced, regardless of whether the trade was a failure or success. A successful trade brings about the desire for a repeat performance, while a failed trade brings about the need for redemption or to make back that lost amount.

Let's not lose sight of our goals. Trading is about making money, plain and simple. But to make money, you have to realize the difference between when you are trading and when you are gambling.

If you can successfully master that psychological stumbling block, you will most definitely become a better trader.

Hidden Stock Market Riches In Your Mind!

noreply@blogger.com (Quang) — Wed, 29 Oct 2008 14:46:00 +0000

Do you know what creative courage is? It is the internal psychological power to ignore everything outside your own mind to come to your own senses in what you want to believe. The alternative is to accept the junk being continually shoved down your throat by society as reported to you by your five senses. Many people are so psychologically downtrodden that they have abandoned all hope of thinking for themselves even though they may say otherwise. Many brilliant minds of the past have been put to death for views against the popular opinion.

The Spanish Inquisition, for instance, suppressed all counter poised thought (termed heresies by the inquisitors) within the Catholic Church. In the history of the Catholic Inquisition, the Spanish Inquisition is especially well-known, particularly in the nature of the “auto de fe”, or trials, of supposedly converted Muslims, Jews, and Illuminists. This Inquisition also gave rise to the Peruvian Inquisition and the Mexican Inquisition, which continued until those countries split off from Spain.

Fundamentally, the Spanish Inquisitions, despite its political intentions of the King of Spain, demonstrates the ability of society as a whole to support mental slavery. We humans have a long history of bludgeoning one another to death in individual rise to societal dominance because material success in society comes from getting the most heads wagging in agreement with an “expert” regardless of whether the truth is expressed.

It has only been in recent years that freedom of speech has been tolerated in parts of the “modern” world. It has only been until recently that individuals have been allowed to openly question anything or everything they value in their lives if they so choose. Nonetheless, Wall Street derives its wealth from blind followers not dissenters in the stock market.

In finance for the last few decades there are a number of hard headed, steely eyed, mean mouthed professors who sternly defend the efficient market hypothesis of Eugene Fama at the University of Chicago. If you write material that went against the grain you were pretty much thrust out into the cold as a researcher. At least until recently when stronger technology and better data has indicated major flaws in the efficient market premise.

Positive change in our thinking is very hard work because society does everything possible to force us to think the same way. Stock investing is no exception. Warren Buffet for instance teaches us that if you know a company is good and the stock drops in price then you should buy more. How many people do you think follow that advice? I can tell you how many, “virtually zero!”

People don’t follow this kind of sage advice because it has literally been beaten into them to not think in ways that are different from the group. Think back to your grammar school days. If you spoke out against the teacher you were so severely reprimanded that you very quickly learned that independent thinking is something severely frowned upon in “modern” education.

If you want to succeed as a stock investor you must develop the creative courage to see the market differently than the public does. You also have to develop the individual pride to act in the way you know is right even if those around you think you are crazy. They may even tell you that you don’t know what you are doing for buying shares of stock in the companies you will come to see as the best buys because public is ignoring them as they are mesmerized by Wall Street’s false pundits on shows like “Mad Money.”

Stock Market Basics - How Great Research Can Bring Great Wealth

noreply@blogger.com (Quang) — Wed, 29 Oct 2008 14:43:00 +0000

Not understanding the stock market basics impacts almost all unsuccessful stock
traders negatively.

To many mediocre and unsuccessful traders, lack of control over research may
sound like a strange point to pick as one which can lead to poor trading results.
But every exceptional and successful trader I know would say methodical research
is a corner stone of their success.

Let’s look at the 2 opposing position. Many traders who do “OK”
trade on news, tips, ideas that come across their desk or over the newswire,
or some other haphazard method for finding trades. A key characteristic of their
trading is that it is reactive.

The exceptional trader doesn’t take such risks...he is proactive.
Ofcourse, great traders are also reactive. They will allow the news and other
events to generte trades for them. This is part of their proactivity. In addition
to that, great traders are is purposefully and methodically trawling the markets
looking for opportunities. This regular trawling, one of a key set of stock
market basics that they have totally mastered, is a key difference that seperates
mediocre from stellar traders.

The great traders research is regular, wide and eventually deep. His missed
opportunities are few and far between and the quality of his average trades
far surpasses the average trades of reactive traders. This is simply because
he has a greater catchment area in which to find trades...and therefore probability
works on his side because a methodical and repeated process throws up many sterling
opportunities regularly.

So, to try to ensure repeated or higher success in the markets, try and do your
research methodically. If you aren’t researching methodically and are
a reactive trader, you are without question leaving money on the table over
a long enough time horizon...and this could come back to bite you....hard.

Why risk it? As Nike says....Just Do It! (right from now on)...and master the
stock market basics.

Using Free Stock Quotes To Explore The Stock Market

noreply@blogger.com (Quang) — Mon, 25 Aug 2008 13:53:00 +0000

For those who have already spent a good deal of time operating in the stock market, they will surely attest to the benefits of free stock quotes. Free stock quotes can be used as a companion to a professional stock broker; it’s important to be well-educated on free stock quotes regardless of whether you are using the services of a professional. It’s always best to be as knowledgeable as possible – using free stock quotes - so that you can participate in the decision-making regarding your money.

Free stock quotes can easily be accessed on the Internet where you can research the history of a particular stock, the climactic changes it has experienced and future predicators to its success. Additionally, you have the opportunity to use free stock quotes to do some “practice run” trading to assess your stock market readiness. Because of this, free stock quotes for the beginner are absolutely essential.

Veterans also continue to rely on free stock quotes to reaffirm their instincts and plan their strategy. Professionals even, who have been in the business for many years, also turn to free stock quotes to help plot their course.

Free stock quotes also require a certain amount of knowledge to understand the information supplied. Beginners should take the time to educate themselves on free stock quotes so that they can best use the information to achieve success.

When using free stock quotes, beginners and veterans alike can vastly improve their chances for success in the stock market. The reason is simple: there are a myriad of reasons that a particular stock will perform well or perform poorly. Experts take all these factors into consideration and use it to supply free stock quotes. Those who seek out free stock quotes are giving themselves an enormous advantage for success.

When seeking out sites that offer free stock quotes, look first to other users. The Internet offers a vast resource for finding other investors just like you who have used free stock quotes. Be sure to ask around about free stock quotes!

Can You Skyrocket Your Stock Market Profits By Using Stock Trading Signals?

noreply@blogger.com (Quang) — Mon, 25 Aug 2008 13:53:00 +0000

It can be a full time job to watch the market closely for signals of change. Trading software is available that can alert an investor when these changes are taking place. The software will place alerts on the computer screen for the investor. The investor is able to choose which changes they wish to be notified of. These are usually subscription services and can cost several hundred dollars for the full service. These services include live stock market information and trading software.

Services are available for the investor who doesn’t have the time to closely watch the market. These subscription services will post changes on an hourly or daily basis. Some of these services use market analysts who will watch the market for indicators of a particular signal. Usually these systems use automated software to watch the market. These services should be researched carefully as some are better than others.

It is always important to know how signals are being generated when using a signal provider. There are many different market indicators and sometimes they contradict each other. Depending on how things are changing, conflicting signals may be sent.

The accuracy of indicators also depends on market conditions. Trend indicators will signal buy during market upswings, but long term oscillator indicators will perceive the market as overbought and may send out sell signals. Trend indicators tend to be more accurate during trends and oscillators are better indicators during times of transition. Both indicators may tend to contradict each other depending on market conditions.

It has been suggested that at least 3 market indicators should be used to provide better accuracy. The signals that are used should come from various time frames. Sometimes a short term market correction may cause an upswing, but the market may actually be trending downward. A wide angle view of the market allows variations to become more obvious.

Signals may be sent daily via email, be available on a website, or be part of your trading software and popup on your computer screen. It depends on which service you utilize.

Signal services are usually offered on a monthly basis. Some are quite expensive as much as several hundred dollars a month. These services target the professional trader. For other traders, less expensive services are available.

Each individual investor must decide whether or not these services have value. Whereas they can save time, users must be careful not to become lazy in monitoring the market on their own. Each investor should have the necessary skills and tools to monitor the signal system and to occasionally do market calculations on his own in order to monitor the market and the effectiveness of the system.

Historic Stock Prices - What Can You Learn From The Stock Market's History?

noreply@blogger.com (Quang) — Mon, 25 Aug 2008 13:53:00 +0000

The stock market has historically averaged a 12% overall increase each year. This is obviously very good when compared to the return you’d get from putting your money in the bank or a long term savings bond.

Therefore, you can look at these historic stock prices and conclude that just throwing your money into a mutual fund is a wise long term choice. Actually, nothing could be further form the truth.

You see, there is a lot of misinformation on investing today. Since the stock market has historically averaged a 12% rate of return on investment, many people view mutual funds as good investments. This is because mutual funds spread out their holdings, and will tend to mirror the market as a whole.

Actually, this can be disaster. Many people have lost small fortunes by keeping their investments a mutual fund long term, and here’s why.

Lets’ say you’ve been investing money in a mutual fund for years and years, and it’s paid off nicely for you with a 12% return. However, you never know when the next stock market crash is going to come.

Here’s something many investors don’t know-people are required to start taking their money out of their 401K once they reach 70. With the tremendous amount of baby boomers set to retire, you combine that with the fact that the vast majority will be taking out a substantial amount of money to live on, and the stock market could very well be headed for the biggest crash in history.

We are likely still a few years off from this potential catastrophe, but it’s coming in a hurry. Therefore, if you have your money tied up in a mutual fund when this crash occurs, you can literally lose a whole lifetime’s worth of investment with one fell swoop. This has happened to many people who were told their money was secure in a mutual fund, and it can easily happen to you.

The bottom line, don’t trust others with your finances. Do your own research, become financially educated, and you will be able to spot hidden opportunities that the vast majority of others miss out on.

While the historic stock prices have generally show good rates of return, it doesn’t take much to wipe out a whole portfolio. Make sure you know what to look for when you enter the exciting world of investing.

Stock Market Trading Tip - Personal Balanced Stock Portfolios Guard Against Recession

noreply@blogger.com (Quang) — Mon, 25 Aug 2008 13:52:00 +0000

Throughout most of American history it has been more profitable to invest in stocks rather than bonds. However, there have been times when stocks are unattractive compared to other assets. For example, right before the tech bubble burst in late 1999 these stocks had prices so high earnings yields were non-existent. The wary investor could have weathered this situation by diversifying stock investments into real estate investments or other types proven to be less risky.

Making major changes in one’s portfolio should be done at various stages in the investor’s life. A young investor is less risk-averse, that is, he is less susceptible to market corrections for the simple fact that he has a lot of years left to make up for the losses. This investor is looking more to the long-term and wealth accumulation in the distant future. This investor’s portfolio would be mostly invested in the riskier assets such as carefully researched foreign and domestic stocks. Still, the young investor needs to have some balance to guard against market setbacks.

As retirement approaches, perhaps 10 years before, the investor should start diversifying holdings into income-oriented assets. These include government and corporate bonds that pay a fixed return rate on the investment. Certain blue chip stocks with long, proven track records of dividend payments can also be included as an income-oriented asset. Yearly, as retirement approaches, a larger percentage of the investor’s portfolio should be income-oriented until that total is 100% at retirement. After all, as an investor, the ultimate goal should be a comfortable retirement. Once at retirement the time to take risks is over and income must be guaranteed.

Stock Market And Stock Exchange Basics - More Info To Help To Help You Master Stock Trading

noreply@blogger.com (Quang) — Mon, 25 Aug 2008 13:51:00 +0000

Each company will generally trade its stock on one Exchange, unless the company is very large and, for example, trade in multiple countries. Each country may have several Exchanges where different companies are listed. As long as operating hours are obeyed, people around the world can trade in any country's Exchanges. Trading times are similar to, but slightly shorter than, a regular business day. Exchanges in New York are open from 9:30am to 4:00pm Eastern Time and other exchanges have similar trading hours in their local time zones. Japan, India, England, Germany, Switzerland, China, and the United States host the major world Stock Exchanges. Notable among these big players are the Tokyo Stock Exchange, Shanghai Stock Exchange, the Nasdaq, the NYSE, the AMEX, the London Stock Exchange, Frankfurt Stock Exchange, and the Bombay Stock Exchange.

Stock markets can be used as a barometer for economic health of a country. When production is high, unemployment is low, and inflation is low the market gains total value. This rise is a bull market. When stock prices start falling in a bear market, the economy is generally on a downturn. High inflation and high unemployment are usually seen at this time.

Changes in stock prices aren't entirely dictated by the health of the economy. A large part has to do with investor psychology and how it relates to changes in supply and demand. When one stock becomes a hot commodity, other investors try to join in and the price is driven ever higher. Conversely, if a number of people start to sell a stock and the price drops, others will try to sell before it drops more. This push to sell just drives down the price faster though. These psychologically driven market changes tend to be short lived and balance out in the long run. It is the economic health over time that is reflected in the long-term trends of the market.

Stocks are not the only place to invest though. Other major investment markets include Foreign Currency Exchange, Futures, and Options markets. Globally, the largest single segment of the investment sector is in Foreign Currency Exchange. Currency traders move very large sums of money between different currencies very quickly to take advantage of small fluctuations in the exchange rate. These trades usually are only owned for a day and are only profitable if the trader is very attentive to factors influencing the day's rates.

Futures Markets are designed to give buyers and sellers in volatile markets fixed prices at set times. The price for a quantity of goods is fixed in the contract, as is the time of the delivery. When the market then fluctuates, the locked in price for the contracted good means that the value of the contract itself changes. Traders in Futures are less interested in the price obtained in the contract for the goods, but are interested in the value of having that price fixed against the changing actual price of the goods.

The Options Market also deals with contracts for future prices. The difference from the Futures market is that Options allow the owner to buy at a specified price before the date given, but does not force the owner to buy that item. The Options themselves may be bought and sold, or used on a higher-risk investment as insurance. These investment tools have a high risk of loss. It requires a specialized knowledge of the option itself as well as the market it is trading in to make a profit. Most traders also benefit from having experience in a market. Stocks require less specialized knowledge to invest in with relative safety because the market as a whole changes more gradually than options on the market change. Stock traders can invest in certain ways intended to change the value of holdings very quickly, but the majority of investors put their long-term investments into stocks.

Why The Stock Market Is Not For Everyone

noreply@blogger.com (Quang) — Fri, 15 Aug 2008 12:23:00 +0000

The stock market offers one the opportunity to have short- or long-term gains. However, not everyone is cut out for such investments. For one, the idea itself of partial ownership in a company by buying shares may not actually be that interesting to some.

Owning stock also exposes one to the risks a particular company faces. If the business is reported to have financial difficulties, legal problems or other issues, its stock is likely to be affected, fall and consequently, also pull down all investors in the company.

An individual who intends to invest in the stock market must recognize that gains generally come after an extended period of time. In addition, even short-term results are not always assured, as negative economic or company news can quickly wipe out any gains. This means that an individual must be patient in waiting for the investment to pay off.

This patience extends to market timing in the case of short-term traders, who aim to move in and out of the market based on what they feel is the most opportune time to do so. The problem with this approach is the assumption that the market can be consistently predicted - a condition that most financial advisors believe would be virtually impossible.

Discipline and flexibility are two other traits needed by individuals who decide to invest in the stock market. Market stability is not always a given, and there will be periods when the market may be volatile. This happens particularly in the event of a major disaster such as the September 2001 terrorist attacks in the US, and the havoc caused by recent hurricanes Katrina and Rita, which forced the shutdown of major oil refineries in the Gulf of Mexico.

When these situations arise, predicting the direction of the stock market becomes difficult due to resulting fluctuations, making it necessary for an individual to remain disciplined with investment strategy but flexible enough to adjust to the situation.

Investors also have to put in some research before selecting any stock. Among the factors they need to know are a brief history of their target company; the company's parent, subsidiaries and other affiliates; earnings movement; expansion plans and management structure. These would give an individual a fairly good idea of how stable a company is and help project the company's direction and future.

Having an interest in a company through shares of stock thus poses both risks and rewards. However, the stock market may not be an ideal investment vehicle for individuals without patience, discipline, flexibility and enough diligence to conduct research.

Reporting the Stock Market

noreply@blogger.com (Quang) — Fri, 15 Aug 2008 12:22:00 +0000

The stock market is a wonderful place to play with your money. A good investment can change your finances so drastically; you will have a hard time recognizing it yourself. At the same time, a small mistake can actually cost you more than you are willing to risk.

The problem is if you do not know which stocks to look for and how to approach these while limiting your risk, you would not be able to get considerable profits.

The best way of going about this is to watch out for stock market reports.

The stock market report contains technical and fundamental analysis used by brokers and professional investors. They use this to interpret the direction and valuation of equity markets or stocks.

The report provides a synopsis of the stock market from different points-of-view. They contain charts and texts of daily data of the performance of stocks in the market allowing traders to evaluate their stock portfolio.

They provide long-term views on certain stocks, predictions on how stocks will perform over the course of a day, weeks or even a year. They also provide reports on certain factors that will affect the performance of these stocks.

Stock market reports are provided by a lot of sources. Brokers provide their clients special reports of certain stocks currently in the market. This allows their clients to make decisions with regards to then buying and selling of stocks.

Certain brokerage services also provide these reports for subscription. Most of these contain stock picks for active trading or long-term investments. Other tips offered are entry and exit strategies, stock market commentaries, analysis, trading and investigation education.

Analysis of the stock market is also provided in business programs in television, cable, and newsprint as well as online portals.

Business programs in cable provide the most current and up-to-date information on stock performance. Reports are made on gainers and losers throughout the trading hours.

Online portals providing financial reports and stock market analysis are also good sources of stock performance information.

Much of the information you will need over the course of your trading experience will come from stock market reports. So it is best to choose a good source of these reports for yourself. Reputable institutions will provide you the best information in the market.

Keeping yourself well-informed with stock market reports will provide you the best chance of making the most out of your trading. It will give you a more definite and clear view on the stock market and enable you to make intelligent decisions with minimal risk.

Tips For Earning Money By Day Trading

noreply@blogger.com (Quang) — Fri, 15 Aug 2008 12:22:00 +0000

Before you start investing your hard earned money, you need to really stop and assess your capabilities. Be aware that when you engage in any trading strategy your investment is always at stake. Don't gamble with your money - plan it out the smart way. Successful investors are successful for a reason. They strictly followed a trading system and stuck to it, regardless what was going on in the stock market.

Today, there are thousands of people who are doing quite well for themselves using day trading. Using profit making techniques, day traders buy and sell stocks. It's not that simple, of course, because you have to buy as well as sell at the same time.

The More You Know

Even if you don't have a background in trading, almost everyone can understand the basics. Buy low, sell high, follow trends, and protect your investments. More advanced traders will have full knowledge of the history of exchanges for that given stock and choose a proven stock picking strategy.

Trend Following

In a nutshell, day traders assume that if a particular stock is steadily rising it will continue to rise, and likewise, if a stock is falling it will continue to fall. This can be measured over a prolonged period of time. Thus, traders will purchase rising stocks and avoid falling ones. Don't worry about having to map up the trend lines on your own. Today there are lots of both free and paid software that are specifically designed for day traders. To find such software you can simply type "day trading software" into your favorite search engine.

Pay Attention To The News

The news has a very profound impact on stock trading. If a particular company has sent out a press release that they have invented a new technology or have acquired another company, its shares may surge. A great way to stay on top of the news for any particular company is subscribe to that companies RSS feed on Yahoo Finance, or to use the Google News Alerts (where you can get Google News to email you news based on certain keywords as it comes in).

Scalping

This is also called spread trading. Usually completed in 12 hours or less, small quantities of a given stock are purchased then the original buyer turns around and sells his shares for a miniscule higher amount than they were purchased for. Not anything to cry home about, but still a good, quick trade.

Covering Spread

This is a kind of leapfrogging of stocks. You buy stocks at the minimum bidding price and sell stocks at the so called asking price. At the end of the day, you will have the same amount of stocks, except that you will have stocks in a higher rated company.

The Stock Market Is A Game

noreply@blogger.com (Quang) — Fri, 15 Aug 2008 12:21:00 +0000

As a kid, have you ever played the board game Monopoly? This is a game that deals with properties, banks, infrastructure, and millions of colorful dollars.

Like in Monopoly, the stock market is a game in which you have to decide the buying and selling of your properties. Although in the case of the trading business, you are making stock market decisions.

The money you collect in Monopoly when you have circulated the whole board game would be the dividend or the payment in the stock market. The amount of the money you collect would be determined by the properties you have in the game. Just like in the stock market, the more shares you have, the larger amount of money you would be given.

When you are getting bankrupt in the game of Monopoly, you have the power to sell your colorful houses or building when you need to regain your finances. Just like in your stocks, when the market falls, you have the authority of which shares to sell out and which shares to retain.

In winning the Monopoly game, you are obliged to keep your properties before the construction of your houses and hotels. You would lose to your challenger if you sell these properties to him even for twice the normal price of your property. Just like in the stock market, making lots of money does not mean you are successful in what you're doing. In order for you to win with your stocks, you should be able to double your property to give you a higher dividend of shares.

In playing the board game, you need an opponent to start the game. It's your opponent's job to prevent you from owning many properties and collecting large amount of money from him and from the bank. Just like in the stock market game, there are also factors that prevent you from the success of your shares. These don't necessarily have to be other investors, but it could be the taxes you are obliged to pay or the interest of your stockbroker from your dividend.

Playing the game of the stock market could be done even with just a little amount of money. Just like in the board game, all you have to own are colorful play-money for you to own properties and collect more money in the future.

Although the trading system could be compared to the board game, you should take the stock market seriously. Why? Because this is real life and real money is at stake.

Career As A Stock Broker

noreply@blogger.com (Quang) — Fri, 15 Aug 2008 12:20:00 +0000

A stock broker is a commissioned agent who arranges for selling or buying stocks or other financial instruments for his or her clients. The stockbroker sometimes is not needed these days when buying and selling can be done over the internet. Still, the earning potential of stockbrokers has never shown signs of decreasing.

I Am Not A College Graduate; Can I Become A Stockbroker?

Anyone who is interested can become a stockbroker, provided he has or she has the requisite grasp of the subjects required and a good understanding of the financial markets. Anyone from high school graduate to a Harvard scholar can become a stockbroker. However, these days it is desirable that aspiring candidates have a college degree due to the complex nature of the job and the larger grasp of the economy that is needed for making technical and commercial financial analyses.

Do I Need A License And What Are The Requirements For Obtaining One?

Yes; but before you get your license, there are exams that you need to pass in order to qualify to represent clients. Although licensing requirements vary from state to state, the overall requirement is roughly the same.

National Association of Securities Dealers, or NASD, conducts this licensing examination which is called the General Securities Registered Representative Examination, or Series 7 exam. After this examination, one is required to put in an internship of at least 4 months with a registered brokerage firm.

Most states also require a secondary examination. This is the Uniform Securities Agents State Law Examination, which is devised to test candidates' knowledge in:

1. General knowledge in securities and stocks business
2. Customer protection laws, procedures and liabilities
3. Record keeping and administrative procedures

You will need to check whether your state requires you to execute a personal bond. Correspondence courses are also available, which is the most preferred mode of study chosen by candidates.

Isn't Working On Commission A Risky Proposition?

It depends on how you look at it. It can be compared to the classic case of two people looking at a half full glass. However, usually those who think they can make a career in this filed also have an in depth knowledge and strong belief that they can succeed in the profession. One long Bull run can cover the lean periods.

How Is the Market Competition?

For brokers there is usually never a long lean patch, even including the sluggish phases that followed the 9/11 attacks. The younger Baby Boomer generation, with their fast paced investment and lifestyles, keep entering the market in search of high returns. A new broker need not refrain from approaching clients of the older, larger brokerage firms. There is always a chance for winning some of them who are not satisfied by their services.

Stockbrokers also do double duty as investment advisors, real estate agents/brokers etc which complements their work as well as supplement earnings. The idea is to catch the investor to diversify his investment. If you want to know the earning potential: the median earning was $69,200 while the central half earned between $40,750 and $131,290.

Learn How Economics Affects Stocks

noreply@blogger.com (Quang) — Mon, 11 Aug 2008 06:01:00 +0000

Economics. Double ugh! No, you aren’t required to understand “the inelasticity of demand aggregates” or “marginal utility”. But a working knowledge of basic economics is crucial to your success and proficiency as a stock investor. The stock market and the economy are joined at the hip. The good (or bad) things that happen to one have a direct effect on the other.

Getting the hang of the basic concepts

Alas, many investors get lost on basic economic concepts (as do some so called experts that you see on television). I owe my personal investing success to my status as a student of economics. Understanding basic economics helped me (and will help you) filter the financial news to separate relevant information from the irrelevant in order to make better investment decisions.

Be aware of these important economic concepts:

Supply and demand:

How can anyone possibly think about economics without thinking of the ageless concept of supply and demand? Supply and demand can be simply stated as the relationship between what’s available (the supply) and what people want and are willing to pay for (the demand). This equation is the main engine of economic activity and is extremely important for your stock investing analysis and decision-making process. I mean, do you really want to buy stock in a company that makes elephant-foot umbrella stands if you find out that the company has an oversupply and nobody wants to buy them anyway?

Cause and effect:

If you pick up a prominent news report and read, “Companies in the table industry are expecting plummeting sales,” do you rush out and invest in companies that sell chairs or manufacture tablecloths? Considering cause and effect is an exercise in logical thinking, and believe you me, logic is a major component of sound economic thought.

When you read business news, play it out in your mind. What good (or bad) can logically be expected given a certain event or situation? If you’re looking for an effect, you also want to understand the cause.

Here are some typical events that can cause a stock’s price to rise:

- Positive news reports about a company: The news may report that a company is enjoying success with increased sales or a new product.

- Positive news reports about a company’s industry: The media may be highlighting that the industry is poised to do well

- Positive news reports about a company’s customers: Maybe your company is in industry A, but its customers are in industry B. If you see good news about industry B, that may be good news for your stock.

- Negative news reports about a company’s competitors: If they are in trouble, their customers may seek alternatives to buy from, including your company.

Economic effects from government actions:

Political and governmental actions have economic consequences. As a matter of fact, nothing has a greater effect on investing and economics than government. Government actions usually manifest themselves as taxes, laws, or regulations. They also can take on a more ominous appearance, such as war or the threat of war. Government can willfully (or even accidentally) cause a company to go bankrupt, disrupt an entire industry, or even cause a depression. It controls the money supply, credit, and all public securities markets.

What happens to the elephant-foot, umbrella stand industry if the government passes a 50 percent sales tax for that industry? Such a sales tax certainly makes a product uneconomical and encourages consumers to seek alternatives to elephant-foot umbrella stands. It may even boost sales for the wastepaper basket industry.

The opposite can be true as well. What if the government passes a tax credit that encourages the use of solar power in homes and businesses? That obviously has a positive impact on industries that manufacture or sell solar power devices. Just don’t ask me what happens to solar-powered elephant-foot umbrella stands.

Pick Stocks Like Market Super Gurus

noreply@blogger.com (Quang) — Mon, 11 Aug 2008 06:00:00 +0000

I believe the best way to beat the market is to learn from Professionals (Market Gurus) who have done so time after time. That is why one can consider following a stock picking criteria based on one of the recognized strategies of well known stock market professionals.

This time I will elaborate on one of the most recognized modern investing Gurus on Wall Street – Martin Zweig and his time proven stock picking strategy.

Introduction
Martin Zweig was born in 1942 in Cleveland, Ohio. He took his first degree at the University of Pennsylvania's Wharton School of Finance, then an M.B.A. at the University of Miami, studying by night and working as a stock-broker by day. He completed his formal education in 1969, with a Ph.D. in finance at Michigan State University. Shortly after completing his Ph.D., Zweig invented the puts/call ratio, a well-known market indicator.

Zweig’s most famous quotes:

“I measure what's going on, and I adapt to it. I try to get my ego out of the way. The market is smarter than I am so I bend.”

“To me, the "tape" is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!”

“People somehow think you must buy at the bottom and sell at the top to be successful in the market. That's nonsense. The idea is to buy when the probability is greatest that the market is going to advance.”

Between 1970 and 1972, Martin Zweig wrote several articles for Barron's magazine. In each, he made a successful prediction for the coming direction of the market.

The resulting public demand led him to begin small-scale publishing of The Zweig Forecast, a market letter. After he advertised The Zweig Forecast in Barron's, it took off.

The Zweig Forecast was the top market advisory for the 15 year period between 1980 and 1995. Zweig Forecast delivered a 16 percent per annum compounding return, the highest risk-adjusted return of any market advisory service during that time.

According to the AAII (American Association of Independent Investors), out of more than 50 stock-screens it operates, the Martin Zweig Stock Screen has been its top performer in the last eight years - up more than 1,700 percent between 1998 and 2006.

In short Martin Zweig's basic stock market strategy is to be fully invested in the market when market conditions are positive and to sell stocks when conditions become negative. Risk minimization and loss limitation are a crucial part of Zweig's investment style. His book, “Winning On Wall Street” describes how Zweig determines whether to be in the market or not.
Zweig’s Stock Picking Strategy

When picking stocks, Zweig goes strictly by the numbers. As he writes in his book, "If a company can show nice consistent earnings, I don't care if it makes broomsticks or computer parts." Zweig is focusing on three main criteria to fish out potential winners:

1) Strong historical sales and earnings growth.
2) Reasonably priced.
3) Strong price movement relative to the market.

Zweig is avoiding stocks that have recently disappointed the market, and he dislikes companies with high debt. While he does not want to overpay, Zweig is willing to pay more for strong stocks. According to Zweig, "buying on strength gives you an edge. You must pay a premium, but you increase the probability of being right."

Revenue Pace
In theory, earnings growth should track revenue growth. Revenues growing faster than earnings reflect declining profit margins, which is a signal that market conditions are becoming more competitive, but earnings growing faster than revenues say that the growth is coming from cost cutting rather than growing sales. If this is the case, the company will run out of steam to cut costs, and earnings growth will slow down. Zweig likes to see stocks with revenue and EPS long-term growth rates in the same range. To mimic those criteria, set screen so that long-term revenue must be equal or greater than 75% of earnings, and vice-versa.

Fair Price
Zweig does not want to overpay for a stock. Zweig uses price-to-earnings ratios to measure valuation. Zweig’s definition of overvalued depends on the market conditions. In his book, Zweig accepts fast-growing companies with price-to-earnings ratios with 50% higher than the market. In the stock screen set current P/E ratio to be equal or less than 50% S&P 500 Average current P/E Ratio

Don't Buy Cheap
As much as Zweig doesn't want to overpay, he also is avoiding stocks that are too cheap. Very low price-to-earnings ratios signal that investors are leaving and perhaps for a good reason.
Zweig advised to disregard stocks with P/Es below 5. For the stock screen set minimum current P/E ratio to be equal or greater than 5% or to be equal or greater than 40% of S&P 500 average current P/E ratio.

Winners
Relative strength measures a stock's performance compared with the overall market over a specified timeframe. Zweig prefers stocks that are outperforming the market or performing at least as well as the market. Zweig does not mention a specific timeframe, but from his book, one would have guessed that six months could be the right measure. A 55 relative strength indicates a stock performing even with the market or slightly above. Set the stock screen’s 6-month Relative Strength to be equal or greater than 55.

Debt
The debt-equity ratio, which is long-term debt divided by shareholders' equity, is the most-commonly used debt measure. Zero values signal no long-term debt, and the higher the ratio, the higher the debt. Zweig dislikes high-debt firms.
Since acceptable debt levels vary by industry, and in order not rule out companies with acceptable debt-equity the stock screening parameter shall be set for Debt to Equity ratio to be equal or less than Industry Average Debt to Equity ratio.

Long-term growth
Zweig prefers consistent sales and earnings growth, going back four or five years. He considers 15% annual earnings growth acceptable, but prefers more. For this screening criteria set average annual sales equal or greater than 15% and set earnings-per-share growth, measured over the past five years also equal or greater than 15%

Recent growth
Martin Zweig avoids stocks with decreasing growth rates. He prefers to see the most recent quarter's year-over-year EPS (Earnings Per Share) growth rate in the same range as the long-term rate and even higher. However, Zweig is not dogmatic and is willing to reduce this requirement a little bit, depending on market conditions. In the stock screen set the most recent quarter's year-over-year EPS growth to be at least 75% of the long-term growth rate and set the most-recent quarter's year-over-year revenue growth be equal or greater than 85% of the long-term revenue growth rate.

Market Surprises
Zweig rejects stocks that had recently disappointed the market by reporting earnings below forecasts. So, rule out stocks with recent negative earnings surprises.

Conclusion
When following any stock screening strategy, it is important to remember that the process is only a first step. Martin Zweig's principles help to reveal a collection of companies exhibiting strong earnings and sales growth, reasonable price-earnings ratios relative to the overall stock universe, and strong relative price strength that can prove to be an interesting starting point. Zweig advises selling a stock if it drops roughly 15% below the purchase price. Otherwise, plan on holding these stocks for one year and then selling.

ESOP’s As Internal Buyers Of Your Stock Company

noreply@blogger.com (Quang) — Mon, 11 Aug 2008 05:59:00 +0000

This article is focused on helping business owners and their advisors understand Employee Stock Ownership Plans (ESOPs) and how they can assist in developing effective Exit Strategies from a business. Even with today’s vibrant Mergers and Acquisitions marketplace, many business owners continue to ask about ESOPs as ‘internal buyers’ of their Company stock.

Many ‘ESOP oriented’ business owners realize that their businesses are inherently difficult to sell and are interested in diversification of their personal wealth away from their illiquid businesses. Others simply want to know about the tax savings that the Internal Revenue Code allows when working with these plans. And some business owners are interested in rewarding management and key employees.

ESOP benefits include the following:

Tax-deferral of Capital Gains: Section 1042 of the Internal Revenue Code allows for the avoidance of capital gains on the sale of stock to an ESOP. Certain rules are required to be followed with this ‘rollover’ strategy, but it is possible for some corporations to sell stock and avoid capital gains taxation in the year that the sale is realized. Under current Estate Tax laws, the gain may be permanently avoided if the assets are ‘stepped up’.

Non-cash Tax Deductions for the Company: As a defined contribution plan, the ESOP allows a Company to make non-cash contributions to an ESOP that reduces its current level of taxable income.

Diversification for the Business Owner While Maintaining Control: This ‘internal’ transfer strategy allows a business owner to diversify any amount of their illiquid holding in the business while still maintaining control and drawing salary and other perquisites of ownership. By contrast, ‘External’ transfers almost always require selling a ‘controlling’, or majority, position in the Company.

Another benefit to an ESOP is the possibility that the employees will appreciate the value of their productivity and change their behavior on the job. Employees will receive small amounts of non-voting shares of stock each year into their ESOP account (remember that it is the ‘sharing’ of this stock ownership that allows the tax benefits in ESOPs). So, if the Company rises in value, employees will see this represented in their annual valuation. Often times this serves the purpose of encouraging more productivity at work through a sense of ‘ownership’ in the Company’s fortunes.

The primary disadvantages of ESOPs are the initial set up costs and the [often times] use of leverage in financing the ESOP.

Both of these disadvantages are mitigated by a few important facts. First, a sale of the Company to an ‘external’ buyer usually involves a much more expensive intermediary. And second, the use of debt is often a very inexpensive form of financing because it allows the business owner to retain a majority of the equity/ownership in the business. This means that the business owner maintains control of future profits in the business. And, many business owners are pleased to learn that the installation of an ESOP does not preclude that owner from later selling the business to an ‘external’ buyer.

For all of these reasons, ESOPs are powerful planning vehicles for Exit Strategies.

So, for a ‘controlled’ and ‘partial’ monetization strategy from a business, an ESOP can be just the right fit for a business owner looking for personal diversification, but not quite ready to give up control of the Company.

Profits In Stock market

noreply@blogger.com (Quang) — Mon, 11 Aug 2008 05:53:00 +0000

The time to hold on is when the tide is running in your favor. Never close a trade just because you have a profit. When tempted to close a trade just because you have a profit ask yourself the questions:

Do I need the money?

Is the move over?

Do I have to sell?

Why should I take profits?

Look at your charts, do what they tell you. If they do not show a change in trend, wait. Protect profits with stop loss order, but do not take a profit too soon. This is just as bad as taking a loss too late. Patience hold on when you are right and nerve to get out quickly when you are wrong will make a success.

Accumulate A Surplus

A surplus must be accumulated before you increase your trading quantities. Margins are not to hold on with, only lambs do that. If big risks are required, do not make the trade. Wait for an opportunity when you can buy or sell and place a stop loss order 3 to 5 points away. It is financial suicide to take big losses when they can be prevented.

You must not expand until after you have made profits. Every important business concern carefully creates a surplus and is proud to publish it. No business is run without a loss at some time and a speculator or investor must expect losses. Therefore, he must create a surplus out of which he can pay losses and still continue to trade.

In very active markets, when trading in high priced stocks, as a rule it does not pay to take a loss amounting to more than two consecutive days� fluctuations. If stocks go against you two days, they are likely to go more. Take your loss out of your surplus and leave your capital unimpaired and wait for another opportunity.

Buying For Dividends

The word dividend means a division of profits or earnings, but often when you buy Curb or mining stocks the word means divy, or that you divide up your capital with the other fellow and later lose all.

A great many people make the mistake of always wanting to buy stocks that will pay dividends. Do not buy stocks just because they pay dividends, nor sell them because they do not. Often people hold stocks because they continue to pay big dividends, only to see their capital half or more wiped out; then the dividend is cut or passed altogether.

Look to the protection of your capital, not for dividend returns. Trade for points of profit, not dividends. Fluctuations yield more money than dividends and you will be able to tell when stocks are being accumulated or distributed for an advance or a decline. If a stock is selling very low or out of line according to the dividend it pays, there is probably something wrong and it is a better short sale than a purchase.

If a stock is selling very high and pays no dividend, there is a reason for it and you should not sell it short. Probably it is going to pay a dividend or it is in a very strong position.

Otherwise it would not be selling at a high price. Manipulation for a time will force stocks above or below their intrinsic value, but in the end Supply and Demand govern the course of prices, and values are based on these factors. How to tell when Supply and Demand show the place where you should buy or sell.

The Bear Rules The Stock Market In 2008

noreply@blogger.com (Quang) — Wed, 06 Aug 2008 17:43:00 +0000

Most major international stock indices are dropping fast. In fact, stock markets in Asia, the United Kingdom, and Europe have all now seen the fury of the bear. A bear market is generally defined as a drop of twenty percent from the market's previous high. Indeed, it was only last October, when all of these global stock markets were about twenty percent higher than the levels of today.

Conditions in the United States equities market are not any different from global bourses. Since last October, both the Dow Jones Industrial Average and the NASDAQ have fallen by about twenty percent and entered bear market territory. It is common that, in most bear markets, the mood of the general public is grim. This time is not any exception. More than 80% of Americans currently think that the country is heading in the wrong direction. Indeed, half of the country even thinks that America's best days are now behind it.

The public's mood is not about to improve as second quarter 2008 IRA, 401k, 403b, and brokerage statements arrive in the mail, a quarter that includes a 10.2% drop in value in the last month alone. In fact, it was the market's biggest June loss since the Great Depression. The U.S. stock market has now lost $2.1 trillion in value this year with a $1.4 trillion loss in the month of June alone. However, in equity investing an investor should not focus on what has happened, but instead consider what will happen next.

If only we had a crystal ball, the market's short term future would be so much easier to see. The many questions that overhang this equity market would suddenly become answered and the market would move accordingly . Unfortunately, the truth is that we would really need the help of Nostradamous to accurately answer all of the questions necessary to predict the stock market's direction in the short term.

Indeed, the questions that will determine the markets future direction do seem endless; How long will the United States recession last? Will there be a global slowdown next? Is $150 the top for a price of a barrel of oil or will it go even higher? Is this just the beginning of an inflationary spiral that will send gold and silver to all time highs? When will the real estate market stabilize? How much longer will the major banks continue to pay the price of the sub- prime mortgage collapse? Will there be a global war with Iran in the next six months? Will the U.S. dollar continue to fall against the rest of the world's currencies? Who will win the U.S. Presidential election and will it even matter to the economy and consumer confidence?

So many questions that are impossible to answer. That is why it is futile to try. In fact, it is sure financial folly to attempt to time the equity market and therefore it is impossible to accurately predict this bear market’s end in advance. Remember, an investor is in equities for the long term (at least five years). The true investor understands that dramatic fluctuations are common and a part of the economic cycle. A real investor looks at the market of 2008 as a unique long-term buying opportunity for an investment in high quality common stock.

So, here are three facts from history to help investors overcome shock as we open and review the sad results from our 2008 second quarter investment statements. (1). The Dow has been declining for 262 calendar days, which is shorter than the median bear market of 363 days. The market's decline so far also is not as severe as the 26.9% average for a typical bear market. Therefore, the twenty percent market decline in the face of all the problems in the banking sector and the economy has so far actually been shallow compared to the average bear market of the past.

(2) The stock market will improve when the economy improves. Many financial pundits think that the economy entered into recession in February 2008. How long this recession will last is anyone's guess. However, history does tell us that the average recession since 1945 in the United States has been an event that has lasted about ten months. If this recession is shallow, it may already be near an end.

(3) The biggest gains in the stock market occur on a recession rebound. Everyone talks with horror about the great depression from August 1929 to March 1933. In fact, the Dow plunged 84.2% during that period of time. However, just one year later, the market had recovered most of that huge loss by achieving an 81% gain. A similar story of recession with subsequent sharp market recoveries can be seen throughout American history.

It is obvious that the bear rules the equities market in 2008. However, the bull will eventually return to Wall Street. History tells us that the return of the bull after a recession brings the biggest rewards to those investors that have withstood the fury of the bear. Certainly, it is market conditions like these that highlight the difference between being a long term equity investor and a short term market timing trader. The truth is that the latter needs a crystal ball while the former needs a level head and time.

Maximizing Your Stock Market Returns

noreply@blogger.com (Quang) — Wed, 06 Aug 2008 17:43:00 +0000

For those wanting to experiment in investments such as managed funds or online trading it is important to have done your research. Online trading has the benefits and freedom of being able to access your portfolio at any time of the day but also comes with risks. Many financial experts believe the average at home trader with limited knowledge of the stock market could be at financial risk. Instead recommending managed funds as a safer option for investing.

The simplest way to access the stock market from home is usually through online brokerage websites, but this can have its disadvantages: those looking to make a substantial return on investment will need a large amount of money to start. You will also need knowledge of financial markets and do background research into stock markets trends. While some people may thrive on the independence that online share trading offers, it's very easy to lose money, as you're competing with professionals who have worked in the stock market for several years. Many at home day traders may find that the amount of research needed into share trends and smart investments will offset any financial gain made. But like all things that are risky, the pay-off from making smart investments can be worth it.Another viable option for stock market beginners is through managed funds, which allows you to combine money with other investors, and let experts make investments on your behalf. Managed funds often are a more popular choice for stock market beginners, as you can still choose what investments you'd like to make, but under the guidance of an experienced professional. Options such as managed funds can broaden your investment opportunities. Using these investment methods can open doors, such as investing in commercial property which most individual investors would not have the opportunity or funds to be able to do. Without being willing to take risk, there will be little return; you're much less likely to reap as many financial rewards as you would have through direct investing. Additionally, management fees can be expensive, which is a turnoff for clients who only want to make a minor profit. But for those who are novices in the stock market, it's often a better choice to learn from an experienced day trader, as opposed to going it alone.

Of course, when it comes to choosing the right method of investment for you, it all boils down to what your expectations are. If you're a knowledgeable day trader and have the know-how of stock market trends, you may be able to get away with paying the fees associated with managed funds by making savvy investment choices, compared to a beginner. For those with little experience of share trading and stock market investments it may be a better option to get guidance from a managed fund run by professional day traders, compared to doing it on your own.

How to Make a Fortune on the Stock Markets Book

noreply@blogger.com (Quang) — Wed, 06 Aug 2008 17:42:00 +0000

If you've ever heard of the book called How to Make a Fortune on the Stock Markets, then you will know that it is considered to be one of the best financial advising books in the marketplace today. In addition, if you are thinking about purchasing this amazing financial counseling book, then you will be happy to know that you can buy How to Make a Fortune on the Stock Markets book, as well as other books written by the same author, Samuel Blankson, on financial advising, such as How to Make a Fortune with Options Trading. So, if you're up to shopping around for the best deals around on Samuel Blankson's keen perception of the markets today, then Amazon still has plenty of books left in stock for you to purchase, and the price range is quite nice, both new and used at around $21.

While looking around at Amazon to make your choice on How to Make a Fortune on the Stock Markets book, try taking a glance at the other books by other authors in the financial advising business, such as the four books listed below:

You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblatt.
How to Buy Stocks by Louis C Engel and Henry R. Hecht.
How to Make the Stock Market Make Money for You by Ted Warren.
Stock Investing for Everyone: Select Stocks the Fast and Easy Way by Arshad Khan.

At Amazon, you will never go without a good choice on a book that can advise you on how to make a fortune in the stock markets.

Screen Of The Week: What's Your Stock's Price Target?

noreply@blogger.com (Quang) — Wed, 06 Aug 2008 17:41:00 +0000

I hate to say it, but I've looked at enough price targets to conclude that – well, I shouldn't be looking at price targets.

I've seen some so far out there that I couldn't imagine how a company could even get near it.

And at other times, so low (and seemingly unattended too) that you're already well above it, meaning you would have gotten out just as the biggest part of the stock's move was beginning.

True, price targets aren't meant to be set-in-stone promises, and they shouldn't be used in a vacuum either. But it would be great if they could make a bit more sense and be a little more realistic.

So here's a way to create your own price targets.

(Note: I'll show you a quick and easy way to create your own price targets at the end of this article. But first, let me explain the dynamics of how you can use a company's P/E ratio to do this and why it makes sense.)

Many people use P/E ratios to determine a company's perceived under- or overvaluation.

But you can also use the P/E ratio to determine upside and downside price targets as well.

The two most common P/E ratios are:

P/Es using the Trailing 12 months (or 4 quarters) of Earnings and

P/Es using the F1 (or Current Fiscal Year) Estimates

First, the P/E ratio is simply price divided by (/) earnings. For example, if a stock's price is $30 and its earnings are $1.25, then its P/E would be 24. ($30 price or 'P' / $1.25 earnings or 'E' = 24 P/E ratio.)
If that stock's earnings rose to $2.00, the P/E would now be 15. ($30 price / $2.00 earnings = 15 P/E.)

The most logical conclusion would be to see the stock's price rise until its most recent multiple (or P/E ratio) of 24 was hit again. Why is this so 'logical'? Because people had just been willing to pay 24 times a company's earnings and they probably still are - if there's reason to believe the company's earnings will continue to improve.

So $2.00 (earnings) x 24 (the previous multiple or P/E ratio) = $48 (price). So the price target I'd have for that stock would now be $48. (And you could do the same thing on the downside too.)

Anyway, what you'll find is that most of the time, a stock's P/E ratio using EPS actuals is higher than its P/E ratio using its forward estimates.

That's because of the uncertainty regarding projected earnings vs. the certainty of actual earnings.

As the company continues to report (and meets its projections), the forward P/E ratio typically increases, which means the stock price increases as the earnings projections are coming to fruition.

And as more optimism grows over future earnings growth, you may see the P/E ratio grow even more, getting even higher than its previous multiple.

So once again, to figure out your stock's price target, simply:

(Take the stock's price) and then multiply it by the equation of its (P/E ratio divided by it's / forward P/E ratio).

The calculation would look like this:

Price * ((current P/E) / (forward P/E)) = future price (or price target)

Let's say a stock's price was $50 and its current P/E was 20. Let's also say its forward P/E was 15. Take 20 divided by 15 and you get 1.33 (i.e., 15 goes into 20, 1.33 times). Multiply the stock price by 1.33, and you get $66.50.

That's: $50 * (20 / 15) = $66.50 price target

Once again, this makes sense because if investors are willing to pay 20 times earnings now; assuming the company's earnings forecast looks good, why wouldn't they be willing to pay at least that in the future?

The screen I'm running today finds stocks with P/Es under the average for their Industry and are under their average P/E over the last 5 yrs. The stocks also have a price target of at least 20% more than their current price.

The Parameters are:

P/E <>
(Stocks with P/Es that are less than the average P/E for their Industry, implying it should have room for P/E growth.)

P/E <>
(I want the stock's P/E to be less that the Average P/E over the Last 5 Years.)

Price Target >= 1.2* the current price

And for good measure:

% Change in Actual EPS Growth F(0)/F(-1) > 0

% Change in Estimated EPS Growth F(1)/F(0) > 0

And lastly:

Zacks Rank <=2

Price >= $5

Volume (20 day average) >= 100,000

This screen produces plenty of great stocks trading well under their price target.
GIII GIII Apparel Group
IMA Inverness Medical
WPI Watson Pharmaceuticals

Stock Market Analysis By: Leroy Rushing02 Leroy Rushing02

noreply@blogger.com (Quang) — Fri, 25 Jul 2008 12:32:00 +0000

Basic Stock Trading Analysis

Analysis is one of the most important aspects of stock market trading, and experienced stock market investors spend hours each day analyzing stock market trends before making a decision. In fact, it is important for any stock market investor to know the trends and stock market options that are available. If you are planning on carrying out some market research, here are a few tips to help you carry out effective research:
1. Business news websites
News websites have a panel of stock market experts that are constantly monitoring the stock markets. One of the simplest ways of getting unbiased stock market advice is visiting news websites and reading through their market analysis page. News websites update their market analysis on a daily basis and also have a ‘stocks to look out for’ section that can help newbie stock market investors to keep close tabs on future stock market options. Another popular feature most business and stock market expert websites have is a chart based analysis system that displays the ‘movement’ of stocks over a period of time.
2. Business newspapers
Although the internet is one of the leading resources for stock market analysis, business newspapers like the Business World are still the preferred source of information when it comes to the stock market. Not all information from a newspaper is available online, and a business newspaper is still one of the easiest ways to get insider news and expert advice on the stock market. In fact, any stock market expert will recommend subscribing to a business weekly for a more in depth look at the stock market.
3. Stock market software
Stock market software is essentially an artificial intelligence program that carries out a thorough comparison of various stocks to reveal a suitable candidate for purchase. Stock market software updates itself on a daily or hourly basis (depending on an individual’s requirements) and also carries out a detailed analysis of each stock market option. In addition, stock market software also produces various statistical data like average trading price, lowest closing, highest closing and other details that can help a stock market investor make an informed decision.
There is software that will chart price movements in various time increments – from a few to several minutes, hours, or even days. It is from these charts that you would be in the best position to find trade setups, trade reversals, trends, gaps, momentums, and so many other insights necessary for successful trading.
It is important to remember that stock market software is essentially a tool and should not be the sole basis of any buy/sell decision. Stock market software is available from a variety of software firms and large stock market organizations usually have their own stock market software.
It is vital to understand that the stock market is influenced by various political and economical factors, and research is a vital part of any stock market decision. What is also true is that the stock market is all about making informed decisions and taking calculated risks. In fact, the reason why people all over the world are turning to research before making any stock market investment is because the stock market can essentially be deciphered by an analytic mind willing to take calculated risks from time to time.
For more information on investing in stocks and e-mini futures visit www.tradingeveryday.com

Pick Stocks Like Market Super Gurus By: Lenard Pikeman

noreply@blogger.com (Quang) — Fri, 25 Jul 2008 12:31:00 +0000