Howtotradestocks.org http://www.howtotradestocks.org/blog Stock trading tips and help! Wed, 11 Apr 2012 12:10:26 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Investing vs Gambling: Are You An Investor, Trader or Gambler? http://www.howtotradestocks.org/blog/investing-vs-gambling/ http://www.howtotradestocks.org/blog/investing-vs-gambling/#comments Wed, 11 Apr 2012 12:10:26 +0000 Wally http://www.howtotradestocks.org/blog/?p=2115 Continue reading ]]> Making money in the stock market can be a great way to supplement or replace your current income, but if you go about it haphazardly and without a good plan, it can also be a one-way ticket to the poor house.

Any kind of investment involves a certain level of risk. It is how you assess and manage that risk that determines whether you are an investor, a trader, or a gambler. When you are dealing with the stock market, being a gambler is the worst possible option. Let’s discuss a gambler first so you can see what you may be doing wrong and move to a more profitable position.

Rolling the Dice

A professional gambler will tell you that they have learned to minimize their risk. While this may be true, the information they can apply is still limited when compared to something like trading or investing (unless they cheat!).

When you put money into a trade or buy a stock for investment without researching the history or situation of the company, looking at trends in the price or the index, or being aware of news concerning the industry they are in, you are gambling. It’s like just rolling the dice and just seeing what comes up. The chances of getting the roll you want are far less than the chances of one of the many other, losing options.

This is basically throwing your money out the car window on the highway. It might seem fun at the time, and a few bills may blow back in through the rear window, but for the most part you are burning cash and watching the smoke rise. I highly recommend not doing this. While that may seem like the most obvious advice you have ever received, I can almost guarantee that at least a few of you have done this in the market. Being honest about your mistakes is the first step to correcting them.

 

Investing Well Requires Lots of Research

Warren Buffet is arguably the greatest investor in history. Do you think that he throws darts at a board to determine where he will put his money? I can tell you that he doesn’t. A successful investor knows where their money is going. They know the company they are investing in like it is a good friend. While you can’t always predict what your friend will do in any given situation, you usually have a pretty good idea how they will react in most.

In order to have a working knowledge of how a stock will act on a regular basis, you have to get to know it. Spend time reading about the company. Who started it? Who runs it now? Who are the key decision makers for it and what is their track record? These and other questions are vital to knowing how the company is run and what their future may hold.

The sector they operate in is just as important. If company X is the greatest widget maker in the world and the next best company is far, far behind them, they may be a great investment. But what if the trend in the world of widgets is that they will be replaced in the near future by wodgets? You certainly don’t want to put your money into a sinking ship, even if it hasn’t quite started sinking yet. Kodak has been a solid investment for many, many years. But with digital cameras eliminating the need for film, now where do they stand? I’m not saying that Kodak is not a good investment, I’m asking where they stand at this point in the industry. Have they adapted well enough to survive? Will they thrive or die? What are they doing now and what are their future plans?

These types of considerations are vital for putting money into a long-term play, which is what investing is. You also need to remain aware of changing circumstances, so that you can get out if you need to.

Investing is not only about stock price, though. A seasoned investor is looking more for stability than movement in a stock’s price. Dividends are an important factor as well.

The best way to make money on an investment is the Buffet method. When you have built up a strong holding in a company that is stable and growing, even at a small or even pace, you can sell calls on the stock that are out of the money enough to get a small but consistent return, with little risk of having to actually sell the contracts. Even if the stock price rises dramatically without warning and you do get called on the contracts, you win. You actually make more money when this happens!

Bottom line: spend time with your stock before you buy it, like you would court someone and date them before marrying them. It will give you the best return on your investment.

Trading is for Short Term Gains

Trading is a different animal than investing, and it requires different methods and research. While investing is best for years-long periods, trading is plays over one day to several months. Volatility is highly desired when trading, while investing requires stability and slow growth.

The tools used in trading are the same you use in investing, but they are analyzed on a much shorter-term basis. For instance, trend lines on a stock chart are important in both, but when investing you should look at monthly trends over a few or more years, while in trading you could be looking at as little as 5 minute periods.

There are trading cycles throughout the year that must be followed to be successful. In the summer, the market is generally very choppy and gains need to be quick and are often intra-day, while in the fall through winter trades can last for weeks. Knowing these cycles gives you good insight for how you should set your trades up.

Tools that can help you understand the way the market flows throughout the year are the Stock Trader’s Almanac, the calender for earnings, and historical charts that you can examine for trends in companies or indexes. If company Z has a drop in price after every spring earnings report, or a run-up in price leading up to it, this can be a regular play that you plan on. While current conditions always have to be taken into consideration, the trends make for a much better chance of the play going your way.

Trading is an excellent way to provide regular income week to week, while investing is more for securing your future. You can make money monthly or quarterly in investing using the Buffet method, however. A good plan is to trade for short term gains and then invest part of your earnings for the long term, while leaving the rest to trade with. Wash, rinse, repeat.

If you are gambling though, just send your money to me. You’ll get the same return.

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Can You Make It Big with Penny Stocks? http://www.howtotradestocks.org/blog/can-you-make-it-big-with-penny-stocks/ http://www.howtotradestocks.org/blog/can-you-make-it-big-with-penny-stocks/#comments Mon, 27 Feb 2012 16:50:26 +0000 Wally http://www.howtotradestocks.org/blog/?p=2439 Continue reading ]]> Browse a few investing or finance websites—even legitimate, high-profile ones like Yahoo! Finance—and you’ll see banner ads making fantastic claims about the money to be made in penny stocks. It’s perfectly understandable that you might wonder, given the prevalence of such advertising, whether there is any truth to those claims

Penny stock websites have proliferated wildly—as you’ll discover should you choose to click any of those banner ads—and come in all flavors. Some, like Hot Penny Stocks Finder, have price boards and graphs that present an appearance that is, at least superficially, very businesslike. Others, such as the Timothy Sykes website, are longer on hype.

Of course, your first question may be, “What exactly is a penny stock, anyway?” Well, as it happens
there is no universal definition. The Securities and Exchange Commission

(SEC) says a penny stock is any issue under $5.00. By that standard, no less a venerable institution than Bank of America (BAC) was a penny stock for a while back in March 2009, when it reached a low of $3.14. Some authorities set a limit of $3.00, and then there are those who insist on a technically-accurate criterion of less than $1.00.

 

It’s these extremely low share prices that open the door to one of the common tactics used to promote penny stocks: the very small price movements (which implies a very short timeframe) required to produce huge gains in percentage terms. At $0.20 a share, $0.04 represents a 20% change. Think about how long it would take to achieve a 20% increase in Amazon (AMZN) or Apple (AAPL) shares.

 

While that may sound perfectly reasonable at first blush, the same hard, cold logic that applies to the august members of the NYSE and Nasdaq applies to penny stocks. Share price should, under normal conditions, reflect the valuation of the company and its future earning potential. It will also reflect collective market activity that favors or disfavors the stock, which (arguably) can be irrational in the short term.

 

In other words, despite the fact that many penny stocks represent young companies, the true value of those businesses isn’t likely to change by huge leaps on the order of 10%, 20%, or 30% in a matter of days or weeks. Nor are institutional fund managers buying into the stocks in quantities that will drive a massive price swing—in fact, they aren’t buying into them at all.

 

So where do penny stocks come from, and where are they found? One origin of penny stocks is delisting—the removal of a company from one of the major exchanges. The NYSE, for example, has certain listing criteria, such as minimum share price and market capitalization, that it requires in order for a company’s stock to trade on its exchange. Companies that fall on hard times can “fall off” the major exchanges, landing somewhere like the Over-the-Counter Bulletin Board (OTCBB).

 

The OTCBB is, like the Nasdaq, a purely electronic exchange (as distinct from the NYSE, which although it uses electronic trading extensively, still has a physical trading floor in New York). However, unlike the Nasdaq, it has very little in the way of listing criteria—no minimum share price, market capitalization, or annual revenue.

 

The second place penny stocks are sold is the Pink Sheets. Stocks on the Pink Sheets fall below thethreshold of 300 shareholders, which is the limit at which the SEC says the company doesn’t have to be regulated. That means the public filings mandated for most public companies—filings which are available to anyone on EDGAR—aren’t required.

 

That leads us to the first problem with penny stocks: the near-total lack of disclosure and reliable information. The sort of transparency investors have come to expect of publicly-traded companies, thanks to SEC regulations and further legislation such as Sarbanes-Oxley, doesn’t exist in this arena. You have no way to know much of anything about these companies, from accurate financial statements to insider holdings and trades to who actually owns or runs them. Analysts don’t follow them; if you do see an “analyst opinion” of one of these stocks, you can bet it comes from someone paid to produce that analysis—which should tell you just how reliable it is.

 

The earlier allusion to the fact that institutional investors don’t buy these stocks segues nicely into the second problem with penny stocks: lack of liquidity. As an investor, you are probably accustomed to clicking the “Trade” button in your online platform and having a transaction occur nearly instantaneously. That’s because there are many buyers and sellers in the marketplace for normal stocks, not to mention market makers who are willing to absorb excess selling temporarily when necessary.

 

None of those things exist for penny stocks. As a buyer you are basically searching for someone who owns that stock and is willing to sell at that moment, and the same holds true when you are a seller. If you’ve ever tried to sell a car by placing a classified or Craigslist ad, you know that until someone comes along who wants it and will pay your price, you’re stuck with the vehicle. The same holds true for penny stocks, so think about how many willing buyers you’ll find when you’re holding an issue that’s currently plunging in value. It can quite literally take days, and don’t expect to get the price you’re asking.

 

Penny stocks are often used in fraudulent schemes, such as the “pump and dump” classic wherein a given stock is heavily touted (at one time spam e-mails were a common method) to lure buyers in and drive up the price, at which point the scheme’s promoters sell their huge blocks of shares, sending the price into a death spiral. Other techniques involve websites—which as mentioned in the introduction are legion—and even telephone scams featuring high-pressure sales tactics from “brokers.”

 

Has legitimate money been made in penny stocks? Certainly it has. As your father may have said, even a broken clock is right twice a day. But the lack of information and transparency so prevalent in this market makes an informed investment next to impossible. As the old saying goes, if you’re playing poker and you don’t know who the sucker at the table is, it’s you.

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Investing in Emerging Markets http://www.howtotradestocks.org/blog/investing-in-emerging-markets/ http://www.howtotradestocks.org/blog/investing-in-emerging-markets/#comments Wed, 04 Jan 2012 10:16:50 +0000 Wally http://www.howtotradestocks.org/blog/?p=2372 Continue reading ]]> If you are only invested in the US stock market, you could be missing out on some pretty big opportunities. It’s always smart to be on the lookout for any deal that is potentially profitable to you. Increasingly, these types of bargains and opportunities are being sought out by venture capitalists and everyday investors alike in emerging markets around the world.

Even though most of the money from investors still flows pretty much to silicon valley, New York, London, China and India, the trickled streams that lead out to other markets keep getting a little wider, deeper, and faster moving. With the risk involved with markets overall in the world today, the risk in these markets is looking less scary when compared to the potential gains. As the world moves further into the age of technology, the barriers to entry for higher-tech companies are being broken down in places that would have previously been considered taboo or downright lunacy.

Many small start-ups are developing at a faster and faster pace in these smaller second- and third-world countries. The commodities market has also been booming in places like South America, where exports to the steam-engine growth centers of China and India have remained solid, even while the US lags more and more behind. The four big emerging markets, China, India, Brazil, and Russia have seen huge growth over the past decade, and even through the recent and ongoing global recession they are beating the pants off most markets in terms of return on investment.

Other than higher risk tolerance and lower barriers, many venture capitalists are throwing money into emerging markets because they can get involved at the ground level with these entrepreneurs, leveraging their local knowledge with the VC’s background in the mechanics of business to create a beautiful creature of a company together. Small tech-based companies such as application developers, software companies, and others are popping up at an increasingly rapid pace in countries such as Malaysia, and established brands like Samsung in South Korea are expanding wildly, bringing interest in other plays from the region.

Apart from the emerging markets tech plays, commodities, and manufacturing, investing in companies that are not based in but do business in emerging markets are great ways to invest while staying in the US stock markets. Dell, while not the player it once was, spent time establishing a presence in China years ago. SAB Miller, while a top brand of beer in the US, has incredible marketshare in South America, India, China, Africa, and Russia. How’s that for an emerging market play? The point being that while investing directly in emerging markets can be a great addition to your portfolio, if you are wary of this option you can still take advantage of the growth in these regions by investing in the businesses that are established or growing there.

While 2011 saw some slippage in the emerging markets growth rate, 2012 has already had some promising news on several fronts. The manufacturing gauges for China and India indicate that the hard landing some were predicting may not be coming after all, and the central European banks still have investing funds flowing there. Brazil’s inflation estimates have been cut 5 straight times by economists, and their shares are rising. Poland’s commodities index is up after tax decreases on metal extraction, and Mexico’s central bank said that their remittance rate is up almost 9% over last year. Without getting caught up in too many particulars and bogging you down with boring numbers, let’s just say that this may be a great time to look outside the Dow Jones for some alternative investment strategies.

The governments in many of these emerging market countries are becoming increasingly democratic in nature, recognizing that the free market principles they are easy into are helping to spur their economies and growth. It is ironic that countries such as China and Russia are experiencing growth while relaxing governmental burdens on businesses, the US has seen stagnation and economic decline while continuing to raise overbearing regulations on businesses. In the past the exact opposite was true, showing that history is a great teacher, to some anyway. As they continue to promote business growth through lighter regulation and removing trade barriers, these markets should continue to see more growth.

When investing in emerging markets, it is wise to also consider the downsides, which can be numerous depending on which region you are looking in to. Turbulent political problems, unstable regimes, and stresses within the countries’ population or with another nation can be a high risk factor. It is often impossible to know if the market will be open for business the following day in some countries. In addition to these issues, the rules of the markets are made and enforced with varying degrees of compliance. For instance, in the US insider trading is fairly stringently monitored and enforced. In most other countries, even though they claim to keep a watch on this practice, in reality the enforcement is generally lax. There is also less liquidity in most emerging markets, which can cause orders to be filled at unfavorable (read higher) levels and higher broker fees. For example, while markets such as Egypt have been on investors’ radars for several years, in the aftermath of the Arab Spring uprisings the future of the region is much less certain.

Diversification has always been a hallmark of any good investment strategy. Most often you will hear this preached as spreading your money over different sectors, and this is indeed a smart thing to do. If you are looking for an even wider range of diversification, however, looking beyond the traditional bond market or real estate plays onto the emerging markets of our new global marketplace could be the strategy that takes your investing to the next level.

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52 Money Saving Tips http://www.howtotradestocks.org/blog/52-money-saving-tips/ http://www.howtotradestocks.org/blog/52-money-saving-tips/#comments Fri, 16 Dec 2011 12:32:02 +0000 Wally http://www.howtotradestocks.org/blog/?p=2103 Continue reading ]]> It’s a tough world out there these days, financially speaking. While we have lots of great information for you here on how to make money in stock market, it’s a fact of life that you must have the money to invest or trade before you can start.

Never fear, we are here to help you make it through the tough spots and get ahead. Need to save some dough so you can make some dough? Here are some simple tips.

  1. Turn off the TV – Unless you are watching CNBC , Bloomberg, or the news (this part is debatable), you’re just numbing your brain. Don’t pay $100 per month to watch American Idol or re-runs of Gilligan’s Island. You can get your stock news from the web in real time.

  2. Drink tap water – Bottled water is one of the largest hoaxes passed off on the public in recent history. Unless you live somewhere like Mexico, stop blowing money on it. Drinking more water will also save money on buying things like soda.

  3. Buy generic groceries – I know, some of it tastes like cardboard, but most stuff tastes exactly the same, or at least close enough if it’s cutting 25% or more off your grocery bill.

  4. Don’t pay for tanning – In the summer get some sun outside, in the winter deal with it.

  5. Plan your trips to the store – Write down everything you need to get as you think of it, so you don’t waste gas making five trips to the store for things you forgot.

  6. Take a stay-cation – Sure the beach or mountains are beautiful, but if you skipped it this time and stayed home, how much could you pay off or put away?

  7. Shred your credit cards – If you can, get rid of them and use a debit card. The credit industry is slowly killing you with interest rates.

  8. Cancel the landline – A cellphone and Skype should handle your needs nicely.

  9. Stop eating lunch out – If you live close to home, eat there. If not, take a packed lunch from home. This will save you lots of money.

  10. Invite friends over for dinner – instead of going out for dinner and drinks. It’s more personal and a lot cheaper.

  11. Stick to your shopping list – Avoid spending extra on every other thing you pass in the store by making a list ahead of time and not deviating from it.

  12. Buy basic items from a dollar store – Tape, gift cards, some cleaning products, etc. can be purchased for much less at discount stores.

  13. Cut out booze and cigarettes – easier said than done, I know, but if you spend money on these things, it’s usually a lot. You’ll also be much healthier.

  14. Change your air filters on time – the air conditioning/heating unit has to run a lot harder when it has to fight through the build up on the filters.

  15. Clean your car’s air filter – you’ll get better gas mileage if you clean it regularly according to the owner’s manual

  16. Cancel subscriptions to unused things – magazines, the gym you never visit, newspapers, and lots of other things take your money and give you nothing in return.

  17. Buy used – sporting goods, tools, and other household items can be bought for much less at yard sales or second hand shops.

  18. Buy things in January – after the holidays there are always good deals on items that are left over from holiday stock-up.

  19. Unplug electronics and appliances – even when they’re not in use, they are still using energy and running the electricity bill up.

  20. Keep blinds closed – it helps to insulate the house and keep the temperature regulated.

  21. Adjust the thermostat – before you leave the house or go to bed, turn the heat or air down or up to save on electricity.

  22. Get books from the library or friends – you can find plenty of quality books to read for free.

  23. Carpool – gas is expensive, so share the ride whenever you can. This will also save on auto wear and tear.

  24. Plan meals weekly or monthly – this will keep you from impulse buying food and let you buy when items are on sale.

  25. Shop online – Use Ebay, Amazon, and other sites where you can get great deals instead of the local brick and mortar or the big-box stores.

  26. Use fee-free ATMs – Your own bank should be fee-free, and others like CashPoints offer no charge as well.

  27. Use coupons – you don’t have to become an extreme couponer, but use the coupons in the paper if you get it. You can find and print lots of coupons online.

  28. Drive the speed limit – speeding tickets can cost you unexpected and unnecessary money.

  29. Cook double or quadruple portions – you can turn one meal into several, saving time, and it is cheaper to buy the bigger amounts once than buying the smaller amounts twice or more.

  30. Stock up on staple items – when there is a really good sale on something like toilet paper that you know you are going to always buy, buy a lot.

  31. Make your own coffee – the coffee you are getting at the drive-through or the specialty coffee shop is costing you at least 10-20 times as much as drinking coffee from your coffee pot at home.

  32. Use a push mower – you’ll use a lot less gas, have a lot less maintenance, and get a lot more exercise than from a riding mower.

  33. Use cheaper entertainment options – Redbox, Netflix streaming, and other similar offerings are much cheaper than renting from a Blockbuster store or going to the movies. You can also watch TV shows on Hulu for free.

  34. Keep air in your tires – another useful tip that will keep your gas mileage optimal.

  35. Get term life insurance – term is the cheapest way to go, and it will cover your family for the loss of income while you’re still of working age.

  36. Wash your hands – this will cut way down on the chances of you getting sick, which can be expensive with medicine, doctor’s bills, and missed work.

  37. Save – how do you save when you are struggling? Just put something away every time you get paid and forget that you have it. You will learn to live on less and will have a fund for emergencies in the future.

  38. Refinance your mortgage – have you seen the rates lately? If you are in a higher rate mortgage, you should look into refinancing.

  39. Take your own trash to the dump – if you have a dump nearby, get a large trash can for the garage or outside and make a trip or two each week when you are going that way. Cancel your curbside service.

  40. Increase your insurance deductibles – this will bring down the monthly premium. You can always decrease it again later if you want.

  41. Close air vents in unused rooms – heating and cooling rooms that you never go into is a waste of money.

  42. Use flexible spending accounts (FSAs) – if your job offers it, this is a great way to save money over the year by spending pre-tax money on medical expenses.

  43. Use free software – using software like OpenOffice or other free software solutions instead of Microsoft Office or other paid-for products can save lots of money, and work just as well (better in some cases)

  44. Use microfiber cloths and warm water for glass cleaning – they work really well. Wipe it down with the water, then buff it out with the microfiber cloth.

  45. Don’t buy furniture polish – microfiber works on furniture too.

  46. Use vinegar to clean your shower and grout – works well and saves money on special cleaners.

  47. Repair damaged clothes – if you can repair it instead of throwing it out and buying new clothes, it’s a lot cheaper. Learn how to sew a button.

  48. Make and use a budget – Sounds simplistic, but if you know and plan where every dollar is going, you will be amazed how much better you handle your finances.

  49. Go to movies during the matinée times – save a few bucks when you do want to see the latest movie.

  50. When you do trade, use a discount broker – a good list of them is here.

  51. Buy cheaper pet food – pet food can be ridiculously expensive. When I see my dogs eating their own poop, I realize that the cheap stuff probably still tastes better.

  52. Earn some extra money on the side – do freelance work, become a consultant in an area you know well, have a yard sale, or sell stuff on Ebay.

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10 Great Ways to Learn Stock Trading http://www.howtotradestocks.org/blog/10-great-ways-to-learn-stock-trading/ http://www.howtotradestocks.org/blog/10-great-ways-to-learn-stock-trading/#comments Tue, 06 Dec 2011 00:42:53 +0000 Wally http://www.howtotradestocks.org/blog/?p=2000 Continue reading ]]> 1. Figure Out What Your Strengths Are

Some traders can make plays using only technicals and charts and do very well. Some understand the news and psychology well and can trade around them successfully.

Try different methods and combinations of methods to see where your trading strengths and weaknesses are. Play with charts, technicals, earnings, splits, indexes, futures, etc. and find out which ones you can play well and which ones you can’t.

If you are getting every trade wrong on news items, stop trading around it. If the charts always go against your trade, focus more on something else. In the same way that you want to become an expert on the few stocks that you trade, you also want to become an expert in a few areas of trading methods.

Very few traders can do it all well. Find where your trading niche is and keep your primary focus in that area. You can keep working on your weaknesses over time, but do it with virtual account and don’t wipe out the earnings you get from your stronger methods.

2. Read Books

You can learn a lot from those who have done well in the market, and many of them have published books sharing their methods and tips.

You can also learn about different techniques, such as candlestick charting and how different technicals like RSI, MACD, or Bollinger Bands can help you look for signals to pull the trigger.

The more you learn, the better you will be, just like in any activity in life. Some books that I personally recommend are Profitable Candlestick Trading by Stephen Bigalow, The Disciplined Trader by Mark Douglas, and The Market Maker’s Edge by Josh Lukeman. There are many more out there, just find some that you can relate to and read them.

3. Watch TV

I’m not talking about infomercials or 30 Rock. A good trader knows what’s going on in the markets every day, all day long, and you should have CNBC or Bloomberg playing as your background noise throughout the day.

It’s not necessary to pay close attention to everything that’s said or reported, but you need to half-listen to it for the “gold nuggets” that come here and there. You should be able to glean something every day that can help you with research or specific trades.

Remember that news about an industry or another company in the industry of a stock you are following can be very relevant information for you. For instance, if a company that competes with the company you are following reports bad earnings or has negative news, it may either cause your stock’s value to go up or drag it down with it, depending on the news.

These types of reports are important to be aware of. There are economic reports that come out almost every day of some sort. Find out how your stocks react when they do and which ones affect your stocks.

4. Practice with Imaginary Money

Before you go throwing your hard-earned money into a trading account, use a practice account to see how you do. Several sites offer free accounts with virtual trading.

I used OptionsXpress when I started, and their virtual trading option is excellent, but there are others out there as well. Using a virtual trading account will help you to assess how well you do with different information without risking your money.

5. Keep a Journal

Make sure that you write down and record your trades. You want to keep a record of what factors you considered when deciding on the trade, what happened (were you right or wrong), and what you did that worked or didn’t work.

This will be similar to a life journal or diary. You want to record everything that you can (within reason) about the economic day. Record the opening, closing, high and low prices of your stock, the different indexes, and related stocks.

Record economic reports that came out and news stories that are related to your position, directly or indirectly. Looking back on this journal will give you greater insight as to what caused the market or the stock to move the way that it did yesterday, last week, or last month.

It takes perseverance to trade well, and you learn from your mistakes and successes.

You may find it helpful to post your trades on a blog, you can get a free blog at wordpress.com or blogger.com

6. Learn About Trading Options

Trading options instead of actual stocks is a little more complicated, but it allows you to get started with less capital invested. One option contract represents 100 shares of stock, but costs less to buy and sell than the actual stock.

The movement of the option price is slower than that of the stock price, but when you get the trade right your gains are exponentially better. The other advantage is that you can make money easier using calls and puts, especially when there is volatility in the stock, than just trying to look for stocks that are going up.

Calls are basically bets that the stock price will rise, while puts are similar to short-selling, in that you are betting that the stock price will fall. Because you don’t actually own the stock, only the option to buy or sell it at a certain price, you can leverage your money into bigger gains more quickly than you can buying and selling the actual stocks.

7. Compare Company News to Stock movement

Watch for news about a company you are thinking about trading and see what happens when they have good earnings, bad earnings, splits in the stock, stock buy-backs, upgrades or downgrades, and mergers/acquisitions.

Pay attention to what their stock price does when each of these happens, and how long it lasts. Research what has happened in the past when these have happened.

Keep in mind that bad news usually effects a stocks price for a longer period of time than good news. You also need to be aware of news about other company stocks in the same sector or industry, particularly if they are competitors.

For example: Let’s say you are watching the stock of a company that makes a particular kind of drug. Their competitor, who makes the same type of drug, comes on CNBC at lunch and announces that their drug is being recalled by the FDA because of potentially dangerous side-effects.

Your company’s stock will be affected, but you need to figure out whether it will go up because of the competitor’s misfortune, or if they will be dragged down as well from public fear of the category of the drug.

These types of insights take time and patience to understand well, but in the long run they will greatly help your trading.

8. Study a Stock’s Relationship to its Index

Look at historical charts to see if the stock you are watching moves with its index, against it, or is rogue, meaning its index doesn’t necessarily affect what it will do very often.

If a particular stock always moves in the opposite direction of an index or another stock, this is valuable information. If it always moves in the same direction, this is also valuable information.

Anytime you can identify persistent trends from a stock, it greatly increases your chances of being right on its movement in relation to other factors.

9. Focus on a Few Stocks

Don’t jump in and start trading on every stock that has good news or lots of movement right now. Pick a few stocks that you are interested in, that have movement regularly (up or down), and become experts on them. Study the stock’s history, know what is going on with the company, and stay aware of news about the company and how it affects the stock.

Once you have a good feel for a few stocks, add another one to your watch list and get familiar with it. This will take time, but you are looking at building experience that will make you money over your entire lifetime if you take the time and do it right.

After you have studied and consider yourself an expert on a certain stock and how it acts and reacts in a variety of situations, consider adding another stock. Trying to trade every stock in the market will lose you money.

10. Take a Class

There are tons of people out there who teach classes on how to trade the market.

I took one myself several times years ago, and took it again several times. Do your homework before you pay for one though, and find out their credentials and success stories that have come from the class.

Don’t take at face value what’s on the brochure or website. There are plenty of scammers out there that want to take your money but have nothing of real value to offer you. Make sure that you are getting quality information before you hand over your money.

There are also plenty of free classes or websites that have good information, but if you want to get a good, solid foundation or some strategies that are effective, you are probably going to pay something for them.

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What Are Oil Futures? http://www.howtotradestocks.org/blog/what-are-oil-futures/ http://www.howtotradestocks.org/blog/what-are-oil-futures/#comments Sat, 21 May 2011 18:09:16 +0000 jenifer http://www.howtotradestocks.org/blog/?page_id=1470 Continue reading ]]> Oil prices have been historically volatile, and the recent surges in the price of oil have been effecting consumers across the world. As the price of oil rises investors in oil futures stand to make huge profits by using oil futures contracts. You may be wondering, what are oil futures?

Oil futures are financial instruments that carry with them legally binding obligations between buyers of a commodity – in this case oil – and sellers of a commodity. Sellers and buyers of the oil futures contracts have the obligation to make or take delivery of an underlying instrument at a preset settlement date in the future.

As oil futures prices are derived from the underlying instrument, these investment vehicles are often referred to as “derivatives”, and settlement dates, quantity, and quality of these contracts is standardized. There are futures markets for a variety of instruments ranging across commodities, interest rates, equities, bonds, and currencies.

Oil futures are traded on the Intercontinental Exchange as well as the NYMEX, or the New York Mercantile Exchange. Light-sweet crude oil is traded on these exchanges, and a single contract – or “lot” – calls for the sale or purchase of 1,000 barrels of oil.

What Are Oil Futures And Who Invests In These Instruments?

What are oil futures and who are the primary investors? Participants on futures exchanges include corporations that may have an interest in oil futures for their daily business. Some examples include transportation companies, utility companies, and airlines. This strategy offers these companies the chance to hedge against losses that could arise from rising oil prices.

Another class of oil futures investors are speculators, which are usually banks and other financial institutions with an opinion on where oil prices are headed. These financial institutions assume the risk and provide the market with liquidity.

There has been much conjecture as to whether this speculation has resulted in the volatility seen in the price of oil. While the volatility seen in oil prices seems to be a combination of factors, including political and global events, speculation has certainly affected at least the short-term price fluctuations in crude oil.

What Are Oil Futures And How Are They Traded?

Oil futures contracts are traded on regulated futures exchanges, and trading can take place through open outcry or through electronic trading systems or a combination of both. You must be a member of that exchange in order to trade on it.

A member of an exchange can either trade on their own account, or they can execute orders for speculators or hedgers. If an exchange member is acting as a broker, they can then collect a fee for their service.

In order to limit these brokerage fees and commissions, you can use a discount broker such as ETrade, that also offers a range of included services, including personalized investment advice. This online broker also offers over 200 futures investment products to make it easier for you to find the futures investment that is best for you.

There is also a clearinghouse for each exchange that ensures that trades are executes according to market rules, and also guarantees the performance of the contracts traded.

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How To Buy Oil Futures http://www.howtotradestocks.org/blog/how-to-buy-oil-futures/ http://www.howtotradestocks.org/blog/how-to-buy-oil-futures/#comments Sat, 21 May 2011 18:04:21 +0000 jenifer http://www.howtotradestocks.org/blog/?page_id=1466 Continue reading ]]> A contract that allows an investor to purchase to buy a commodity at a specified price at a specified time is what is referred to as a futures contract. An oil futures contract is a futures contract that deals with the price of oil, which can be extremely volatile.

Oil futures contracts are often used by producers and users of the commodity in order to hedge against fluctuations in prices. As an example, a transportation company may purchase an oil futures contract in the hopes that the price of oil will rise, with this rise in value of the contract offsetting any losses that could come with the additional cost of fuel.

There is also the opportunity for investors to use futures contracts for speculation and profit. If you are interested in investing in these financial instruments, you are probable wondering how to buy oil futures.

Investing in oil futures is not for every investor, and you should thoroughly research every potential investment to assess its suitability for your situation and risk-tolerance. Speak with a personal financial adviser at industry leader ETrade, to find out if this strategy is right for you.

How To Buy Oil Futures

The first step in learning how to buy oil futures is finding a reputable broker. You must ensure that the broker is in good standing with the FTA – Futures Trading Association. You should choose a broker that offers competitive commissions on trades, top-notch trading platforms, and the option to speak with a real person.

Online broker ETrade offers these services and more, and is worth looking into if you are interested in oil futures trading.

You should research whether oil is trading over its 200 day moving average, which is an important technical indicator that professional traders use to discern whether a commodity is bearish or bullish. If oil is trading above its 200 day moving average, it is more likely to be rising further, while if it is falling below its 200 day moving average, it is likely to continue to fall.

How To Buy Oil Futures: Checking Oil Trends

When learning how to buy oil futures it is important to keep up with the trends in oil. You can accomplish this by checking the weekly charts, as well as reviewing historical charts. You will then draw a trend line across the lows and another one across the highs.

This creates a channel, and when you purchase a contract, the channel should be sloping upwards, and you should aim to purchase the contract near the bottom of the channel, not the top.

You should then use a limit order to buy the oil futures contract when it touches the bottom trend line. This type of order is an automatic order that will trigger when the market drops to the line. This keeps you from having to watch the market.

You should also set your stop loss order to close your position if it turns out that you were wrong about the market’s direction.

An excellent all-in-one site for investing in oil futures is online broker ETrade. This discount broker offers a vast array of products and services for its clients to use to maximize their chances of investing success.

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How To Track Real Time Oil Futures http://www.howtotradestocks.org/blog/how-to-track-real-time-oil-futures/ http://www.howtotradestocks.org/blog/how-to-track-real-time-oil-futures/#comments Sat, 21 May 2011 17:59:46 +0000 jenifer http://www.howtotradestocks.org/blog/?page_id=1460 Continue reading ]]> If you are an investor in oil futures, you may be wondering how to track real time oil futures. You have some options for tracking real time oil futures quotes, and there are several providers who can help you keep up with prices.

You can receive real time oil futures on your web-enabled phone, PDA, or home or office computer. These options will allow you to keep up with the futures markets even when you are on the go. When you use mobile options you can keep track of your investments and know what is happening no matter whether the market is up or down.

Online broker ETrade offers professional grade futures trading for its clients, including real time bids and asks, and market depth. You can also receive futures education, daily market analysis, and one of the industry’s best trading platforms.

How To Track Real Time Oil Futures

Before you learn how to track real time oil futures, it is important to review what these investments entail. By investing in oil futures you are attempting to predict where the price of oil is headed. These financial instruments carry with them legally binding obligations to purchase or sell an underlying commodity – in this case oil – at a specified settlement date in the future.

Oil futures are a part of the derivatives family, as their worth is “derived” from the value of the underlying instrument. These contracts are standard in terms of settlement dates, quantity, and quality. In the case of crude oil, the major exchanges are the Intercontinental Exchange and the New York Mercantile Exchange.

Investing in oil futures carries the very real risk of loss of capital, and are not suitable for every investors. Take advantage of the training available through your broker, such as the free futures training offered at online broker ETrade, to better position themselves for investing success.

How To Track Real Time Oil Futures

The first step to learning how to track real time oil futures is to register for an account with a charting and technical analysis service. There are several free services you can use online, or you can use the real-time oil futures tracking services provided by your broker.

When you have accessed the real-time quote area of the website you are using, you can then enter the ticker symbol for a contract that follows crude oil, such as USO, which tracks the United States Oil Fund. Many sites will also allow you to set up alerts to notify you of price changes.

You can enter in the price alerts you would like to receive, and you will be notified if the price of your futures contract falls below or rises above your preset levels. Some real-time quote service allow you to choose how you receive your alerts, and you can usually opt to have them delivered to your email or sent in a text message.

It is important to keep track of your investment in oil futures in real time, as the oil futures market is extremely volatile, and prices can be subject to minute-by-minute fluctuations.

Keep up with your investments, access free trading platforms and receive free investment advice at online broker ETrade.

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Can Oil Futures Manipulation Affect Prices? http://www.howtotradestocks.org/blog/can-oil-futures-manipulation-affect-prices/ http://www.howtotradestocks.org/blog/can-oil-futures-manipulation-affect-prices/#comments Sat, 21 May 2011 17:55:02 +0000 jenifer http://www.howtotradestocks.org/blog/?page_id=1455 Continue reading ]]>

Can Oil Futures Manipulation Affect Your Cost At The Pump?

As the price of oil – and consequently gas – has risen, there have been many questions as to why the price has skyrocketed. In recent years the question has been posed as to whether it is possible to use oil futures manipulation to drive up the price of oil and profit at the expense of consumers and other investors.

There are conflicting opinions on whether this is possible. The laws of supply and demand dictate that is is impossible, while some economists and analysts claim that speculators can create an artificial market where higher prices are accepted and paid.

So who – or what – is to blame for higher oil and gas prices? There are several possible scenarios for what drives oil prices higher and lower.

Oil Futures Manipulation: Supply And Demand

The laws of supply and demand render oil futures manipulation unfeasible. Economic theory states that for a given level of supply and demand there will be a market clearing price, referred to as the equilibrium price.

All things being equal, if the supply and demand dictates the clearing price is $50 per barrel, no independent seller would be able to charge a higher price while still being able to sell their oil. This theory makes it impossible for a speculator to drive up the price, or keep the price high for any length of time.

So how can any group of participants move the price of oil higher? How can speculators keep the prices higher even after there has been a reconciliation between supply and demand? This is only possible if a speculator either controls the market, or they are such a massive participant their independent moves drive market prices.

Oil Futures Manipulation: The Connection Between The Futures Market And The Spot Market

There are those that believe that oil futures manipulation is possible, and that manipulating oil futures can affect the spot price. While this should be impossible, some analysts claim that in certain situations an artificial market could influence oil prices, even if only for a short time.

In order to address the connection between the spot market and the futures market, we can assume that the both the spot market and the futures market move together. This means that if the spot market rises by $1, the futures market will rise by a similar amount. For example, any shift in the oil supply should move current and future prices together closely.

The idea that large institutional investors can manipulate commodity price for their own personal gains has far reaching implications on both prices as well as the economy in general.

Some people believe that the trading of certain commodities by hedge funds and other institutional investors as asset classes can influence spot prices based on the massive amounts of money invested by these funds. They assert that the degree of investments in these markets can distort the markets.

Very large speculators can absolutely influence the cost of futures contracts by bidding up the prices with purchases that are a significant percentage of the market. Because futures contracts can control a large amount of oil with a relatively small amount of capital, this manipulation is easier in the futures market than in the spot market.

Speculators can also use the media and other means to spread rumors to traders, creating a self-fulfilling prophecy.

Although there are several scenarios where market manipulation influences the spot price, conventional wisdom dictates that at some point the market should return to its supply and demand equilibrium. This is due to the fact that although some investors may have enough money to drive up prices artificially, buyers will eventually know whether these price increases were justified.

There is also the possibility that these speculations could cause producers to horde their oil supplies or increase production, causing an overcapacity, which could ultimately drive prices lower.

Ultimately, it is most likely a combination of factors involved in short-term oil price increases. As oil supply is not something that can be influenced greatly in the short-term, and the estimated global oil consumption is constantly changing, it stands to reason that oil prices will be highly volatile.

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Find Out How Oil Futures Raise Prices http://www.howtotradestocks.org/blog/find-out-how-oil-futures-raise-prices/ http://www.howtotradestocks.org/blog/find-out-how-oil-futures-raise-prices/#comments Sat, 21 May 2011 17:49:35 +0000 jenifer http://www.howtotradestocks.org/blog/?page_id=1451 Continue reading ]]>

Find Out How Oil Futures Affect Your Costs At The Pump

There is no question the the world runs on oil, and the price of oil can influence economies around the world. While most people are familiar with the laws of supply and demand, it can be less clear how oil futures raise prices.

Oil futures are simply a contract between a seller and a buyer, where a buyer agrees to purchase a specified amount of a commodity such as oil and a preset price. Oil futures offer a way for investors to bet on whether oil will increase in price at a later date.

In 2006, the price of oil began to rise, despite the fact that US petroleum reserves were at an eight year high. As demand rose, supply kept pace although prices continued to climb. This was the beginning of an artificial market for oil, and this artificial market has been blamed for the price of oil jumping more than $100 per barrel between 2004 and 2008.

How Oil Futures Raise Prices: The Basics Of Oil Speculation

It is important to understand the basics of oil speculation in order to understand how oil futures raise prices. As the price of oil has risen, people have searched for answers to why. While supply issues and geopolitical issues have been cited as possible explanations, those theories haven’t always panned out, leaving the experts to assert that oil speculation has been to blame for the rising costs.

Adam Smith, an 18th century political economist stated that everything that can be bought or sold has what is referred to as a natural price. This natural price is the total of the values of everything that is required to create a product or service.

Distribution, labor, and raw materials all contribute to a products natural price, and any amount received over that natural price is considered profit. Using derivatives, an investor can place a bet on the future price of a commodity. A derivative’s value is based on the value of a commodity – for example, a wager on whether a barrel of oil will decrease or increase in price.

How Oil Futures Raise Prices: Investment Firms And Other Major Players

A speculator has no hand in the sale of the commodity they are wagering on as they are neither the seller nor the buyer. A speculator betting on a single futures contract will have no effect on the market. A speculator with a sizable amount of capital to put to work however, can purchase a stake that is sizable enough to sway the market, and is considered the major factor in how oil futures raise prices.

As speculators purchase on rumor rather than fact, a speculator purchasing a large amount of futures at a price that is higher than the market value of oil currently can lead to the hoarding of the commodity by producers in the hopes that the commodity can be sold for a higher price in the future.

As the supply of oil is reduced by these actions on the part of the producer, this leads to a realized increase in the price of the commodity both in the present as well as the future. An investment firm as well as oil producers stand to make a huge profit, as an estimated 60% of oil’s per barrel price is the result of speculation on the part of investment firms and other major players.

Investing in oil futures carries significant risk, as these instruments exhibit extreme volatility, and are subject to outside influences such as natural disasters and geopolitical events. As a retail investor, it is advised that you consult with a financial professional, such as the investment specialists at online broker ETrade prior to committing any capital.

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