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One of the alluring myths that surrounds the stock market is the prospect that a certain stock may split, giving stock holders twice as many shares as before. What is poorly understood by the outsider, though, is that although the investor has more share after a split, the value of each share is reduced. For example, if a corporation decides to split its share 2-for-1, it issues one new share for each outstanding one. At the same time, the value of each share is cut in half. So the stock holders now hold twice as many shares but the total value is the same as before the split. A share split is like receiving 2 five-dollar bills for a single ten-dollar bill. Same value – twice as much paper.
Why would a company do this?
A lot of it has to do with investor psychology. The price-per-share of a share may be so high that the average investor feels it is out of his reach. A stock split reduces the price so that it may be more affordable to smaller investors. In reality, the small investor could have bought a smaller number of pre-split shares for the same price, but the appeal of buying a $20 stock as opposed to a $60 may be strong for some investors.
Shares can be split by a number of ratios but the most common are 2-for-1, 3-for-2, and 3-for-1. stocks can also be reverse-split – the company reduces the number of outstanding shares so that each stock holder has fewer shares than before. Reverse share splits are less common, but can be used for several reasons: the price per share may be so low that it appears as a poor investment; the company may be attempting to stave off possible de-listment on the share exchange; to push out minority stockholders; or as a way to go private.
Advantages
Lower prices per share can result in greater liquidity – shares are easier to sell at lower prices and there is less of a bid/ask spread. This is especially true for shares that are priced in the hundreds of dollars – small investors view them as out of their budget and the high bid/ask spreads (the difference between buying and selling prices) can put off bigger investors.
Other advantages have to do with investor psychology. A split is usually seen as a bullish indicator – share prices are increasing and the company is doing well financially. There is usually a short-term rally around a stock which splits, but the market tends to normalize after a short period.
On the downside, a split may cause investors to expect more about how the company performs. If these expect ations
are not met investor confidence may be shaken and the result could be a drop in share prices.
The bottom line is a share split does nothing to affect the worth or performance of a company. It may be nice to own more shares, but in the end your 2 five-dollar bills are still worth the same as your ten-dollar bill.
Filed under Stock Market by on Nov 28th, 2009. Comment. 
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Stock picking is akin to weather prediction – no one can predict with certainty five hours from now if the price will rise or fall, much less five years from now.
Nevertheless, there are indicators that help to reduce the risk and increase the odds of profiting over the long term. After all, historically stocks have returned over 10%, as measured by the growth of the S&P 500.
The first step is to get educated. Learn not only about dividends yields and earnings per share, but also some basic accounting. Reported figures have an air of authority but the sad fact remains that those numbers are arrived at, in part, by accounting methods which are not cut and dried.
The Enron case (case in which the executives of Enron manipulated their earnings figures to appear to be much more
successful than they were) is extreme, but even ordinary procedures involve judgment calls on the part of financial officers and auditors.
Next, commit to continuing research about shares both inside and outside your intended portfolio, and update it as you buy and sell.
There's a broad spectrum between exact prediction and throwing darts blindly. In the long run, those who do their homework do far better and almost all day traders lose money.
Research both prospective buys and intended sells. Many investors put considerable time and effort into analyzing a buy, but then only watch for some price to be reached in order to sell. Knowing when to sell is just as important, and a target should be selected before the stock is bought.
RESEARCHING BUYS
Obtain the latest, and some historical, financial statements. The SEC provides these free (www.sec.gov) in their EDGAR database, but other exchanges have similar arrangements.
Analyze the quarterly statements covering two to three years, looking for EPS (earnings per share) and revenue trends. Calculate dividend yields, if the company pays dividends.
Compare the company's P/E (Price to Earnings) ratio to others in the same economic sector. Look at P/S (Price to Sales) ratios, too. Sales growth is easier to predict than earnings and less volatile than P/E ratios.
Examine general economic factors. Interest rates affect share prices as well as bonds (though less directly), since almost every company borrows money. Even when they don't, their competitors, suppliers, and customers do. Interest charges reduce profits for all but the lenders, for whom it's income.
Even when researching a bank, though, high interest rates increase short-term profits, but can reduce the number of loans and cause certain current ones to be repaid early. High interest rates aren't necessarily good for banks either, therefore.
Use some of the more common technical indicators, such as MA (moving averages) and RSI (Relative Strength Index, which compares the number of days a stock finishes up versus down). An RSI of 70, or above, for example, does tend to indicate a stock which is overbought and due for a fall in price.
RESEARCHING SELLS
Pick a target price, which amounts to deciding how much profit (in dollars or percentage terms) you seek then sell at that price, unless your continuing research has turned up significant new information.
Consider selling if the price has dropped substantially or remained unchanged for several months. Losses are hard to bear, but consider that you can't always pick winners and while you're invested in one stock, you're forgoing potential profit from another. That profit could help reduce or more than make up for the loss from the sale.
Continue to monitor the company's fundamentals by obtaining updated filings. Re-evaluate them by updating earnings trend calculations, significant management or general economic changes.
You can ease the difficulty of performing calculations (which is a useful exercise at least once) by finding Internet sites that provide objective data and go easy on the "here's how to pick winners" sales talk.
And remember, 'on the street' opinions are a dime a dozen – including mine.
Filed under Stock Market by on Nov 27th, 2009. 1 Comment.
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Technical analysis is the art and science of examining stock chart data and predicting future moves on the stock market. Investors who use this style of analysis are often unconcerned about the nature or value of the companies they trade stocks in. Their holdings are usually short-term – once their projected profit is reached they drop the stock.
The basis for technical analysis is the belief that stock prices move in predictable patterns. All the factors that influence price movement – company performance, the general state of the economy, natural disasters – are supposedly reflected in the stock market with great efficiency. This efficiency, coupled with historical trends produces movements that can be analyzed and applied to future stock market movements.
Technical analysis is not intended for long-term investments because fundamental information concerning a company's potential for growth is not taken into account. Trades must be entered and exited at precise times, so technical analysts need to spend a great deal of time watching market movements.
Investors can take advantage of both upswings and downswings in price by going either long or short. Stop-loss orders limit losses in the event that the market does not move as expected.
There are many tools available to the technical analyst. Literally hundreds of share patterns have been developed over time.
Most of them, however, rely on the basic concepts of 'support' and 'resistance'. Support is the level that downward prices are expected to rise from, and Resistance is the level that upward prices are expected to reach before falling again. In other words, prices tend to bounce once they have hit support or resistance levels.
Charts
Technical analysis relies heavily on charts for tracking market movements. Bar charts are the most commonly used. They consist of vertical bars representing a particular time period – weekly, daily, hourly, or even by the minute. The top of each bar shows the highest price for the period, the bottom is the lowest price, and the small bar to the right is the opening price and the small bar to the left is the closing price. A great deal of information can be seen in glancing at bar charts. Long bars indicate a large price spread and the position of the side bars shows whether the price rose or dropped and also the spread between opening and closing prices.
A variation on the bar chart is the candlestick chart. These charts use solid bodies to indicate the variation between opening and closing prices and the lines (shadows) that extend above and below the body indicate the highest and lowest prices respectively. Candlestick bodies are coloured black or red if the closing price was lower than the previous period or white or green if the price closed higher. Candlesticks form various shapes that can indicate market movement. A green body with short shadows is bullish – the stock opened near its low and closed near its high. Conversely, a red body with short shadows is bearish – the stock opened near the high and closed near the low. These are only two of the more than 20 patterns that can be formed by candlesticks.
Filed under Stock Market by on Nov 17th, 2009. Comment.
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Traders use ETFs to determine when it' s time to
buy and sell different market securities. Exchange Traded Funds are like mutual funds, but there are major differences.
All types of funds allow small investors access to a broad range of investment selections. You can professionally and diversified that have the assets in the fund which are all types of instruments including stock, bonds, and other securities. Therefore the portfolio looks like it belongs to someone who knows what they are doing.
Rather than being held by just one investor, a big amount of investors hold funds. For the amount of money and profit available they have a small investor option that is shared.
Net asset value of a mutual fund. NAV is the acronym for net asset value, which is the worth of a company based on its' pluses and minuses, in the financial column. Each day it is chosen. As people buy or sell shares, the ETF price will adjust.
Day trading is possible with the purchase of one share of an EFT. Usually investors are asked to buy a minimum number of mutual fund shares to begin with, and usually those investors hold them for the long term.
In all markets, trends are utilized, yet the most crucial trends for an ETF investor are 50 and 200 day trends. A good investor looks for trends in the market before buying in. The trend looks at the number of days identified in it's name, 50 day trends are fifty days of information.
Over a length of time, any one, is a trend. Analysts were looking at very long trends when they said stocks earned average returns of 10-12%. It's easy to see that the trend historically did not hold over the past few years.
While different investors use different trend trading strategies, it's generally a good idea to buy when a security has risen over the last 200 trading days and to sell when it falls below its 50-day moving average. The fund's price is moving lower once it falls beneath its 200-day moving average, meaning that it's time to sell.
If you decide to utilize trends, you must figure out your plan prior to purchasing. What are you willing to lose? If you purchase today and begin making a profit, it is probably that you will eventually lose a few of those profits.
Making profits with ETFs is all about knowing when to sell. It's not a guarantee, yet studying the trends should assist you in doing that.
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When glancing at charts the untrained eye may simply see random movements from one day to the next. Trained analysts, however, see patterns that are used to predict future movements of share prices. There are hundreds of different indicators and patterns that can be applied. There is no one single reliable indicator, but when taken into consideration with others, investors can be quite successful in predicting price movements.
Patterns
One of the most popular patterns is Cup and Handle. Prices start out relatively high then dip and come back up (the cup). They finally level out for a period (handle) before making a breakout – a sudden rise in price. Investors who buy on the handle can make good profits.
Another popular pattern is Head and Shoulders. This is formed by a peak (first shoulder) followed by a dip and then a higher peak (the head) followed again by a dip and a rise (the second shoulder). This is taken to be a bearish pattern with prices to fall substantially after the second shoulder.
Indicators
Moving Average
The most popular indicator is the moving average. This shows the average price over a period of time. For a 30 day moving average you add the closing prices for each of the 30 days and divide by 30. The most common averages are 20, 30, 50, 100, and 200 days. Longer time spans are less affected by daily price fluctuations. A moving average is plotted as a line on a graph of price changes. When prices fall below the moving average they have a tendency to keep on falling. Conversely, when prices rise above the moving average they tend to keep on rising.
Relative Strength Index (RSI)
This indicator compares the number of days a share finishes up with the number of days it finishes down. It is calculated for a certain time span – usually between 9 and 15 days. The average number of up days is divided by the average number of down days.
This number is added to one and the result is used to divide 100. This number is subtracted from 100. The RSI has a range between 0 and 100. A RSI of 70 or above can indicate a stock which is overbought and due for a fall in price. When the RSI falls below 30 the stock may be oversold and is a good time to buy. These numbers are not absolute – they can vary depending on whether the market is bullish or bearish. RSI charted over longer periods tend to show less extremes of movement. Looking at historical charts over a period of a year or so can give a good indicator of how a share price moves in relation to its RSI.
Money Flow Index (MFI)
The RSI is calculated by following stock prices, but the Money Flow Index (MFI) takes into account the number of shares traded as well as the price. The range is from 0 to 100 and just like the RSI, an MFI of 70 is an indicator to sell and an MFI of 30 is an indicator to buy. Also like the RSI, when charted over longer periods of time the MFI can be more accurate as an indicator.
Bollinger Bands
This indicator is plotted as a grouping of 3 lines. The upper and lower lines are plotted according to market volatility. When the market is volatile the space between these lines widens and during times of less volatility the lines come closer together. The middle line is the simple moving average between the two outer lines (bands). As prices move closer to the lower band the stronger the indication is that the share is oversold – the price should soon rise. As prices rise to the higher band the stock becomes more overbought meaning prices should fall. Bollinger bands are often used by investors to confirm other indicators. The wise technical analyst will always use a number of indicators before making a decision to trade a particular stock.
Filed under Stock Market by on Nov 13th, 2009. Comment.
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Penny stocks are low-priced stocks – usually with a value of less than $5 – of small companies. These shares are traded on the Over-The-Counter-Bulletin-Board (OTCBB) and the Pink Sheets. Both these trading venues do not have the same kind of minimum requirements of exchanges such as Nasdaq or the NYSE set by the Securities and Exchange Commission. Companies which issue penny stocks may be new businesses or close to bankruptcy. A new issue of stocks could be a way to inject quick capital to try to save the business.
All of these factors – low price, lack of standards, and lack of stability – make penny shares one of the riskiest investments around. It is true that if a company succeeds the payoff will be great, but the vast majority of penny stocks end in bankruptcy. Other reasons why penny stocks are risky include…
– Lack of information about the company.
Companies listed in the Pink Sheets or the OTCBB do not have to issue financial statements. Most companies also have little reportable history.
– Low liquidity. Penny shares are infrequently traded, so finding a buyer may be difficult. The price may have to lowered substantially to interest someone in buying the stock.
– Potential fraud. Due to their unregulated nature, penny stocks are often used by con artists who sell them through spam email or off-shore brokers.
So penny stocks are risky but are there any benefits to them?
Not all penny shares are frauds or companies facing bankruptcy. Some represent hard-working businesses that are struggling to meet the requirements to get listed on Nasdaq or the NYSE. Investing in these companies offers real growth potential – you have the opportunity to get in at the ground floor and ride all the way to the top.
The difficulty is finding which companies have this growth potential. Getting this information requires a lot of research and unless you are willing to take the time to personally investigate a company, you may again be the victim of fraud. Some companies specialize in offering 'inside information' about companies selling penny share, but they may simply be fronts for pushing a particular stock on unsuspecting investors.
There are two ways to play the penny shares – do research or play craps. The low cost of these stocks means that you will not lose a lot money if the company goes under, and as long as you are prepared to lose this money penny shares can be an interesting and fun addition to any portfolio. It must be stressed, however, that penny stocks should only make up a small portion of any portfolio. The odds are that most penny shares will end up in a total loss.
If you would like to buy penny stocks you need to find a broker that will place an order for you. Many brokers will not cover them because of the difficulties in tracking them, but some online brokers specialize in penny stocks. Regulations require brokers to receive written confirmation from the client concerning the transaction. The broker is also required to give the client a document outlining the risks of speculating with penny stocks.
Finally, the broker must disclose the current market price of the share and the amount of compensation the firm receives for the trade. Monthly statements must be sent to the client detailing market value of each penny stock in the account.
Filed under Stock Market by on Nov 13th, 2009. Comment.
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The investor has many tools at hand when making decisions about which stocks to buy. One of the most useful of these is fundamental analysis – examining key ratios which show the worth of a stock and how a company is performing.
The goal of fundamental analysis is to determine how much money a company is making and what kind of earnings can be expected in the future. Although future earnings are always subject to interpretation, a good earning history creates confidence among investors. stock prices increase and dividends may also be paid out.
Companies are required to report earnings on a regular basis and stock market analysts examine these figures to determine if a company is meeting its expected growth. If not, there is usually a downturn in the stock's price.
There are many tools available to help determine a company's earnings and its value on the stock market. Most of them rely on the financial statements provided by the company. Further fundamental analysis can be done to reveal details about the value of a company including its competitive advantages and the ratio of ownership between management and outside investors.
Financial Statements
Every publicly traded company must publish regular financial statements. These statements are available in printed form or on the Internet. All statements must include an income statement, a balance sheet, an auditor's report, a statement of cash flow, a description of the business activities and the expected revenue for the coming year.
Auditor's Report
The auditor's report is one of the most important sections of the financial statement. The auditor is an independent Certified Public Accountant firm which examines the company's financial activities to determine if the financial statement is an accurate description of the earnings. The auditor's report contains the opinion of the auditor concerning the accuracy of the financial statement. A financial statement without an independent auditor's report is essentially worthless because it could contain misleading or inaccurate information.
An auditor's report, although not a guarantee of accuracy, at least provides credibility to the financial statement.
Balance Sheet
Another important section of the financial statement is the balance sheet. This is a 'snapshot' as it were, of the financial condition of the company at a single point in time. The balance sheet shows the relationship between assets (cash, property and equipment), liabilities (debt) and equity (retained earnings and share).
Income Statement
The income statement shows information about the revenue, net income, and earnings per share over a period of time. The top line of the income statement shows the amount of income generated by sales, underneath which the costs incurred in doing business are deducted. The bottom line show the net income (or loss) and the income per share.
Cash Flow
The statement of cash flow is similar to the income statement – it provides a picture of a company's performance over time. The cash flow statement, however, does not use accounting procedures such as depreciation – it is simply an indicator of how a company handles income and expenses. A statement of cash flow shows incoming and outgoing cash from sales, investments, and financing. It is a good indicator about how the company is run on a day-to-day basis, how it handles creditors and from where it receives growth capital.
Filed under Stock Market by on Nov 13th, 2009. Comment.
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The stock market is a reliable indicator of the actual value of companies which issue stock. Values of stocks are based on verifiable financial data such as sales figures, assets and growth. This reliability makes the stock market a good choice for long term investing – well-run companies should continue to grow and provide dividends for their shareholders.
The stock market also provides opportunities for short-term investors. Market skittishness can cause prices to fluctuate quite rapidly and investor psychology can cause prices to fall or rise – even if there is no financial basis for these variations.
How does this happen
? News reports, government announcements about the economy, and even rumors can cause investors to become nervous or to suspect that a company will increase in value. When the price starts to fall or rise, other investors will jump on the bandwagon, causing an even faster acceleration in price. Eventually the market will correct itself, but for savvy short-term investors who watch the market closely, these price changes can offer opportunities for profitable trading.
Short term traders are divided into 3 categories: Position Traders, Swing Traders, and Day Traders.
Position Traders
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Although the raw data of the Financial Statement has some useful information, much more can be understood about the value of a stock by applying a variety of tools to the financial data.
Earnings per Share
The overall earnings of a company is not in itself a useful indicator of a stock's worth. Low earnings coupled with low outstanding shares can be more valuable than high earnings with a high number of outstanding shares. Earnings per share is much more useful information than earnings by itself. Earnings per share (EPS) is calculated by dividing the net earnings by the number of outstanding shares. For example: ABC company had net earnings of $1 million and 100,000 outstanding shares for an EPS of 10 (1,000,000 / 100,000 = 10). This information is useful for comparing two companies in a certain industry but should not be the deciding factor when choosing stocks.
Price to Earning Ratio
The Price to Earning Ratio (P/E) shows the relationship between stock price and company earnings. It is calculated by dividing the share price by the Earnings per Share. In our example above of ABC company the EPS is 10 so if it has a price per share of $50 the P/E is 5 (50 / 10 = 5). The P/E tells you how much investors are willing to pay for that particular company's earnings. P/E's can be read in a variety of ways. A high P/E could mean that the company is overpriced or it could mean that investors expect the company to continue to grow and generate profits. A low P/E could mean that investors are wary of the company or it could indicate a company that most investors have overlooked.
Either way, further analysis is needed to determine the true value of a particular stock.
Price to Sales Ratio
When a company has no earnings, there are other tools available to help investors judge its worth. New companies in particular often have no earnings, but that does not mean they are bad investments. The Price to Sales ratio (P/S) is a useful tool for judging new companies. It is calculated by dividing the market cap (stock price times number of outstanding shares) by total revenues. An alternate method is to divide current share price by sales per share. P/S indicates the value the market places on sales. The lower the P/S the better the value.
Price to Book Ratio
Book value is determined by subtracting liabilities from assets. The value of a growing company will always be more than book value because of the potential for future revenue. The price to book ratio (P/B) is the value the market places on the book value of the company.
It is calculated by dividing the current price per share by the book value per share (book value / number of outstanding shares). Companies with a low P/B are good value and are often sought after by long term investors who see the potential of such companies.
Dividend Yield
Some investors are looking for stocks that can maximize dividend income. Dividend yield is useful for determining the percentage return a company pays in the form of dividends. It is calculated by dividing the annual dividend per share by the stock's price per share. Usually it is the older, well-established companies that pay a higher percentage, and these companies also usually have a more consistent dividend history than younger companies.
Filed under Stock Market by on Nov 2nd, 2009. Comment.
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If you are interested in penny shares you are sure to hear about the Pink Sheets. It is an electronic quotation system for many Over-The-Counter (OTC) securities. The name comes from the colour of the paper the quotes were originally printed on. Today the Pink Sheets publishes quotations on the Internet, and most of its listings are so-called penny shares.
Penny stocks are securities that are less than $5 in value. Although they can be traded on regular stock exchanges, companies that are listed in the Pink Sheets usually do so because they cannot meet the requirements of other exchanges like the NYSE and Nasdaq. The Pink Sheets has no listing requirements – even companies with no financial history can be listed.
The Pink Sheets is not a registered share exchange. As such, it can list companies that would otherwise be unable to raise capital through stock offerings. Although it is not regulated by the Securities and Exchange Commission (SEC) its trading system is only accessible by brokers licensed by the National Association of Security Dealers (NASD) and these brokers are required to follow NASD regulations. Companies which issue stock listed in the Pink Sheets must follow Federal and State security laws.
As an unregulated exchange, stocks listed in the Pink Sheets carry more risk than stocks on the big exchanges like AMEX. The lack of financial data means that companies may be facing bankruptcy and are issuing share in a last ditch effort to stay afloat. Not all companies are in dire straights, however. Some may be in the process of becoming listed on the regular exchanges and use the Pink Sheets as an intermediate step to raise capital.
To get listed in the Pink Sheets a company needs a broker dealer to quote the stock. The only requirement is that the broker is a member of the National Association of Securities Dealers (NASD). Once listed, the company remains in the Pink Sheets as long as the stock is quoted. It can happen that a share that no longer exists still is quoted in the Pink Sheets – a situation that highlights the need for researching any company that lists here.
The main advantage of buying Pink Sheet securities is their low cost. Investors who hope to get in on a new company right at the beginning can pick up stock for literally pennies. In the event that the company does well and grows the small initial investment will pay large dividends.
There is a very real risk, though, that the company will simply vanish, leaving behind valueless stock issues. The investor interested in penny share in the Pink Sheets should be prepared to lose all. For this reason, Pink Sheet investments should represent only a small portion of an overall investment portfolio.
Another risk to the investor is the lack of liquidity of Pink Sheet listings. Volume is generally quite low and finding a buyer for stock may be difficult. The seller may have to settle for a much lower price than anticipated in order to unload his shares.
Filed under Stock Market by on Nov 2nd, 2009. Comment.
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Brokers handle most of the buying and selling on the stock market, and the average investor will use a brokerage service to handle his trades. There is a broad range of brokerage services available. There are brokers who offer many services for aiding their clients meet their investment goals. These 'full-service brokers' can give advice about which stocks to buy and sell and often have full research facilities for analyzing market trends and predicting movements.
These perks are not free – full service brokers charge the highest commission rates in the industry. Whether or not you decide to use a full-service broker depends on your level of self-confidence, your knowledge of the share market and the number of trades you regularly make.
Investors who wish to save on commission fees can use a 'discount broker'. These brokers charge much lower commissions but don't offer advice or analysis. Investors who like to make their own trading decisions and those who make many trades often use discount brokers for their transactions. Some traders may use both types – there is no reason why you can't have two brokers.
The least expensive way to trade stocks is usually with an online brokerage. Both full-service and discount brokers usually offer discounts for orders placed online. Some brokers operate exclusively online and offer even better rates.
No matter what type of broker you choose, you must first open an account.
Each broker sets their own requirements for maintaining an account balance but it is usually between $500 and $1000. When choosing a broker look at the fine print and find out about the fees involved. Some brokers charge an annual maintenance fee while other charge fees whenever your account balance falls below the minimum.
There are two basic types of brokerage accounts. A 'cash account' offers no credit – when you buy you pay the full amount of the stock price. A 'margin' account, on the other hand, allows you to buy stock 'on margin' – the brokerage will carry some of the cost of the stock. The amount of margin varies from broker to broker but the margin must be protected by the value of the client's portfolio. If the portfolio falls below a specified amount the investor will have to add more funds or sell some stock. Margin accounts allow investors to buy more stock with less cash thereby realizing greater gains (and losses). Because they involve more risk than cash accounts, margin accounts are not recommended for inexperienced traders.
Before choosing a particular broker the investor should carefully consider his needs. Does he wish to receive advice about which stocks to buy? Is he uncomfortable making trades on the Internet? If so, he should go with a full-service broker. Technology savvy investors who have the knowledge and confidence to make their own trading decisions are better off with a discount broker.
After deciding which type, compare a few competitors. There can often be significant differences in costs when all the annual fees and brokerage rates are factored in. Try to gauge how many trades you expect to make in a year, how much cash you can deposit into your account, whether you wish to use margin accounts and which services you need. This information will allow you to compare the actual costs of various brokers.
Filed under Stock Market by on Nov 1st, 2009. Comment.
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Stock trading has its own specialized vocabulary but once you have the basics under your belt you can understand better how the market works. As with any investment, the more knowledge you have about stock trading the more successful you are likely to be.
Most share trades are done through a broker – an intermediary who takes orders and executes them. Brokers can also offer advice about which shares to trade and the condition of the market. These 'full-service' brokers charge a relatively high commission. To cut costs, many people use discount brokers that charge significantly less. You don't get advice, but to some, that is an advantage.
Some of the services commonly offered by brokers include online trading, broker assisted trading and some brokers offer options like Interactive Voice Response System for placing orders by telephone and wireless trading systems for making orders by using web-enabled cellular phones or other hand held devices.
Some brokers have their own proprietary software for placing orders over the Internet while others allow you to access their order department through their website with a password. Whichever systems they use, almost every broker offers a variety of charting options that allows you to track movements on the stock market. Analysis software may also be included in their service or available for an extra fee.
Types of Orders
There are different types of orders that can be made when buying or selling stocks. A 'market order' is an instruction to buy or sell at the current market price. The order is usually executed very near the price you are quoted at the time of your order. However, if the stock price is fluctuating or is not actively traded there may be a difference between the quote and the actual transaction.
A 'stop order' or 'limit order' can be placed if you expect the share price to move and wish to buy or sell at a certain price above or below the current market price. A stop order instructs the broker to trade at a certain price, while a limit order is an instruction to trade at a specified price or better.
A stop order helps to limit losses or protect profits. They become effective when the market hits the stop price but may trade above or below the stop price because they are traded at market price after they become active. Limit orders may not be placed at all even if the market reaches the limit price. If the market moves quickly there may not be time to execute your order before the price falls out of the limit price range.
For example: You buy Bell Canada (BCE) at $50 and then put in a stop order of $45. If the price of BCE falls to $45 your stop order will become effective and your share will sell at market price. Conversely, if you place a limit sell after buying BCE for $60, when the price rises to that level your share will be sold at a profit.
You could also buy BCE with a limit buy order for $45. This allows you to (possibly) buy stock at less than current market. If the price does not fall to your limit buy price, however, you will not buy any of that stock.
All orders can be placed as 'good til canceled' (GTC) or as a 'day order.' GTC orders remain in effect until they are canceled but day orders remain effective only until the end of the current trading day.
Shares are usually traded in 'round lots' – lots of multiples of 100. It is possible to trade other amounts of stocks, but this kind of trade is called an 'odd lot'. Trading software can handle both types of orders, but odd lot orders are slightly more difficult to fill than round lot orders.
Filed under Stock Market by on Oct 29th, 2009. Comment.
The stock market today is more volatile than ever. Many investors got burned badly in the last few years as the market plunged into recession and that makes them skittish.
Stock market values are based on past histories due to no one can figure out how to predict the future market.
Over the long term these can be pretty accurate, but in the short term predicting changes in the stock market is next to impossible to do with 100 percent accuracy.
It is important to understand about human psychology to know what can happen in the market. People usually overly optimistic when the times are good and then they will start greedy
Here are some things you should know about the stock market today:
Filed under Stock Market by on Aug 8th, 2009. Comment.
Are you a pupil who is annoying to learn how to advance in the stock market. You will most possible live through in turn weigh down since there are too much junk on the internet.
There are so many investors who claim they are experts with decades of occurrence in stock trades. From best-selling books in the bookstore to online ebooks, you just do not know who to take note to! just about every lone cause promises you that his or her guide is all you will ever need to happen as expected in the market even if you are a apprentice
Learn how to put in to make money in trades 101:
What ought to you do as a pupil in the area of stock market investing
?
Drop your ego down a notch for the reason that you need to endure the fact that you are a beginner You can buy a book that is cuisine to basic to learn the basic 101 or a website that does the same. Most websites will impart you free in sequence to get the perception of the nitty-gritty
The best thing to do as a stock market novice is to make a dummy account to play fake trades on the internet. In a dummy description you have an X quantity of play money to supply in a real stock market. It is a great way to learn how stuff work and it is free.
Once you get the hang of it, you can sign up for a brokerage relation Be very cautious for the reason that some companies have many buried fees so be sure to ask questions. You can read reviews of companies online to see what relations are adage If any personality guarantees that you will be rich with no risk, run the other way. Anything that you authorize in has some type of risk.
Do not guess to realize at once star in the stock market. If you think you can develop into rich in a week or two, you need to rethink whether or not this is right for you for the reason that that won't go off Any wealthy investors will tell you that they did not get rich for the night
A frequent pupil confuse with is not diversifying his or her set Never put all your eggs in one case When you do not put all your money to invest into one definite typical you make light of the risk of bringing up the rear money
You will lose money every now and then in the stock market and that is expected It is part of the method to learn how to advance Many easy quit because they are terrified to lose money in trades.
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Filed under Stock Market by on Aug 1st, 2009. Comment.
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