Stock Market Trading: Here Are Some Little Lessons to Learn

Stock market trading is like buying a company. The shares are equal parts of the company and each shareholder owns a portion. Most people watch infomercials or hear people talking and they believe that the only way to make money in the stock market is to buy and sell frantically.
Think about it, would you buy a store one day, and sell it right away the next? Maybe if the price was right. However, you have to ask, why did you buy the store in the first place? To make money for years and years, not just for one day.

You earn money from the profits of the business when you trade in the stock market for long-term results. After the company you purchase pays their taxes and other bills, the money left over is their earnings.

These earnings go back to the shareholders as dividends. The best news is that sometimes, you can reinvest those dividends and get more shares that grow and pay even more dividends. There's a lot of money to make when you do stock market trading that's not just from the rise and fall of the stock price.

One of the top mutual fund managers said that he purchased stock after he sampled their customer service. If the stock was that of a restaurant chain, he ate at the restaurant. If it was an airline, he flew the airline. Often the consumer sees situations that create hazards or growth in the company.

All of these things affect the life and profitability of that company. You need to look at the company from a business angle. Are their computers junk, or do you love the new changes and models? Does the company have a good reputation for quality? These are simple questions that you need answering before you purchase a stock.

People that do stock market trading sometimes look for price fluctuations and have no concept what that company does. Trading on price movement alone puts your money at risk to the whims of the market. If you know that a company's financial situation is solid, then you don't panic and sell each time the price of the stock dips.

Remember, the stock price is not real. It's what people perceive to be real. When you buy stock without knowing any of the companies financials or even the type of industry they're in, you might as well put your money on the pass line at a Vegas craps table, because your odds of winning are just about the same.

Understand the company and the industry when you do stock market trading. During times of depression and recession, some companies do quite well. During bull markets when the economy has a sunnier picture painted, other companies do quite well.

You can grab up bargains in the period of time when your company stock, through no fault of it's own, drops in price. The company is still the same, but the idiots that buy willy-nilly drive the price down because they don't understand the real money made on long term investing. If you know the financial situation and the company and it's good, during that industry down time you get bargains on that stock so it's time the to buy more.

Knowledge is your best comrade when you do stock market trading. Just remember the staff at Microsoft. If they sold their shares at first, they would have made pennies. A few years later, a sale would have brought them thousands. Those staffers that knew the quality of their company and held the shares ended up making millions because they had knowledge.

DO YOU KNOW THESE 10 THINGS ABOUT STOCK MARKETS

Investing in stock attracts extreme reactions from people ranging from extreme enthusiasm and optimism to complete pessimism and apathy. None of this is right way of approaching stock markets. Stock markets like any other asset class do offer scope for capital appreciation within the boundary of its inherent risk reward equation.Fortunes have been made on stock markets, as Rakesh Jhunjhunwala or Warren Buffett would tell you. But for every Warren Buffett and Rakesh Khunkhunwala,we have quite a few who have lost money in the stock markets well. The key is to understand the dynamics of this market and play it well. So, for you and me , what are the things that we need to know before we trust equities with our hard earned money? I have outlined 10 such things which all equity investors should know. 1. Stock Market is a financial institution , not a casino - First thing to understand for everybody before we get any further is that stock market is a place where trading of stocks happens. It is not a casino where you make money by wagering. There is a method to even day trading that takes place on the indices and hence you must not approach stock markets just to try your luck. You might get lucky at times, but,certainly not always. If you approach stock markets like a casino then be prepared for an outcome like you get in casino.
2.Understand the risk reward ratio - Equities like all other investment class has its own risk reward ratio. Equities are supposed to be relatively riskier asset class as compared to debt based instruments like FD, bonds, Gilts etc. So people investing in equities should be aware of this fact that equity is riskier than other investment tools. And since there is more risk in equities, the chance of returns are also higher in it than other investment tools like Bonds, Gilts, FD etc. One must enter into stock markets only if he is ready to take the risk that is inherent in equity investment. 3.Past performance is not an indication of future performance - This might sound cliched but the fact is that this is very critical for all investors to understand.Past performance of a particular stock or broad markets is no indication or guarantee of future performance. In other words, if the market did well in last 12 month delivering over 30% returns, it does not mean that in next 12 months it will again deliver 30% returns. The markets can under perform or over perform over next 12 months and that may not have anything to do with the way markets behaved in last 12 months. So one must make his investment decisions based on the fundamentals of the company, its management quality, its growth potential etc and not on the basis of its historical returns. 4.Know about the company you want to invest- Great investment guru Warren Buffett says that he invests in equities based on his assessment of the quality of the management running the company, the company's inherent strength and its growth potential and whether the company enjoys a consumer monopoly or not in the market.He says even if the stock markets were to shut for next 20 years , he would still invest in the same companies. The essence of this is that while investing in a stock , one must do a thorough analysis of the company, its management quality , growth potential etc. One must never invest based on a "tip". Its your money and hence you must know the company before you give them your money. 5. Trust professionals if you don't have the time - For all those who don't have the time or expertise required to follow the stock markets, companies , its financial etc, there is way out. They must trust professionals to do this job for them. One can take help of noted stock brokers/financial planners etc to help them out with this. 6.Avoid joining the herd - Warren Buffett's prescription for making money in stock markets is to "be greedy when others are fearful and be fearful when others are greedy". Or in other words, one should try and buy when every one is selling and sell when others are buying. Rakesh Khunkhunwala, the other day said in an interview that he made his fortune by buying stocks much against what others were doing before Madhu Dandwate presented his budget in 70s. He took a contrarian view and that paid off handsomely. 7.Define your goals and stick to it -Another important thing is to enter the markets with a target in mind of how much returns you want from it. Make that a realistic target and then stick to it. So for instance if your target is to make 20% returns on a stock then sell it once it appreciates by 20%. Don't wait for it to go up to 25% or 30% .Doing so will expose you to the risk of loosing even 20% gain that you have now if you waited too long. 8.Buy stocks with stop loss -Almost any trader active in stock market will tell you the importance of buying stocks with strict stop loss on it. Stop Loss is a value below the market price of the stock which is assigned to that stock at which you sell it, cutting your lossses. This ensures that you looses are within manageable limits. For example, lets say you buy Reliance at Rs 1600 and keep a stop loss of Rs 1500, then this ensures that the maximum loss that you are willing to take on this stock is Rs 100 and not more, thereby limiting your downside risk in the stock. 9.Monitor the funds - It is not only important to invest in good stocks and build a good portfolio , its also imperative that you monitor the performance of the portfolio and each of the stocks regularly, to weed out the deadwood from the portfolio. 10.Stick to index funds - For all those who want to invest in mutual funds , index funds offer a great opportunity to invest in the markets at minimum charges. The relative performance of the index funds are same, if not better, than any actively managed fund. This coupled with the fact that the charges are lower ,makes it a better option than actively managed funds.

So, these are the top 10 things you must be aware of before trying your luck with stock markets.Please add up things which you feel I might have missed out.

Something Every Stock Trader Needs To Know

One of the known strategies in marketing today is the Contrarian trading. This is an act of buying stocks even though all indicators affirm that those products will eventually go down. As risky as it may sound, there are still some people who are not afraid to try something new for their business and when they have tried this, they will surely find how beneficial it is for them. Many businessmen hire advisors who give them some recommendations as to what they have to do in order for their business to thrive. However, did it ever cross your mind that they are merely following what they have read or heard from other people? Contrarian investing is not about getting ideas from other people but doing different things to be able to achieve top profits.
What the other investors say in their articles or other sources will only mislead you because you will think that it is right to follow their steps. There may be instances wherein you might think that they are doing okay today and so you copy what they are doing. However, what if the time comes when their sales declined and their customers are slowly decreasing? You should go against the flow in the very beginning of your venture. If you are able to do this, you will be counting your profits and increase them every single day.

However, in contrarian trading you may not always be right. There are certain instances when you have to make efforts and money but in the end, you will not gain any. You will be facing a lot of risks and committing mistakes as you make your contrarian investing. As a matter of fact, you will make more faults than making the right guesses so when you want to avoid them, you should make the selling quickly.

In addition, you will need to exert efforts in order to keep your losses in minimum instead of sitting in your office and waiting for the opportunity that will enable you to avoid the deficits. Those who are willing to be in the contrarian trading industry should permanently possess a view of the bear market, which refers to the steady plunge of certain products or services in the stock market.

It is not true that the contrarians are pessimistic. It is also incorrect to state that they believe that everything is hyped. In reality, both pessimism and optimism will result to the plunge of the business when they are used in an unjustified manner. What you can do about this is to observe the stock movements and the crowd behavior.

Be wise enough and differ from the business manner of conventional wisdom. This will give you good profits. In the end, you will be one of those individuals who thank the contrarian investing approach, which will enable you to seek opportunities that occur in periods when everybody is doing the opposite.

How To Start An Investment Program

If you are just beginning an investment program, the first two things you want to do before you start are pay off your credit card debt and build up an emergency fund.
Most experts and common sense dictates that you set aside some money in case of emergencies. Investments are usually long term in nature. Because of that you don't want to make an investment, have an emergency crop up and then have to tap into your investment account, especially if the market has declined in value.

In addition, it makes sense to pay off credit card debt with high interest rates first. The likely that you'll earn a return of eighteen to twenty percent especially today is not likely to occur. Also do to the fact that you have to pay a commission to trade and pay taxes on any gains, your best investment is in reducing your debt. This will give you a higher return without commission or taxes most likely.

Regardless of your debt, you should start setting aside a fixed amount of money each paycheck into an emergency fund. Over time this amount will grow. Put it someplace you will not touch it. Everything else use to pay off your debt.

Once you have done that then take the money you were spending and start putting it in an invesment account. If you don't have enough to open an account at a brokerage, ask them if you can still open it and start putting money into it. Sometimes they will let you do it that way. If not, choose another brokerage or put the money in a savings account to at least earn some interest in the meantime. Check around for a good interest rate as most banks in your neighborhood do not pay any interest rates. However, you might find one online that will pay a much much higher rate.

Tips To Time The Stock Market

1) When doing stock pick, investors can take note of: Debt/equity ratio, return on equity ratio and price/earnings ratio. Generally, the higher the debt/equity ratio, the more costly the interest expense for the company. Investors should question whether the company is able to finance its debt. Return on equity ratio shows how much profit a company generates with the money shareholders have invested. Generally, the higher the return on equity ratio, the better it is. Consistently high return on equity over a long period of time - at least 15% for 10 consecutive years, show that the company has sustainable competitive advantages. The price/earnings ratio is a measure of the price paid for a share relative to the annual profit earned by the firm per share. A low P/E ratio could mean that a stock is undervalued by the market (making it a possible buy) or that it has lost value. These ratios should not be studied in isolation; they should be compared to the industry average.How to do your stock pick?
2) The cash flow statement report on operating activities, investing activities, and financing activities. Positive cash flow is a sign that the company is healthy. One should not study the company's cash flow in isolation. To get the full financial picture of the company, you also need to study the balance sheet, income statement, and statement of owner's equity and do a comparison with the financial health of its competitors. Positive cash flow is a good sign, but negative cash flow is not always bad news. Sometimes a company may have negative cash flow due to investments in new equipment which is beneficial in the long run. Hence, there is no simple rule of thumb to say whether or not a company with strong cash flow is attractive.

Gurus know all about technical analysis.It is possible to time the market,maybe not exactly.There is always some "noise trading" eg. by speculators and institutions that trade for reasons unrelated to fundamental value.

Covered Calls during volatile times

calls can be a great way to profit when the stock market is trending sideways. If you don't know which way stocks are going to go it isn't a bad idea to sell some calls on strong stocks. Some reasons Selling Covered Calls can be a good idea are.
1. Monthly Income

Selling calls is a nice way to make a monthly income from the stock market. If you are a dividend investor a 2-5% cash flow after a year might seem good enough. Forget about dividends covered calls can normally produce a profit of 2-5% a month if you do it right.

2. Non Trending

There is no need to look for a trending stock and attempt to ride it all the way up. Selling covered calls allows you to profit from the stock market even if it is not making new highs. The only thing you need is for the stock not to move down too much.

3. There are good long term investments

There are always good investments in the stock market that you can afford to buy and hold for a few years. Why not buy a strong ETF and sell few calls on the stock while it is going through a sideways trend.

4. If the markets recover you will be in a good position

If you buy some strong stocks to sell calls on and then the market starts making new highs, well you are going to be in a spot where you own a stock and the markets are going up. You can always stop selling calls on it and just enjoy the benefits of a rising market.

Of course if the markets start heading down you can stand to lose a lot so it might be wise to have some point where you are going to limit your losses if you are wrong.

Don't Confuse Stop Limits With Stops

One of the biggest mistakes I have made was confusing a stop limit order with a stop order. This could potentially be very harmful to your account.
A stop order is simple; when you use it you tell your broker "sell my stock once it gets to a certain point". This way you can effectively limit your potential loss on a stock which would make it easier for you to effectively manage your account.

A stop limit order on the other hand tells your broker to sell your stock if it reaches a certain point, but only if you can get a good price. So for instance if you use a stop limit order both the stop and the limit has to be triggered in order for you to exit the position.

This can work out ok most of the time, but when it works against your favor it can really be harmful.

I had a bad experience with a stop limit order before which is why I never use them to exit out of a trade. I had bought the stock at $93 expecting it to bounce off of support and head up.

I was new to the markets so I figured a stop and a stop limit where the same thing. I placed the stop limit at $90. If it fell to $90 I wanted to get out of the trade and cut my losses short.

That was the plan anyways, what happened was some bad news came out. The stock gapped down and opened at $88, which triggered my stop. If I had a simple stop order on the stock I would have exited here at $88 and would have cut my losses relatively short.

However I had a limit order on it, so I would not get filled unless I could get filled for $90 or higher. Of course the stock kept heading lower and I when I saw my account I was forced to exit the trade at $84, or triple what I wanted my max loss to be.

How to invest in the stock market

I have tried a few different criteria and I like to start my picking process with the below process. I start a stock screener where I can compare the current stock price to cash. If this is > 2, meaning that at least 50% of the share price is comprised of the amount of cash in the bank. I am even more apt to invest with the company if they have a long standing history of dividends, and even greater chance if they have a history of increasing that dividend. This shows that the company is dedicated to their shareholders and will act accordingly.
Also one should look at their price to earnings, (P/E), because this represents the premium that you are paying to gain access to their earning power. For example, Johnson and Johnson at the time of writing this has a P/E of 11.62, which means that for ever $11.62 that you invest with them they returned $1 in earnings. This doesn't take into account their dividend history just earnings. One must also realize that analysing the P/E of companies in different sectors is unadvisable.

Thirdly, Return on Equity, is a ratio that looks at how well the company uses its capital to make money. If two companies have near equal P/E and they are in the same sector, then this would be a good tiebreaker. Ideally this shows that company A, with a higher ROE is a more efficently managed company than company B. I like this because when you take the market as an aggregate you are abstracting to a high degree and whether your company makes gears, cogs or harvest heart valves from pigs, we are looking at getting paid regardless of what the company produces. And the ROE measures exactly that, how well the company uses its capital to make us money.

5 Stock Tips to becoming a Successful Trader

When People look for stock tips they look for someone to tell them which stock will go up and make them a million dollars. But I’m going to give you something much more valuable, especially when you consider most “Hot Picks” don’t do so well.

If you want to learn how to make a nice return in the market you are going to want to learn the ropes yourself. That is all there is to it. You can’t rely on someone else to give you “Hot Stocks” because they will either have no clue what they are talking about or you will not play it the same way as them.

Luckily anyone can learn to trade the market. And if you are going to trade or invest there are 5 critical stock tips that you must follow.

Here they are my 5 stock tips.

1. Control Your Emotions

Being in the market is a constant struggle with your emotions. If your stock goes up even a little you get the urge to sell everything and walk away a proud man or woman with your tinny little profit. If the stock goes down you want to watch it all day as if that would make it change directions.

Emotions are bad (at least when it comes to the stock market) you can’t make any rational decisions when you are obsessed with every little thing. How could you, the slightest tick can bring so many emotions your way, good or bad and make you react differently, stressed, overjoyed, whatever it is.

This is one of the key elements that keeps so many traders and investors from making a decent return in the market, in fact, if you can’t control your emotions none of the other stock tips here will help you. But how can you do it? You are human after all.

The best way is to have specific rules that tell you when to get in and when to get out of a stock, and follow them. This will make sure your emotions will have no control over your position. You can only get out once your rules tell you to and not before.

Another thing you can do which will help control your emotions and follow your rules is to use smaller positions. Forget the fact that going all in 1 position is foolish anyways, but keeping your positions small will put less emotional stress on you, which will help you react more rationally.

2. Learning From Bad Trades

We all make bad trades, it can be hard to handle when you have lost some money trading. After all when you are just getting started you aren’t expecting it to happen. The stock market is supposed to make you money right? You’re not supposed to lose the stock can’t go down, that’s the wrong way.

Well, unfortunately experiencing losses are a natural occurrence in the stock market. The only thing you can do is learn from them.

Whenever you lose money don’t lose the lesson. Figure out why you lost and see what you could have done differently next time. Maybe there wasn’t anything you did wrong, the trade just didn’t work, it happens. In that case I just hope you kept your loss small by setting stops like I teach you.

Learning from your past trades helps you do well with other stock tips like controlling your emotions. When you do have a bad trade don’t consider it a bad trade. Consider it an education expense, you pay for college, the stock market is no different.

The money you lose will be put to good use if you take the lesson and use it to profit next time around.

3. Take A Breaker

Out of all these stock tips this is the one no one wants to hear, but it’s true. You can’t be involved in the markets every hour of the day. In fact sometimes being involved every day is too much.

Take some time off, remember to set your stops before you do, then let yourself get unstressed. Go fishing, golfing, play pool, do something else that will let you have fun and take your mind off the markets. There are other things in this world then money.

It will probably also benefit to your trading, sometimes it is better to take a break, especially when you are on a losing streak and come back later with a refreshed mind. You’ll be surprised at the results you can get.

4. Be risk Cautious

Most new traders look at the stock market as a pot of gold. You grab as many golden coins as possible then run off with a huge smile on your face. At least that is how I first imagined the market would be.

But it’s not, you’re going to win some and lose some. No matter who tells you otherwise it is not profit, profit, profit, it is profit, loss, loss, profit.

You can’t control when you will experience a profit and when you will experience a loss. The only thing you can control is how much you will lose if you are wrong.

So make it your business to cut your losses short and let your winners ride. The less you allow yourself to lose on a trade when you are wrong the less often you will have to be right to make a great return trading the markets.

Make use of things like stop orders, position sizing, and risk management. They can be your best friend in the markets, and save you from being one of the herd panicking while they see their accounts drop 50+% in a bears market.

Out of all the stock tips here this would probably tie for the most important with controlling your emotions. The best trader in the world is no different than a bum on the street if he loses all of his capital. Remember this is a business; your capital is the lifeblood of your business so guard it well.

5. Follow Your Rules

The Last of these stock tips is the icing on the cake. It is what puts everything together and makes you a profitable trader.

If you want to succeed you must have a set of rules that allows you to, cut your losses short, let your winners ride, and keep your emotions under wrapped.

This should take everything into consideration, how much you are willing to risk per trade, your time frame, everything. Remember your trading rules should never be broken, no matter what. The biggest mistakes I have ever made in the stock market happened when I did not follow my trading rules. Don’t make the same mistakes.

Now, as you learn and grow you might want to adjust your rules a little (not while you are in a trade of course). And see if you can’t make yourself even more profitable. But following your rules should be a daily practice for you.

Remember those stock tips. They can be very valuable for anyone willing to take the time to profit as a successful trader.

Reasons For Selling Options

Selling options has a ton of benefits in the stock market, especially when you are having trouble profiting from the market by buying options. Here are some of the major benefits you can get by being a seller.
1. You don't Have to pick the exact line

When you profit from buying the stock or the options it is very important to find the exact point at which the stock will turn around. You want to be able to draw a support or resistance line that is your line of action.

When it gets to that point you want to get in a trade. But if you are wrong, oh well better luck next time. When you are selling options however you don't have to know the exact point at which a stock will change directions.

For example when the market was making a large rally I knew it was overbought in the short term. I did not know exactly when it was going to turn around, but suspected it was going to pull back. So I sold a bear Call Spread.

If I had tried to find the exact point where it would turn around and head lower, I would have been stopped out numerous times and lost money. But because I sold the spread I was able to wait and finally profit when the markets did head lower.

2. It is less Stressful

It is less stressful to sell a far out of the money option and let the option expire then it is to find the exact point at which the stock is likely to turn around.

3. Higher Probabilities

Selling out of the money options gives you a greater chance of being successful on any 1 trade then buying the stock. That is because the stock does not need to move in your favor for you to make money.

It only need to not move against you too far. If you can find stocks like that you can be a profitable option seller.

Signs of a bottom

Everyone wants to find the bottom of the stock market so they can make huge returns and be looked at as a genius. But often times the only way you can tell when a bottom is, is after the fact. There are some signs that you can look at however to determine if the bottom is coming.
1. No one believes it

One of the best signs of a bottom historically has been when no one believes they are at a bottom. Everyone hears bad news and has some reason why the markets will keep falling. But remember the stock market is a forward looking instrument.

Stocks could start trending up 6 months or more before we see any recovery in the actual economy.

2. Stocks Stop Falling

Of course before stocks can start to go up again the first thing we need is for them to stop falling. When the markets start stabilizing again that is normally a good sign that the worst is over and we may see stocks start heading up again.

This can take a long time, it isn't that stocks just start going up all of a sudden, but they normally take some time to cool off first.

3. Leaders emerge

Often times a few of the strongest stocks will start trending higher. When those stocks start heading up it is normally a sign that other stocks will follow their lead, but not always the case. Of course the stocks that recover the fastest might make higher returns than the market.

I wouldn't mind getting into them as long as I cut my losses short if I'm wrong.

4. Reversal Patterns

Normally the bottom of the market is marked by a reversal pattern like the heads and shoulders or the double bottom. These patterns aren't always accurate, but they are worth looking at.

Of course there is no way to tell for sure whether we are at a bottom or not, but these are the signs that typically form when the end is near.

Zacks Beats The Major Brokers

Independent consulting firm Investars found that you would make more money by following Zacks Equity Research than looking at brokerage ratings.
Over a variety of periods, our long-term buy recommendations earned investors more money than those made by the major brokerage firms. Similarly, our sell recommendations helped investors identify which stocks to avoid.

Investars calculated that Zacks Equity Research's buy-recommended stocks rose 23.9% over the past 5 years, nearly 200% better than the Russell 2000.

To put this performance in perspective, let's look at how Investars says other firms performed. Following the buy recommendations from Goldman Sachs, Standard & Poor's, Deutsche Bank, Citigroup, Piper Jaffray, Raymond James, BMO Capital Markets and Ameriprise would have lost you money. Not a single one of those well-known brokerage firms had a positive return.

At the same time, Zacks Equity Research did a great job of telling you which stocks to avoid, or even short. According to Investars, Zacks' sell-recommended stocks fell 50% more than the Russell 2000. In other words, not only did Zacks warn you about the bad stocks, we helped keep you out of the worst of the worst - the ones that wreck your portfolio.

The Secret Behind Our Strong Performance What's our secret? It is combining our powerful quantitative model with the expertise of seasoned analysts.

Zacks harnesses the power of earnings estimate revisions to create two quantitative models: a short-term (1-3 month) indicator - the Zacks Rank - and a long-term (6+ months) indicator - the Zacks Recommendation. The Zacks Recommendation is an extension of the Zacks Rank and is designed specifically for long-term investors. Both models are applied to approximately 4400 stocks.

In addition, we employ a staff of 50 analysts with expertise in the specific industries they cover. Since there are often factors such as valuation, business conditions and management effectiveness that can be better spotted by a trained investment professional, we allow our analysts to override the quantitative model when they feel it is necessary.

Since our analysts cannot cover every stock, subscribers to Zacks Premium have access to 2 types of reports: analyst reports and snapshot reports.

Analyst Reports contain the analysts' recommendations as well as their in-depth written description on the company. These reports can range from 5 to 20 pages on the individual stock. Or simply, as many pages as necessary to impart to you why to buy, hold or sell the stock. These reports are available for the 1,150 stocks covered by our analyst team.

Snapshot Reports contain the quantitative recommendations and a quick overview of the key fundamental drivers behind the recommendation. This is contained in a 1-page document for approximately 3,250 stocks not covered by analysts.

The Best of Both Worlds There are many stocks with a long-term buy recommendation that are also on the short-term Zacks #1 Rank and Zacks #2 Rank lists. Combining both rating systems is a profitable strategy, and one I use for finding candidates for the Zacks Elite Focus List.

Here are 5 stocks that are buy-rated from both a short- and long-term perspective:

* Autozone Inc. (AZO) * Salesforce.com (CRM) * Hot Topic (HOTT) * ISIS Pharmaceutical (ISIS) * Tesoro Corporation (TSO)

Zacks Premium subscribers can view the full list of Zacks Equity Research's buy-recommended stocks. In addition, subscribers can also screen for stocks that are buy-rated from both a short- and long-term perspective with the Custom Screener.

Are Chipmakers Finally Stabilizing

Highlighted stocks include Altera Corporation (ALTR), Intel Corporation (INTC), Marvel Technology (MRVL) and Texas Instruments (TXN).

Much to my surprise, I'm seeing reasons to not be so pessimistic toward semiconductor companies.

The biggest is the trend in earnings estimate revisions. Six weeks ago, I said that "chip companies have seen approximately 400 earnings estimates cut". The number of falling forecasts has since declined to just 62. (Both numbers reflect revisions made over the preceding 4-week period.)

Some of this decline can be attributed to the fact that we are between fourth- and first-quarter earnings season. Typically, the number of earnings estimate revisions, both positive and negative, declines significantly during this time of year. Click here to find out more!

What can't be explained by the calendar, however, is the fact that 88 earnings estimates have recently been revised upwards on chip companies. In other words, there are now more positive revisions than negative revisions - a sharp change from early February.

This is not to say that industry conditions have improved; they haven't.

In early March, the Semiconductor Industry Association (SIA) said that January worldwide sales were down 28.6% from a year prior. A few days later, Marvel Technology (MRVL) said it does not expect conditions to improve over the short-term. Not to mention the fact that the economy continues to contract.

First-quarter earnings won't be good either. Every chipmaker in the S&P 500 (SPX) is projected to report at least a double-digit drop in profits.

So Why The Optimism?

Semiconductor companies have been responding to the difficult industry conditions by continuing to cut costs. For instance, MRVL is reducing its workforce by 15%. Intel Corporation (INTC) is freezing salaries.

There also could be a sense among brokerage analysts that conditions are nearing a bottom.

Worldwide revenues are at their lowest level in more than 4 years. Though semiconductor prices have dropped, usage of chips has increased. Consider the explosion in wireless devices that has been occurring. Not to mention the rise in devices that use flash cards, such as digital cameras and music-playing phones.

Inventory levels have also declined and at some point will be low enough to allow the industry to recover.

Still Early, However

Though these are positive signs, it is important to realize that the chip companies still have a long way to go. Even the estimate revisions, though positive, are not that impressive.

Nearly half of the positive revisions made recently are for just 4 companies: MRVL, INTC, Altera Corporation (ALTR) and Texas Instruments (TXN).

The fiscal 2009 profit projection for MRVL has the company earning 6 cents per share. Though an improvement from a month ago, when the consensus estimate called for a loss of 11 cents per share, it is still well below what analysts were projecting at the start of 2009.

Similarly, changes in forecasts for ALTR, INTC and TXN have stemmed the trend of negative revisions, but not much else.

So, I'm not prepared to make a bullish call about the semiconductor industry. But, there does appear to be some stabilization. Whether this is truly the bottom, however, remains to be seen.

Related ETFs

There are several ETFs that directly track the semiconductor industry. Semiconductor HOLDRS (SMH) has an approximate 45% allocation to INTC and TXN. Alternatively, S&P Semiconductor SPDR (XSD) is more diversified with no stock accounting for more than 5% of its holding.

What Makes the FOREX Market Different From the Stock Market?

To get started in learning about forex trading, you will need to locate the forex trading software, education-learning system you want to use. As you find the games, as they are called, you will enter information about yourself, about what you are interested in learning and then you will download software to your computer. In following the 'game', you will learn how to make and lose money in the forex market. This type of game is going to make you more aware of what happens daily, how the markets open and close, and how different the various countries currencies really are.
You will open an online "account" using the gaming system. You will then be able to read the news, find and compare markets, and you will be able to make 'fake' trades so you can watch your money build or be eaten away in losses. As you learn the system, using it a few times a week, you are going to be more prepared, more educated and you will be ready to use the forex trades to make money. Of course, you may still need the aid of broker or a company to make your transactions happen but you will better understand the process, what will happen, and what calls you may want to make when you read about the news, the markets, and the currencies in other countries.

A forex market trade is one that involves at least two countries, and it can take place worldwide. The two countries are one, with the investor, and two, the country the money is being invested in. Most all transactions taking place in the FOREX market are going to take place through a broker, such as a bank.

What really makes up the FOREX markets? The foreign exchange market is made up of a variety of transactions and counties. Those involved in the FOREX market are trading in large volumes, large amounts of money. Those who are involved in the FOREX market are generally involved in cash businesses, or in the trade of very liquid assets that you can sell and buy fast. The market is large, very large. You could consider the FOREX market to be much larger than the stock market in any one country overall. Those involved in the FOREX market are trading daily twenty-four hours a day and sometimes trading is completed on the weekend, but not all weekends.

You might be surprised at the number of people that are involved in FOREX trading. In the years 2004, almost two trillion dollars was an average daily trading volume. This is a huge number for the number of daily transactions to take place. Think about how much a trillion dollars really is and then times that by two, and this is the money that is changing hands every day!

The FOREX market is not something new, but has been used for over thirty years. With the introduction of computers, and then the internet, the trading on the FOREX market continues to grow as more and more people and businesses alike become aware of the availablily of this trading market. FOREX only accounts for about ten percent of the total trading from country to country, but as the popularity in this market continues to grow so could that number.

The forex market is also referred to as the FX market. If you are interested in joining the millions who are making money in the forex markets, you want to ensure you are dealing with a reputable banker or company involved in forex trading. With the spur of interest in the forex markets, there are many types of companies that are popping out on the Internet appearing to be genuine forex trading companies but in reality, they are not. Forex trading can be completed through a broker, a company that deals in the funds, and from within your own country. For example, the US has many regulations and laws regarding forex trading and what companies are permitted to work with the public dealing with international trading and markets.

FOREX - Foreign Exchange Market

Most all countries around the world are involved in the forex trading market, where money is bought and sold, based on the value of that currency at the time. As some currencies are not worth much, it is not going to be traded heavily, as the currency is worth more, additional brokers and bankers are going to choose to invest in that market at that time.
Forex is a trading "method" also known as FX or and foreign market exchange. Those involved in the foreign exchange markets are some of the largest companies and banks from around the world, trading in currencies from various countries to create a balance as some are going to gain money and others are going to lose money. The basics of forex are similar to that of the stock market found in any country, but on a much larger, grand scale, that involves people, currencies and trades from around the world, in just about any country.

Different currency rates happen and change every day. What the value of the dollar may be one day could be higher or lower the next. The trading on the forex market is one that you have to watch closely or if you are investing huge amounts of money, you could lose large amounts of money. The main trading areas for forex, happens in Tokyo, in London and in New York, but there are also many other locations around the world where forex trading does take place.

The most heavily traded currencies are those that include (in no particular order) the Australian dollar, the Swiss franc, the British pound sterling, the Japanese yen, the Eurozone eruo, and the United States dollar. You can trade any one currency against another and you can trade from that currency to another currency to build up additional money and interest daily.

The areas where forex trading is taking place will open and close, and the next will open and close. This is seen also in the stock exchanges from around the world, as different time zones are processing order and trading during different time frames. The results of any forex trading in one country could have results and differences in what happens in additional forex markets as the countries take turns opening and closing with the time zones. Exchange rates are going to vary from forex trade to forex trade, and if you are a broker, or if you are learning about the forex markets you want to know what the rates are on a given day before making any trades.

The stock market Is generally based on products, prices, and other factors within businesses that will change the price of stocks. If someone knows what is going to happened before the general public, it is often known as inside trading, using business secrets to buy stocks and make money - which by the way is illegal. There is very little, if any at all inside information in the forex trading markets. The monetary trades, buys and sells are all a part of the forex market but very little is based on business secrets, but more on the value of the economy, the currency and such of a country at that time.


The currencies that are traded on the forex markets are going to be those from every country around the world. Every currency has it own three-letter symbol that will represent that country and the currency that is being traded. For example, the Japanese yen is the JPY and the United Stated dollar is USD. The British pound is the GBP and the Euro is the EUR. You can trade within many currencies in one day, or you can trade to a different currency every day. Most all trades through a broker, or those any company are going to require some type of fee so you want to be sure about the trade you are making before making too many trades which are going to involve many fees.

Trades between markets and countries are going to happen every day. Some of the most heavily trades occur between the Euro and the US dollar, and then the US dollar and the Japanese yen, and then of the other most often seen trades is between the British pound and the US dollar. The trades happen all day, all night, and thought out various markets. As one country opens trading for the day another is closing. The time zones across the world affect how the trading takes place and when the markets are open.

Stock Day Trading Tips 2009 > How to Pick Good Stocks - Top Day Traders Tips

It's no secret that online trading can be a very lucrative, yet highly competitive field, and the truth is that the stock market doesn't care if you are an experienced or a beginner trader.

The rules and the opportunities are the same for everyone, so either you are going to make money when you pick a stock and make a trade or you are simply going to lose it in favor of the more seasoned ones.

It won't matter if we are in a recession or we have a great economy. Gamblers and ignorants loose money consistently either way. While experienced and Profitable traders make money in good or bad times. The trick is to learn how to do it.

As a stock trader your homework is all about studying and testing market strategies that can help you take advantage of stocks while at the same time protect your gains.

Just always keep in mind that a good strategy is simple and practical. Complicated stock systems will always make you slow in your decision making process or confuse you from the start.

A trader must always read as much as he can. There is simply no other way to prepare one self for this difficult yet incredibly rewarding activity, but to read and put into practice as much ideas as you can, at least by paper trading first.

The are a lot of books on the subject that pretend to help you, however many of them where written 6 or 8 years ago and that kind of makes them obsolete in this constantly changing field.

Fortunately there are some practical stock trading sites on the web where you can access proven trading strategies that are easy to implement. One of those sites is http://www.MomentumStockPick.com

They focus on stock trading methodologies that can help you identify and take advantage of certain stocks with momentum, while limiting your risk.

Visit them today and improve your stock trading potential in 2009.

Put options Vs Short ETFs

Put options and short ETFs are two ways you can look at profiting from the downside, so which one is better. What provides the least risk and highest reward?
Well at least when you compare it to your total investment put options probably give you a higher risk then short ETFs do. But all and all I believe buying puts is a better way to go about trading the downside then buying short ETFs for these reasons.

1. Higher reward

Obviously option trading will give you a much higher percentage gain then buying or selling ETFs. If the market has a really bad day and moves down 5%, well the inverse ETF might be up 4 or 5%, but a put option could potentially be up 100% or more.

That means that if you want to get the most return for your investment put options can help you.

2. Lower Capital

You could buy the short ETF for $50 or you could buy a put option for $5. It requires a lot less capital and therefore it allows you to have a smaller possible loss. If you own the short ETF and the market gaps to the upside it can be potentially deadly to your account. But if you bought the put the most you can possibly lose is the $5 you put into it.

3. Look for individual stocks

Inverse ETFs allow you to take advantage of individual ETFs or individual funds. However Put options are available on almost every stock. If the market is going to have a down day you can profit from the market moving down as a whole or you can profit as a few weak stocks move down faster than the market.

I like the second option because you can make a higher return by profiting on a few bad stocks that can fall much faster than any ETF fund.

How to Use Covered Call Options For Additional Safety and Profit

If you buy stock, you expect that the price of the stock will go up, and you will be able to sell your stock and make money. If the price of the stock falls, you will sell it for a loss. Call options can be used in either situation -- to enhance the profits of rising stock, or reduce the loss from falling stock. In today's erratic economy, it is essential that investors understand options and use them for safer investing.
One easy way to start with options is by selling a call option when you buy stock. This combination of buying stock and selling call options is referred to as a "covered call" or a "buy-write". Here's how it works.

You buy 100 shares of stock, and at the same time (or later) you sell one call option. You may then be obligated to sell the stock at a pre-determined price before the option expires (usually within 45 days or so). If you set the pre-determined price high, the option is likely to expire and become worthless. If you set the pre-determined price low, it is likely that you will sell the stock on expiration day for that price.

Let's see a specific example. Suppose it is Jan 12, and Apple (AAPL) is selling for $89. I want to add the protection that call options bring. I buy 100 shares of AAPL, and sell the February 90 Call option for $6.00. This means that my net cost is $84. As long as the price of AAPL stays below 90 until February 20, the option will expire worthless, and I get to keep the $6.00. This adds a few percentage points to my monthly return and provides protection in case AAPL falls a little. If AAPL rises above 90, I will sell it at 90, keeping the $1.00 profit on the stock, and the $6.00 from the sale of the option. That's about 10% in a month. Essentially, you can lock in some profit every month. Some people use options for speculation and gambling. Some are successful, but many are not. I use options for a safe investing strategy.

The covered call can be used in several different ways depending on the market and the investment results desired. There are also several other more advanced options strategies that use selling call option to provide additional income.

Cutting losses on Stock Options

When you hear the words stock options you probably think something like risky or huge losses. But if done correctly trading options can be profitable and help you to experience limited losses.
Most people who trade options will probably end up going bankrupt, and why is that? It is because they do not limit their losses. It is very important to look at protecting your capital when trading.

So how do you limit your losses? Well the first thing you need to do is manage how much of your capital you are putting into 1 trade. If you are putting 10-20% of your account into 1 option trade, beware. That is too much. Putting such a large percentage of your account into 1 option trade is very foolish. If you lose that trade then your entire account will be drastically affected.

Now you can decided to be a little wiser with how much you risk and decide that you are only going to risk 2-5% of your account on 1 trade. Sure your possible gain is smaller if the trade works in your favor. But if the trade does not work in your favor and actually works against you it will not affect your account that much.

It is hard to come back from a 20% loss in your account, but it is much easier to come back from a 2% or 5% loss.

Another thing you can do to help limit your losses as an option trader is to use stop orders. When you place a stop order on an option you are limiting the amount you can lose on that trade. Suddenly your max loss is not 100% or your invested capital.

Instead your loss is only 50 or 40% of your capital. That could make a big difference.

For more on options visit http://www.stocks-simplified.com/stock_options.html

For more tips visit http://www.stocks-simplified.com/stock_tips.html

How To Invest In This Economy

For investors looking to invest in stocks during these troubled times, it is not easy to know the best thing to do. In the past, you might have been amenable to working with a financial planner, who would likely have diversified your capital across a broad base of mutual funds or stock, both here and abroad.
In this new financial era, though, the effectiveness of this investment strategy has been strongly challenged, with a lot of people that invested over a decade ago still experiencing net negative gains. So if this old style of attempting to spread out risk isn't the the most prudent course of action, than how should anyone be investing?

If you follow most of the television pundits, it is a great moment for value buying. Value investing is when you invest in equities, usually at a reduced price, speculating that it is cheaper than it should be and will ultimately gain in price to reflect their true price. This is the method that Buffett made his incredible wealth, and it is has historically proven to be a prudent method of investing.

However, investors should be careful about hastily purchasing equities simply because they are not trading at a high price. Some stocks are at a low price because they are undervalued; others, however, are now at a low price simply because they genuinely aren't worth a lot. Not all cheap stocks are the same, and any person seeking to buy at a low price should diligently research the long-term outlook for such companies. For the moment, despite the fact that they are really cheap, I would still advise staying clear of the wall street stocks, for example.

Furthermore, considering the shaky nature of the entire economy - and the endemic, all-pervasive nature of the entire economic situation - making low-priced based investments at this point should still be considered with caution, even if the underlying investment is fundamentally solid. If you have a significant time period for these investments, this kind of strategy could well prove to be very successful. That said, if you have a shorter-term time horizon - a few years, for instance - than there might be more appropriate alternatives, since these investments, even if they are intrinsically good buys, could still go through substantial drawdown if the stock markets begin to crash again.

Another strategy could be to avoid equities entirely for the time being, and instead put your money in other types of investments. For someone with a longer time horizon, I would advise looking into gold and other commodities. Gold has over time been negatively related to the greenback, and with the probability of more inflation, gold could well be a significantly high returning purchase for the long-term. In addition, one might consider looking into farming commodities, considering that the supply is increasingly limited, which may well continue to drive the market value up in the future. You could either purchase individual commodity futures, or simply buy a commodity ETF if you want broad exposure.

Finally, for people that are ok with alternative investments, there are quite a few investment managers that have generated high returns, even during the economic crisis. For such investors, non index-based investments are a good option to look into. An absolute return money manager attempts to generate higher-than-market returns throughout various financial markets by trading both buy and sell positions depending on what the market is doing. Some are trending based, others attempt to make money from reversals of trends, and some are grounded on the premise of mean reversion. Even though quite a few of such concepts are unfamiliar to most regular investors, it is definitely worth considering, even if merely as a way to diversify your current portfolio.