Most stock market investors can enjoy the best of both investment approaches, by allocating a portion of their investment capital for day trades, and the balance of it for long term investments. Because day trading can be more volatile, and can result in huge profits or disastrous losses, most investors are recommended to put only as much of our cash as we can reasonably afford to lose, into this kind of trading strategy. Before you invest you should make sure to only invest what you can afford to lose that way, even if you encounter a worse case scenario, it will not significantly impact your financial situation.

There are pros and cons to both approaches. Investors who do day trades enjoy the idea that they can get in and out of the stock market quickly, and make money without waiting for the results. It does not matter what type of investment strategy you take it still requires you to do some analysis on the back end. Long term stock investors figure that if you are trading, buying and selling stocks at a fast pace, then you do not have any time to do research on a stock.

Investing in corporations that present you with slow but consistent gains is a time-tested approach to investing . In fact, historical data proves that if you buy and hold good stocks, over a long period of time, then chances are that your investment will do well. So it may be a good thing for a younger person to invest in some quality stock investments right now.

With most stock investments, it is usually best to diversify to reduce your risk and increase your potential returns. An approach that you could utilize to diversify is to use a portion of your investment cash for short-term and long-term stock investments. If one set of investments does not do well, the other probably will. If both strategies are successful, then all the best.

Learn more about stock market investing basics at
http://www.howtobeastockmarketplayer.com

Article Source: http://EzineArticles.com/?expert=Omar_Best

So the divergences this year have been rather odd.

The U.S. economy stumbled in the first half of the year, resulting in the U.S. stock market tumbling into a quite serious correction in the summer months, with the S&P 500 down 20% at one point. But the economy began recovering in the fall, and the U.S. stock market has been in an impressive rally since its early October low, the Dow gaining 15% from that low, and closing up approximately 6% for the year.

In the process it has broken out above its important long-term 200-day moving average again, its bull market that began in early 2009 still intact. And it enters the new year near a new rally high, and with economic reports increasingly positive.

But far from moving in tandem, numerous markets outside of the U.S. have been quite ugly in 2011.
For instance, China, the world’s 2nd largest economy, sees its stock market in a quite serious bear market, down 30% over the last 13 months, and entering the new year still in a negative downtrend.

And that’s in spite of China’s economic strength still being at a level that’s the envy of the rest of the world. China’s economy has grown at an average annual rate of 10% for more than 30 years (which is how it has become the world’s 2nd largest economy).

Economists estimate that China’s growth slowed to 9% this year, and will slow further to 8.5% next year. But that compares to Goldman Sach’s estimates that U.S economic growth, which has been recovering from the first half slowdown, will still only reach 3% next year.

The stock markets of other large Asian countries like India, Hong Kong, and Japan have not experienced the resilience seen in the U.S. market either. They are in bear markets, down 26%, 26%, and 22% respectively as they enter the new year.

It’s not much different in Europe where the stock markets in Germany and France, the eurozone’s two largest economies, enter the new year also in bear markets, down 22% and 24% respectively, although higher than at their October lows.

Can the U.S. market continue to outperform the rest of the world next year?

The U.S. economy continues to recover from the severe recession of 2008. The employment picture, although still dismal, is improving, with the unemployment rate down to 8.6% in November, its lowest level in three years, and the four-week average of new weekly unemployment claims at their lowest level since June, 2008. Consumer confidence is at its highest level since last April, factory output is rising, and even the housing industry is finally showing signs of recovering.

The biggest threat is that the debt crisis in Europe might finally implode and push Europe into an economic recession that would spread around the world to include the U.S. The markets in Europe and Asia seem to have factored that possibility into stock prices with their bear markets of 2011.

However, encouraging assessments regarding the eurozone debt crisis have begun creeping out from under the year’s overwhelmingly negative headlines, with some economists now predicting the crisis will be contained by recent measures undertaken by the EU and ECB, and will be more permanently resolved by mid-2012.

If markets in Asia and Europe begin to factor in a positive outcome, or even just that the crisis will be kicked down the road again, their bear markets would likely end and be replaced with new bull markets. That would free the U.S. market from the drag they have had on it, and the U.S. market rally could indeed have further to run, with global markets moving in tandem again giving it a further push.

Is it too much to hope for? Maybe not.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

Successful stock market trading is based on several key factors. All trading is based on probabilities. You want to put the odds in your favor as much as possible, before taking a position in the market. This is achieved by implementing a successful trading plan. A plan should encompass strategies, methods, techniques, and principles. A great example of a successful method is the one used William J. O’Neil. He is the founder of Investors Business Daily, and one of the most successful stock market operators of all-time.

A major key to successful stock market trading is money management. You simply must cut your losses short. A good policy is to always sell a stock if it drops 10% below the purchase price. If you buy a stock at $30.00 per share, and it drops to $27.00, you sell it no matter what. This will keep you from taking a huge loss, which will hurt not only your stock market account, but your psychological ability to trade properly.

Analysis makes a big difference

Proper analysis is critical in several different time-frames. This includes the general market direction on the daily chart. Is it currently in an up-trend, down-trend, or basically moving sideways? Proper price and volume analysis will give you the answer. You do not want to be buying stocks during a stock market correction. This is because about 75% of all stocks follow the general market. It does not make sense to fight the trend. That is like trying to swim against the current of a river.

Take a logical and more professional approach to trading

The approach you take to stock market trading can make a big impact on your overall results. Analyze stocks closely. Look for trends, and get out of a position when the trend seems to be stopping. Do not wait around and hesitate when the market starts to go against you. Holding on to a loser is one of the biggest mistakes a trader can make. An even bigger mistake is adding to a losing position. This is a recipe for disaster. You should only add to a stock or futures position after the market has gone in your favor, and you are up money on the position.

Volume is a major clue

Volume should be a major consideration in your stock market trading process. You want to make sure a stock has enough following for a significant price advancement. A great test is the market itself. If volume rises substantially, then big players such as mutual funds or hedge funds know something, and are getting involved. If the price rises at the same time, this is a buy signal. If the price falls, you have a sell signal.

Your stock market trading results can be amazing. Implement a logical, analytical approach, along with cutting your losses short, and letting your profits run. This is a recipe for success. Always keep learning, and you might make a fortune trading the various markets.

Did you know that over 90% of traders in the stock market, and commodities market lose? Become a winner, and learn the secrets of the world’s best traders and investors by clicking here:

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Gary E Kerkow, founder of Tradingmarkets4u, is a stock market, and commodities market expert. Kerkow is a highly successful trader, and top trading instructor. Learn the successful methods he implements by clicking here:

http://www.tradingmarkets4u.com/About_Gary_E_Kerkow.html

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With the current volatility it is almost impossible for the small investor or the amateur to “time” the market. Even in the best of times with a relatively stable market is difficult making a profit trying to out guess the market and in these times it is a fool’s folly. Traditional investing theory postulates; if you’re investing for the long-term, maintain a consistent investment strategy by continuing to put small amounts of money into the stock market as often as possible, on a regular basis, ignore CNBC, and remain oblivious to short-term stock market gyrations. The premise being that the stock market, at some point in the future, will be lower than it is now; conversely at some other point in the future it will be higher than it is now. While history has shown this to be still an immutable fact, even in this volatile market; there are still other ways to make a substantial profit in today’s market.

Thousands of small investors are now looking online for investing guidance and opportunities. There is a new kind of social awareness group that specializes in finding undervalued stocks which the general trading community has over looked. These stocks have to meet several criteria, some of which include:
1) A manageable share structure on the verge of being maxed out
2) A current filing status with reasonable transparency
3) Very few, if any, convertible notes
4) No history of abusive dilution or reverse splits
5) A responsible management team who has experience in running companies and will respond to shareholder inquiries with frequent, valid, business updates
6) And most important the company has to have an undervalued share price with which to give every member a solid return on their investment.

Following the types of tenants above allow members to benefit greatly alongside the company as they are able to attract more business and financing without the need for the typical cycle of dilution. We also strongly believe in accumulating and trading exclusively at the offer, or Asking Price. Penny stocks are illiquid, plain and simple. There are NO market makers here to make a market, hence the need to always use limit orders instead of market orders. By buying exclusively at the asking price liquidity is maintained and a stocks’ price is allowed to appreciate in a healthy manner.

This is just one type of online investing resource. Whether it is a nationally advertised and recognized online resources or that “one of a kind” online investment resource that you just discovered, due diligence is required before any money is to be risked. It is important that the resource that you chose utilize fits your needs and accommodates your risk tolerance when adopting their suggested market strategy.

AskBlasters.com. A leading investment company.

http://www.AskBlasters.com
http://www.LeeEstrada.info

Article Source: http://EzineArticles.com/?expert=Lee_Estrada

With the right statistics (and widely accepted assumptions) this was a simple suit of imperial clothing to weave. And with a ready audience on both Wall Street and Main Street (don’t you just hate that expression), this conclusion laid the framework for the passive investment mentality that has overrun the markets.

Armed with some pretty impressive theory, the economists “poipetrated” the very first occupation of Wall Street!

We now have more derivative betting mechanisms masquerading as common stocks than we have common stocks themselves — ’nuff said on volatility. So long as derivative chips are in play, it (high volatility) will run the casino.

Clearly, the MPT creators were once Mutual Fund investors, looking for something better after years of disappointing investment returns. True, mutual fund managers rarely beat the markets — but why? And also true, private, individual, portfolio managers rarely fail to beat the market averages over significant time periods.

Mutual Fund managers were destined to failure on the day that the first “self-directed” retirement/savings plan was created. This transfer of management responsibility to inexperienced “main streeters” spelled disaster from the get-go.

At about the same time, market cycle analytics (Peak-to-Peak, Peak-to-Trough, etc) were scrapped in favor of a competitive, calendar year, racetrack scenario.

When the going gets tough, professional Mutual Fund managers become sell-order-takers. When bubbles develop, they are “prospectusly” required to join the lemmings in their race up to and over the cliff. Open-end Mutual Funds are managed by the mob, quite literally.

Independent managers (particularly MCIM practitioners and CEF portfolio managers) have no push-pull relationship with the mob. Management rules are applied to economic realities; probabilities being left to statistical Monday morning QBs. Real managers call the shots, taking our profits before the mob panics and selecting bargains while the cyclical rout is in progress.

The Probability Of Winning The Bet On Probabilities

MPT (Modern, lazy if you will, Portfolio Theory) has other erroneous ideologies and assumptions in its DNA. It wants investors to believe that short term growth in portfolio market value is the be all and end all of investing activity, and that the proper alignment of any number of speculations is an acceptable investment strategy.

The creation, development, and growth of a portfolio’s income component is systemically ignored and left to chance in the MPT portfolio design process, while an all consuming battle is waged against the simple fact of a rather simple to deal with reality called the market cycle.

Economists are just naturally averse to admitting that they can neither predict, nor control, nor cope with market, interest rate, and economic cycles as well as a seasoned professional investor just has to. They observe and study the past — managers, and actual investors, operate in the present, and deal with an unknowable future using rules and disciplines — not probabilities.

But MPT promoters, university funded economists, and Wall Street have deeper pockets than small and independent investment professionals. The ability to create all manner of securities (and theories) from thin air is clearly more profitable and less risky (from a law suit perspective) than dealing with the intricacies of individual stocks and bonds.

There is no real question about the prospects for market volatility — it is here to stay. The real question is how to deal with it profitably. The most obvious solution is rapid trading for fun and profit, a conclusion that most readers of this article will nod their heads to.

But long term, portfolio development-wise, looking to a more secure retirement or other objective, there is a non-MPT, non short-term-trading solution — one that embraces both the extremes of volatility and the repetitive (if not predictable) nature of the market cycle.

Market Cycle Investment Management, with its core equity trading discipline, and mandated “base income” growth mechanisms, is a proven common sense methodology that no self respecting economist will ever appreciate.

The K.I.S.S. principle is just not as sexy as standard deviations, correlation coefficients, alphas, and betas. But basic investment principles, applied with professional decision-making and risk minimization skills, have fared far-better without MPT mumbo-jumbo than they ever will with it.

And, for the record, market volatility is nothing to be afraid of, really — just bring it on!

Steve Selengut
http://www.marketcycleinvestmentmanagement.com
Author of “The Brainwashing of the American Investor: The Book That Wall Street Does Not Want YOU to Read”

Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day’s gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.

The only question I continue to have about all this comical hubbub is why don’t y’all just relax and enjoy it. Jon Methuen nailed it in his August 15, 2011 parody of the financial world’s ridiculous obsession with “volatility”. “A Reasonable Guide To Stock Market Volatility” is a must view — but only for mature adults with a semi-sick sense of humor.

Decades ago, a nameless college Statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. “In the real world”, he said, “there are liars, damn liars, and any member of the groups just mentioned”. An economist or a politician, armed with a battery of statistics, is an ominous force indeed.

Well, now all the economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.

But the volatility (and the uncertainty it either causes or results from, depending upon the expert you listen to) persists.

Modern computers are so powerful, in fact, that economists and statisticians can now calculate the investment prospects of just about anything. So rich in statistics are these masters of probabilities, alphas, betas, correlation coefficients, and standard deviations that the financial world itself has become, mundane, boring, and easy to deal with. Right?

Since they can predict the future with such a high degree of probability, and hedge against any uncertainty with yet another high degree of probability, why then is the financial world in such a chronic state of upheaval? And why-o-why does the volatility, and the uncertainty, remain?

Why the Volatility and Uncertainty Remain

I expect that you are expecting an opinion — yet another opinion — on why the volatility is as pronounced as it seems to be compared with years past. I’ll do that next. But, first a sentence or two on “uncertainty” — the playing field of the NFL (National Financial League). An uncertain environment is the only “for real” certainty you will ever experience in investing. Every investment has some form of risk and uncertainty.

Volatility, on the other hand is simply a force of nature — one that you need to embrace and deal with constructively if you are to succeed as an investor.

But this new force of nature, this extreme volatility that we have been experiencing recently, has been magnified by the darkest forces of the Dismal Science and the changes that it has encouraged in the way financial professionals view the makeup of the modern investment portfolio.

On the bright side, enhanced market volatility enhances the power of the equity and income security trading disciplines and strategies within the Market Cycle Investment Management (MCIM) methodology — an approach to market reality that embraces market turbulence, and harnesses market volatility for results that leave most professionals either speechless or in denial.

But, with no statistical data necessary (or available) to support the following opinion, consider this simplistic rationale for the hyper-volatility of today’s stock market.

Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations to finance their growth and development.

“Tax collecting” raise an eyebrow? Look at a rental car statement or your next hotel bill. Those greedy corporations collect more money for state and local governments than the income tax collectors — but that is a whole ‘nother issue.

Those of us who trade common stocks in general, IGVSI stocks in particular, owe a debt of gratitude to the real volatility creators — the hundreds of thousands of derivative products that bring an entirely speculative kind of indirect supply and demand to the securities markets.

Generally speaking, the fundamental, emotional, political, economic, global, environmental, and psychological forces that impact stock market prices have not changed significantly.

Short term market movements are just as non-predictable as they have ever been — they continue to cause the uncertainty you need to deal with using proven risk minimization techniques like asset allocation diversification and trading.

The key change, the new kid on the block, is the impact of derivative betting mechanisms on the finite number of shares available for trading. Every day on the New York Stock Exchange, thousands of stocks are traded, a billion shares change hands. The average share is “held” for mere minutes.

On top of derivative trading in real things such as sectors, countries, companies, commodities, and industries, we have a myriad of index betting devices, short-long parlor games, option strategies, etc. What’s a simple common share of Exxon to do?

Market volatility is here to stay — at least until multi-level and multi-directional derivatives are relocated to the Las Vegas markets where they belong.

Steve Selengut
http://www.marketcycleinvestmentmanagement.com
Author of “The Brainwashing of the American Investor: The Book That Wall Street Does Not Want YOU to Read”

Basics of ETF investing

Both individuals and institutions can get involved in ETFs. This can be done in basically the same way stock investing is carried out. With an online broker or offline broker, ETFs can be bought and sold like any stock. The amount of research and control required depends on the personal preferences of the investor, and the type of broker chosen.

An ETF is a basket of stocks designed to track an index or market. There are ETFs that track everything from the S&P 500 to commodities. Their prices will basically mirror the price of the market they are based on, although they may trail or exceed it at times. Designed only to follow, they require relatively little active human management, and therefore have much lower administration fees than most mutual funds.

Those who invest in ETFs are not trying to beat the market. They are only trying to capture the average returns that the markets have historically offered over time. Since many stock market investors and mutual funds usually do not beat the market anyway, they can be a smart choice.

Benefits of ETF investing

There are several benefits that you can get should get involved in ETF investing. These include:

Diversity: As mentioned earlier, ETF investing offers diversity to investors. A typical ETF is essentially a combination of stocks in different companies. To make the most out of an investment, it is possible to use ETFs to shadow various financial instruments such as bonds or commodities.

Minimal costs: ETF investing has lower costs compared to mutual funds, particularly when ETFs are purchased less frequently but in larger amounts. Furthermore, ETFs also offer more control over taxes when compared to mutual funds, since the latter is subject to higher turnover internally. Generally, ETFs do not generate significant capital gains until they are sold by the investor.

No investment minimums: Not only do ETFs have minimal costs, they also don’t require investment minimums, and you can even be purchased in one-share increments. This isn’t the case with mutual funds, which generally require a minimum of $1,000 or more for the initial investment.

Ease in transaction: Investors are limited to selling or purchasing mutual funds at the closing price every day. This isn’t the case with ETFs, since you can trade these whenever you wish to, similar to how stocks work. There are even day traders and short-term traders who use ETFs in their portfolios.

Transparency: Those who are involved in ETF investing know exactly where their funds and assets invested in ETFs are going. This isn’t the case with mutual funds, which are a lot more opaque that most people think.

While ETFs have a lot of advantages, they are not for everyone. Those who want their investments more actively managed for them will want to go with mutual funds. In addition, those who would like to beat the markets certainly need another investment. However, for everyone else, they are an option that should be considered.

Great advice on saving and investing at Money Saving Tips. Topics include credit cards, insurance and various forms of investing such as investing tax free.

Article Source: http://EzineArticles.com/?expert=Tom_A_Smith

Up until recent times you could stay out of serious trouble by simply allocating about half of your investment assets to stocks and the other half to bonds. That’s the traditional investment strategy often recommended for average investors, and most people deal with it by putting their money in stock funds and bond funds. Stock funds are the growth half of the equation and the risky part of the strategy. Bond funds are considered the relatively safe investment designed to pay higher interest income. Over the years losses in one fund type were usually offset by good returns in the other.

Welcome to the year 2012, where bonds and bond funds will likely not be such a safe investment. Stock funds are never safe and 2012 will be no exception to the rule. Asset allocation will be only half of the story going forward. Selecting the right funds within each category will be the other key to success. Let’s look at your best investment strategy in both fund categories, and the reason why certain funds will be your best choices.

Two things stand out about the so-called recovery the USA has supposedly experienced over the past few years. First, the economy did not recover as it has in the past after a recession – 9% of the working force is out of work. This makes for a weak economy and puts pressure on the stock market and stock funds. That’s why you’ll need to be careful about which stock funds you include in your investment portfolio.

Second, interest rates have been driven down to historically low levels to stimulate the economy in general and the pathetic housing market. Even with a 4% mortgage rate average folks can not qualify for a mortgage or afford to buy a house. Today’s ridiculously low interest rates mean savers can not earn a respectable interest income in truly safe investments. It also means that bond funds could be a trap in 2012 for people who don’t really understand bonds and bond funds. Let’s look at the best bond fund strategy first.

Even the best bond funds of the past few years could be big losers in 2012… if they hold long term bonds in their investment portfolios. When interest rates turn around and go back up the bonds they hold will lose significant value because new bonds will become available that pay more attractive (higher) interest income. Your best investment strategy for bond funds is to own funds that hold corporate bonds that mature in about 5 years to 7 years. CORPORATE BOND FUNDS pay more interest income than similar funds that invest primarily in government bonds. Funds that hold bonds maturing in 5 to 7 years (intermediate term bond funds) will be much less affected by rising interest rates than long term funds holding bonds that mature in 20 years or more. That’s a fact, and that’s how bonds work.

Your best investment strategy for stock funds will be to go with GROWTH AND INCOME funds that invest in high quality companies with a history of paying 2% or more per year in dividend income. If the stock market gets truly ugly in 2012 and beyond these funds will be your best bet to sidestep huge losses. In a bad stock market funds that pay little or nothing in dividends are usually the big losers.

Sometimes it pays to be aggressive and take on more risk. The year 2012 looks like a time to get more conservative and live to be a risk taker another day. Most investors need to hold stock funds and bond funds as well as truly safe investments like bank CDs. Your best investment strategy for 2012: allocate your investment assets with 40% going to INTERMEDIATE TERM CORPORATE BOND FUNDS and the same going to high quality GROWTH AND INCOME STOCK FUNDS paying 2% or more in dividend income. The other 20% of your investment portfolio goes to safe investments like bank CDs.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Article Source: http://EzineArticles.com/?expert=James_Leitz

Of course, there has never been a shortage of scandals that have bedeviled Wall Street, and investors have generally ended up on the short end of the deal. Whether it was the recent financial meltdown that was a direct result of improper mortgage risk assessment by Wall Street bankers whose primary goal was to repackage the mortgages and sell them at a profit, as the recent credit evolved, or the never ending push to bring new, innovative, and profitable investments to the investing public, regardless of the welfare of the public. You must understand that Wall Street is dedicated to making money for its shareholders, and is definitely not worthy of investors blind trust.

Against that backdrop, we must attempt to answer the question posed in the title of this article. What is the best investment strategy for every individual has to be considered on a case-by-case base. As a general rule of thumb, traditional thinking dictates that the farther you, as an investor, are from the time you will require the use of the money, the longer your investment horizon should range.

But recent years have brought some change to that mode of thinking.

Let me first issue a disclaimer, of sorts: I have been a long time institutional investor for most of my professional career. I was a swing trader in those days, and my trades ranged from one trading session to several weeks. In the last eight years I have narrowed the scope of my investing to primarily intraday trading, using scalping methodology. My average investment horizon is now about 15 minutes. Wow! That is a real change in investment thinking; but I am in all cash every night and I sleep like a baby.

Where it 20 years ago, I would strongly recommend that younger investors take a long term approach to their investment strategy. I don’t feel that way anymore, for several reasons:

• The ultra-fast dissemination of news through social media and traditional media has literally brought the world into our living rooms. By the same token, the markets receive data and react to that data nearly instantaneously. There can be no doubt that the rapid transmission of information across the globe has added a volatility component into the market that did not exist in prior decades.

• Computer based trading programs, also called black box trading, and has had a profound effect on the price action of all highly liquid investments. High Frequency Trading (HFT) operators claim that, under current technology, they can execute 3,000 trades per minute. Further, the NYSE currently estimates that in the area of 50% of all trading fall under the category of HFT. This change of trend in trading has definitely affected the personality and performance of investment practices of the last 6-8 years.

• Mutual funds, which are strictly longer term investment vehicles (excluding the ETF variety of mutual fund); have consistently underperformed their corresponding index returns with unprecedented uniformity. Last year, nearly 85% of all open end mutual funds failed to match their index benchmarks.

Is long term investing dead?

No, not necessarily. But the days of buying the current hot stock and then forgetting about it are long gone. Price volatility has driven the market to lavish highs and unprecedented lows, which has caused long term investing to be viewed as a far less attractive investment choice than in prior times.

That is also my viewpoint.

I manage my portfolio with a 2-year investment horizon. Given the current state of affairs in the world (two wars, the housing crisis, Japans nuclear issues, the euro crisis, the US economy), I am confident looking ahead only a couple of years, and the once vaunted USA economy cannot be counted on, at the present time, to churn out double digit returns. I feel this approach is well considered and realistic, given the current geo-political problems we are currently experiencing.

So I have discouraged longer term investing, suggesting smaller investors concentrate on the intermediate term. I have taken the time to mention that I am interested in intraday (or, day trading) and most of my current investment (or trading) income comes from intraday trading. I prefer short term trading and about half of my portfolio in straight stock investing. I have outlined the reasons for this above. While short term investing takes a bit more time and effort than intermediate or long term investing, the rewards may be well worth the effort.

In summary, we have taken some time to look at the pros and cons of long-term investing, intermediate investing, and short term investing. I have stated that in my current economic outlook, I am shunning long term investing in favor of investing with a shorter-term outlook.

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During the tech boom of 2000, people got very excited when they saw on their charts a huge run up of their shares. When the market started to turn down, they didn’t know what to do because they didn’t have any pre defined exit points. Consequently they often held on too long and lost nearly all or all of their money.

I like to let my profits run, so I don’t like to have profit target. I like to get out once the share has retraced off its high. I can’t do that if I have set a predefined share price at which I’m going to exit. I know I’m not going to be able to pick the top, but I like to hold on to my winning trades.

You need to have a mechanical way in which you process your exits. Having the exits as mechanical as possible is one of the keys to making sure you’re going to stick with your exits, and not be swayed by your emotions.

To be profitable stocks traders we need to act counter intuitively. When trades are going wrong, it is instinctive to hang on. We must act counter intuitively and cut our losses short. On the other hand, when trades are going our way, our instinctive reaction is to want to exit in order to capitalize on the trade. This again needs to be resisted if we are to let our profits run.

In order to exit from a profitable trade, we set a trailing stop, based on percentages or indicators. Your initial stop, the stop you use to exit a non profitable trade, is calculated on your entry price. Your trailing stop, used to exit a profitable trade, is calculated from the highest price since entry. In this way, the stop ‘trails’ price, rising as the price rises. A trailing stop allows you to ride the trend for longer. It is important to find the balance between giving your trade enough room to move while also having the stop tight enough not to force you to give back too much profit.

I personally like to use what I call the LL stop. This looks for the lowest low (LL) in the past x number of periods, where x is set based on the style of the system I’m trading. For example, my initial stop may be set to be the lowest low (in price) over the past 28 days. As the trade progresses, my trailing stop kicks in and I look for the lowest low in the past 28 days as calculated from the current price.

A trade exit can be seen as an emergency chute when things go wrong and as a seat belt when things are going right. The exits should be mechanized and as far removed from human intervention and emotion as possible. Put your self in the top 1% of traders by writing down your exits and then using them with every trade you enter.

Know How To Devise A Trading Plan.
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Article Source: http://EzineArticles.com/?expert=Reece_Matthews

There is a lot of demand for less regulation, but that can be a two-edged sword: and was, in the case of mortgages. Regulations were repealed, allowing the financial institutions to do what they couldn’t do before. So, what happened? – just the greatest total threat to financial collapse on a worldwide basis that we have ever seen! If extraordinary steps had not been taken, I think it was obvious that the whole financial system would have collapsed. However, the treatment hasn’t come up with a cure yet. The world is still struggling to find answers and at present we are just keeping things afloat.

Where does manipulation come in now that we know the problem? Manipulation is being carried on, in my opinion, because the stock markets are being traded in a range that is not explainable. Lately we have seen lots of violent market action due to the financial situations in Europe. Here’s where the manipulation comes in. One day the market sees a big rise and the explanation is that the European situation is not as bad as was thought. Why? A vague answer comes. The markets go to the upper end of the range and then suddenly there is a steep drop. The reason given for the steep drop is that the European situation is not as good as they thought it was. In reality, nothing in the European situation has changed at all. There is a real mess over there, but you can’t say one day that Greece isn’t very important and then the next day say that Greece influences major financial institutions around the world and the risk of a domino affect to Portugal, Italy, Ireland, Spain, etc. is possible.

One of the key problems is that the financial institutions will not release what their real position is. The same thing is true of situations here in the US. Banks are allowed to carry items on their balance sheets that do NOT have to have the true value posted. To get a much truer position, you would have to have what they call “mark to market”, meaning that they would have to post the current value of the assets that they are carrying on their books. Think of it this way – You want a loan, so you go to the bank and they want to know the value of your assets, in order to determine your financial situation at the time you want the loan. Try telling them that you paid $400,000 for your house that is now worth $250,000, but you say you should be allowed to state that the house is still worth $400,000 because that is what you paid for it, and someday real estate values will rise again as they always have. If the bank only just laughs in your face instead of kicking you out the door, consider yourself lucky. But for them, our leaders have found it in their best interests to allow the financial institutions to do just that – not report the current value of their assets. That is manipulation in my book.

There are many other examples of how small groups manipulate markets so that the vast majority do not get a fair shake. Here in California the consumers were manipulated in the electricity rate business. Again, regulations were changed, so that rates were not regulated any more. So what happened? The few that bid on rates sold to each other and each sale resulted in a rise in our rates. Then the rates were sold by the 2nd party back to the first and rates went up again. I don’t know how many times this happened, but it was all proven to be true. Then what happened? Did they unravel this and make the greedy people pay for their crime by getting settlements that could be passed back to the consumer? No way – it never happened. The vast majority paid for it in all ways. So much for doing away with regulations that really protect. Granted, there are regulations that stall and even prevent needed projects. But, my thought is that the lobbyists get around that point eventually by seeing to it that the people in control are taken care of first, in the form of campaign contributions.

So much for manipulation! We the people get manipulated time and time again, with the small controlling group profiting by their actions.

Hey, we haven’t forgotten about something being rotten in Denmark – oops, no, not Denmark, but right here in the US – again. The scandal that appears to be on the verge of being exposed is gathering steam, and we will continue to follow it and have more to say about it shortly – I’m talking about Solar-Gate!

In the meantime, stay tuned, for you know by now, for sure, that… these are interesting times. (We pay through the nose, but we do get interesting times.)

Today’s Thought

We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution, but to overthrow the men and women who pervert the constitution. – Abraham Lincoln

If you enjoyed this economic commentary, Mike Celeste has a lot more where that came from. Check out his site at SplitMaster.com and his newly published ebook, Never Let Wall Street Steal Your Money Again! The book is packed full of investment information and how to stop being manipulated in today’s market. Get a comprehensive Free Preview of Never Let Wall Street Steal! Also, send us your questions and comments to contact@splitMaster.com.

Article Source: http://EzineArticles.com/?expert=Michael_Celeste

Yet a number of people associated with financial markets will not be interested in short-term trading. It does not suit their temperament or life style. There are a number of tools associated with these market timing studies that can be invaluable for investors too. Therefore, let’s refine this article into three categories of market participants, according to the strategies involving different cycles and different time frames for chart analysis. The reason for making this distinction is because investors and traders will use different technical studies and chart patterns to determine a favorable point to enter and exit into a position.

Long-Term Investor

From a cycles’ perspective, a long-term investor is one who will create an investment strategy with the four-year cycle as the central focus. That means the 4-year cycle will be used in tandem with a longer-term cycle, such as an 18-year cycle, a cycle that is “above” (longer than) the time frame of the 4-year. Additionally the investor will use the subcycles or phases that unfold within the 4-year cycle, as the next cycle of a lower degree. That will involve the two- or three-phase classical breakdown of the 4-year cycle, which may include two 23-month cycles (with a usual range of 19-27 months), and/or three 15.33-month cycles, with a range that varies according to whether it is the first, second, or third phase. As outlined in Volume 1, the mean average of a 46-month cycle would be 15.33 months. But historical studies show that the first phase has a mean cycle length of 16.5 months with a normal range of 13-20 months. The last phase, however, is shorter, with a mean cycle length of only 14.3 months, with a very wide range of 8-23 months. Because it is the last phase of a longer-term cycle, it is not surprising that 54% of the historical cases of this third phase occurred outside the “normal” range of 13-20 months that were observed in the first phase.

In my own practice, I use the 18-year cycle as the “greater cycle” containing four or five 4-year cycle phases. In other words, historically there are usually 4 or 5 four-year cycles within the greater 18-year cycle. There has been at least one instance of 6 four-cycle phases within an 18-year cycle (see Table 1). The “lesser degree” cycles I use in tandem with the 4-year cycle are the 2- and 3-phase subcycles within the 4-year cycle. These are the 23-month and 15.33-month subcycles discussed previously. I will also use the 50-week cycle to help time a long-term entry or exit point. As demonstrated in Volume 1 of the “Stock Market Timing” series, there may be anywhere from three to five 50-week cycle phases within a 4-year cycle. Half of the time (50%) the 4-year cycle will contain four 50-week cycles. The other 50% of the time it will likely contain three or five 50-week cycle phases. Thus one starts with the idea that a 4-year cycle will contain four 50-week cycles, but at the same time be aware that it might contract to include only three, or expand to include as many as five 50-week cycles. The point to understand here is that a long-term investor who is applying these methods to enhance investment performance, will use a 4-year cycle, and tie it in with at least one longer-term cycle and one shorter-term cycle.

The long-term investor will also examine charts of at least three different time frames. The primary time frame to be used for analysis might be the monthly chart. Above that, perhaps he may tie it in with the yearly or quarterly charts. Below that, he may tie in the monthly studies with the weekly and maybe also the daily charts. The point is that he wants to invest in the direction of what his monthly charts are telling him. But he wants to make sure this conforms to the trend direction suggested by the yearly or quarterly charts and their technical studies. He then wants to make sure that the weekly chart is at a point of reversal, and ready to move into the direction of both the monthly and longer-term charts.

Intermediate-Term Investor

In actual practice, quarterly and yearly charts are not that practical for investment purposes. An investor can do just fine by concentrating on the weekly and monthly charts, and then maybe using the daily chart to fine tune entry and exit points. A distinction may be made between a “long-term investor” and “intermediate-term investor.” An intermediate-term investor, in this case, may use the monthly, weekly, and daily charts for applying technical studies in the pursuit of optimal investment entry and exit points. At the same time, he may use the 50-week cycle as his primary frame of reference, and tie it in with the 4-year cycle and its phases (a level above the 50-week cycle), and the primary cycle (one level below the 50-week cycle). This type of investor may be most comfortable holding a position for several months, and maybe even 1-3 years.

Position Trader, or “Trader”

The term “position trader” will refer to one who intends to be in a position less than one year but usually at least two weeks. This trader will primarily be focused upon the daily chart. But in assessing an entry or exit point, he will tie this in with the weekly chart (one time frame above), and quite possibly an intraday chart (one time frame below the daily chart), such as a 60- or 30-minute type. In reality, it seems that most position traders are not concerned about intraday charts. They use mostly daily and weekly charts, and perhaps some will use monthly charts, just as investors will.

In terms of cycles, this type of market participant would be advised to use the primary cycle as the central point of analysis, and combine it with both the 50-week longer-term cycle (one level above the primary), and the major and/or half-primary cycle phases within the primary cycle (one level below the primary). If entering the first primary cycle within the greater 50-week cycle, the trader may elect to hold onto this position for several months. If entering the final primary cycle phase of the greater 50-week cycle, he may elect to hold onto the position for only 2-8 weeks.

Short-Term Trader

Most professional traders are short-term or even aggressive traders. Their basic goal is to enter a trade that – according to their studies – has maximum profit potential with minimal market exposure. Their average duration in a trade may range from one day to three weeks, sometimes more.

The short-term trader will use the same time frame charts as the position trader. But he will tie in different multiple cycles in choosing his entry and exit points. That is, the daily chart will likely be the primary chart for reference. Against that chart, he will integrate studies from the weekly chart (one level above) and perhaps a 30- or 60-minute chart (one level below the daily). He wants to trade in the direction of the trend indicated on the weekly chart. If the weekly chart studies suggest rising prices, then he wants to enter the market when the daily chart signals are bottoming and exhibiting signals that it is ready to turn up. He will then use the 60- or 30-minute charts to fine tune his entry point.

In terms of cycle studies, the short-term trader may use the 6-week major cycle as the central point of focus. The level above the major cycle to use in this endeavor would be the 18-week primary cycle, and the cycle to use on the next lower level would be the 2-4 week trading cycle, or even the 4-9 day alpha-beta cycles. If the primary cycle is in its early stages, the short-term trader will look to buy on any corrective decline to a major or trading cycle trough. He may use the alpha and beta cycles to help him make this decision.

Aggressive Short-Term Traders

In my daily and weekly market reports, parameters are provided for both “position traders” and “short-term aggressive traders.” These suggestions for aggressive traders are for those willing to go against the trend of the primary cycle. Or, in some cases, it will refer to those who wish to be in a trade for perhaps only 1-4 days on average.

An aggressive short-term trader is going to use a host of intraday charts to find the right technical set up for entry and exit. He may be most focused upon a 30- or 60-minute bar chart. The next level up to tie his analysis in with may be the daily chart. He should always try to trade in the direction of the daily chart, except when he believes the daily chart is about to reverse. Because he is willing to “bottom pick” or “pick the top” of a move before the reversal is confirmed, he is an aggressive short-term trader. He is picking the top or bottom of a move before it has actually reversed. He understands that the sharpest price moves in the shortest amount of time occur when the market reverses its trend and starts a counter-trend move. This is especially true in bull markets when prices are making a crest. The decline is usually sharp and vicious at the end of the rally to the cycle’s crest. However, the decline is also brief in comparison to how long it took to reach the crest. That is why the most successful traders are willing to sell short at certain points in a bull market. Investors would never think of such an unconventional and risky approach. But aggressive short-term (and professional) traders know that the greater the risk, the greater the profit potential as well.

Below the 30- or 60-minute chart, this aggressive trader may use a 5- or even 1-minute chart to fine tune entry-exit points, and maybe even a “tick chart,” which records each and every trade as it is being made. This trader studies the technical signals of these very short-term charts, and waits until they are also ready to turn against the trend of the daily chart, as well as the 30- and/or 60-minute charts.

There are no three cycles to tie in with one another for this type of aggressive speculator, unless one uses intraday cycles, like 50-minute, or 3-hour cycles, which are not within the scope of this book. However, an aggressive short-term trader may use the fast-moving solar-lunar phases, within the field of geocosmic studies, to help determine days when 4% or greater reversals, lasting 1-4 days, are most likely. The Sun-Moon combination changes every 2-3 days, and many of these combinations have very high historical correlations to 4% or greater price reversals in various stock indices. These studies were reported in Volume 4 of this Stock Market Timing series, titled: “Solar-Lunar Correlations to Short-Term Reversals.” For the aggressive short-term trader, the studies in this book are invaluable for knowing when to enter and exit a 1-4 day trade that has a higher than normal probability of success, assuming the very short-term technical studies are set up properly. Once again, the primary purpose of this book is to know how to identify such a compatible technical set up.

Summary

The importance of using multiple time frames and multiple cycles to establish a successful trading plan cannot be underestimated. It is the most important factor in determining the trend. It is only through an understanding of where the market is in terms of its trend that one can consistently realize profitable trades or investments. But trend means different things to different people. It means different things to a cycles’ analyst too. The trend to a short-term trader may be completely opposite the trend to a long-term investor. The key to understanding trend is to focus on a particular time frame or cycle, and to tie it into a time frame or cycle that is “above” that level, and also one that is “below” that level.

The idea is to first of all determine when the “up one level” chart or cycle is in a clearly defined trend. Then patiently wait for the next lower time frame or cycle to finish a contra trend move (i.e. retracement) and indicate it is ready to begin a thrust in the direction of the “up one level” chart or cycle. When it appears the lesser cycle is ready to move in the direction of the greater cycle trend, then time the entry (or exit) to coincide with the “below one level” chart entering an oversold (if buying) or overbought (if selling) technical pattern. The central and “below one level” time frames or cycles should also be in a time band when a cyclical trough (if buying) or crest (if selling) is due. It should also be in a time band when appropriate geocosmic signatures correlating with a reversal are present. This concept will be repeated over and over again, for these are the steps within the methodology of this series that make the market timing studies work. These are the steps that provide the structure in which market timing can be a very valuable tool to the success of any investor or trader, regardless of one’s market temperament. But as with all successful endeavors in life, it requires work. It requires planning and proper analysis, and the correct implementation of these rules, plus perhaps a few of the reader’s own. But the rewards are worth it, and it is an exciting process.

The following list represents suggested time frames and cycles to use in this endeavor for each type of market participant. The first time frame or cycle listed in each group represents the next “higher level” type to use. The middle time frame given will be highlighted in bold. It represents the suggested primary time frame to use for trading or investing. The last time frame given represents the suggested “lower level” type to use to fine tune one’s optimal entry and exit point for maximum profit potential.

Buy and Hold Long-Term Investor (6+ years)

Cycle:72- or 90-year, 18-year, 4-year
Charts:Yearly, monthly, weekly – concerned with percentages.

Long Term Investor (2+ years buy and hold):

Cycle:18-year, 4-year, 50-week
Charts:Yearly, monthly, weekly

Investor (1-3 year position):

Cycle:4-year,50-week, primary
Charts:Monthly, weekly, daily

Position Trader (2 weeks – less than one year)

Cycle:50-week, primary, half-primary or major
Charts:Weekly, Daily, 30- or 60-minute

Short-Term Trader (3 days – 3 weeks, sometimes as long as 6 weeks)

Cycle:Primary, major, trading
Charts:Daily, 30- or 60-minutes, 5- or 15 minutes

Aggressive Short-Term Trader (1-4 days, sometimes longer, sometimes shorter)

Cycle: None. This speculator looks for contra-trend moves based on technical set ups, but may use Sun-Moon studies as a leading indicator.
Charts: Daily and perhaps 60-minutes, 30-minutes, 5-minute or 1-minute, and even tick charts.

Determine which of these best fits your own psychological temperament and life style. It is possible to utilize more than one of these types. It is possible to utilize all of these types for various purposes and at various times. I do. But make the effort to define which approach you are taking with each investment, with each trade. Once that is determined, apply the suggested time frames to that type of investment or trade for the best and most consistent results.

Article Source: http://EzineArticles.com/?expert=Raymond_Merriman

Central banks around the world seem to be doing so, making little effort to prevent it this time around, resigned to letting the business cycle play out.

Stock markets around the world also seem to be doing so. In anticipation of economic slowdowns that won’t slide all the way into recessions, stock markets normally decline only into corrections (declines of less than 20%). But they plunge into bear markets when recessions loom.

And global stock markets outside of the U.S. are already in full-fledged bear markets. That includes 10 of the world’s 12 largest economies, the exceptions being only the U.S. and Canada.

In order of the size of their economies, at the recent August lows the stock market in China, the world’s second largest economy, was down 23% from its November peak, Japan down 21%, Germany down 30%, France down 29%, the United Kingdom down 21%, Brazil down 33%, Italy down 39%, India down 25%, Russia down 28%, and Spain down 29%. The exceptions were the U.S. and Canada, which at their August lows were down only 16% (the Dow) and 18% respectively.

But the recession and bear market are coming to the U.S. too, and may have already arrived.
You can be sure of that because it’s been one world economically for years, and historically global economies and stock markets tended to always move in and out of recessions and bear markets together even before their dependence on each other became so pronounced.

You can be sure of it because central banks seem willing to let it play out this time as in days of old, without intervention.

In the financial crisis of 2007-2008, it took a massive coordinated effort by global central banks to pull the world back from the brink of what would have been a total global financial collapse.

But when their economies began to slow again in 2010, without the world being on the brink of financial Armageddon, major nations outside of the U.S. were content to let the business cycle play out normally, arguing against the U.S. Fed’s decision to jump in with its QE2 stimulus efforts.

Indeed, while the Fed was making that massive monetary easing effort, central banks in Asia, Europe, and South America were tightening monetary policies and raising interest rates to ward off rising inflation, and to tackle the government debt crises created by their 2008-2009 bailout efforts.

The Fed’s QE2 effort pushed a flood of additional dollars into the global financial system, spiking the prices of commodities and paper assets like stocks, but had no lasting effect on even the U.S. economy.

This year, as global economies again slow significantly, central banks outside of the U.S. again seem content, or at least resigned, to letting the business and economic cycle play out, even though it likely means a global recession.

They refrain from saying anything too negative that might make matters worse, but for instance, this week the central bank of Brazil, which actually has one of the world’s strongest and fastest growing economies (but highest rate of inflation), warned that this downturn in global economies will not be as severe as in 2008-2009, but will be more prolonged.

The Financial Times reported Friday that “As the Organization for Economic Cooperation and Development’s forecasts showed on Thursday, the near-term economic outlook for the Group of Seven is dire, yet the mood is one of resignation…. Finance ministers across the G7 are searching for ways to explain their lack of likely coordinated action.”

And even in the U.S., the Federal Reserve has been clearly transparent about its reluctance to intervene this time.

With the economy far weaker than it was when the Fed intervened with QE2 last year, Fed Chairman Bernanke continues to say the Fed has some tools it can use if necessary, but will wait and see. In his most recent speeches he cautioned that the Fed is limited in what it can do anyway, and called for Congress to step up to the plate.

Thursday evening, President Obama did call for Congress to step up to the plate and pass his $450 billion jobs bill.

But even if the proposal should get through the political grinder of the grid-locked Congress, it would be too little too late by the time it could be implemented.

So prepare for a recession and bear market.

Hopefully investors learned from the 2000-2002 and 2007-2009 bear markets that Wall Street’s advice to diversify into ‘defensive’ stocks won’t do it. As I’ve shown you in previous columns, so-called defensive stocks, defensive because they pay high dividends or have been around a long time, are dragged down just as far as any in a bear market.

Back in ‘the old days’ the call of successful investors in times like this was that “cash is king”. Even receiving little to no interest income on cash was better than experiencing a 30 to 40% loss.

These days investors are better served. The availability of ‘inverse’ mutual funds and ‘inverse’ exchanged-traded funds, designed to move up when markets move down, make them the new king in bear markets. Cash may be better than losses, but the opportunities for 30% profits while others are experiencing 30% losses are even better.

In the interest of full disclosure, I and my subscribers have already taken double-digit profits from positions in the ProShares Short S&P 500 etf, symbol SH, and ProShares Short Russell 2000 etf, symbol RWM, and we’re looking at others.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

From the standpoint of methodology, trend following is the easiest way to trade. A trader can create a simple algorithm, plug it into a computerized trading platform, and have the trading signals completely automated. The trader can sit back and tend to other business and not have to worry about how the markets are acting on any given day.

At the same time, the markets do not always move in major trends. For a significant period of time, they can trade in narrow trading ranges. For commodity trading advisors who manage money in these markets, this usually results in negative returns.

This is the main reason why most small investors who attempt to trade commodities fail. They are unaware of the difficulties in following a trading system or trading strategy that looks good on paper.

One popular trading system known as the Turtle Trading System for trading commodities has been marketed as a methodology that will make the investor 100% annual returns for years on end. What the marketer has done is simply add up the profits and losses from each market traded in a basket of markets at year end, and imply that the system would make 100% returns. Unfortunately, this is not the real world of trading.

In the real world of trading a trend following system like this in a basket of commodity markets there are typically significant drawdowns that occur every year. For instance, if you start out with a portfolio of $100,000, at some point, you can expect your equity to drop by 30% or more. If this occurs right out of the gate, you are down to $70,000. Most people find this psychologically difficult to deal with, and give up. Also, when your account equity drops, smart risk management rules will require smaller position sizing in each market. As a result, it will take a while to climb back to the breakeven point. In fact, if initial equity drops by 30%, it will now take a nearly 50% return on current equity to get back to breakeven. This is why most emphasis on trading systems designed for trading commodities is on risk management, rather than the signals for entering and exiting positions.

In the stock market, some traders have experienced significant returns by employing a trend following strategy. William J. O’Neil, the founder of Investor’s Business Daily, is one of these traders. However, his methodology also incorporated some fundamental analysis of a company as well.

Trend following in the stock market tends to be more difficult because the universe of stocks to choose from is so large, and unfortunately, most stocks do not trade in trends that are very persistent.

With all this in mind, however, it would seem that applying a long term trend following system during bull market cycles is a viable way to earn above average returns for the small investor. While the universe of stocks is so large, many of today’s trading platforms and software programs allow the investor to screen stocks very quickly and easily. The investor can then focus on only those stocks that show the characteristics they are looking for in a potential trade. A smart investor can then employ the best risk management techniques utilized by commodity traders to enhance their trading performance.

In conclusion it is clear that trend following has its merits and drawbacks as a viable trading methodology. However, most of the world’s best performing traders and investors do utilize one form or another of this methodology in the trading. While Warren Buffett has often waited for stocks to become cheap, he is the ultimate trend follower in that the overall market itself has stayed within an uptrend for decades, even with the significant bear markets of the last ten years. Buffett has capitalized on this fact because he rarely sells out of a position. With that in mind, small and large investors alike should do significant research into the potential of trend following as a core trading strategy for their portfolio.

Scott Cole is a former execution trader for a hedge fund and commodity trading advisor (CTA). He has specialized in developing trend following trading systems for stocks and commodities. Visit http://www.besttipsfortrading.com/ for great insight on trading stocks, commodities and forex markets.

Article Source: http://EzineArticles.com/?expert=Scott_A._Cole

In other words you should consider a stop loss strategy to improve overall stock portfolio performance adjusted for your own risk tolerance and investment objectives.

What is a “stop loss” order? Simply it means a trade order placed with a broker to sell a stock when it reaches a certain price level. Placing the stop loss order with a broker might not be the best solution, instead consider tracking the price movement yourself with a software program that will update portfolio prices and allow you to create price alert reports.

The reason you may prefer to track prices yourself is in case there is panic selling and you need to consider each stock based on its own merits. On days where there is extreme market volatility and wide swings in price movement your specific position might trigger a stop loss order with your broker only to rebound later the same day.

Your price alerts should first be set based on your basis in the security setting a sell alert at a predetermine percentage below what you paid for the stock. That percentage should be based on your risk tolerance, strength of the company, amount of dividends if any and your overall objectives.

Another technique is to also consider a “trailing stop loss” a strategy where you set a sell order based on a price as either a spread in points or a percentage of current stock’s value. As the price moves upward the trailing stop loss follows the market to higher levels thereby increasing your gains.

For example:

You purchase a stock for $20.00 and place a stop loss at 20 % of your cost basis meaning you would sell the stock if it falls to $16.00 or below. The security is currently trading at $30.00 and you wish to lock in your gains. Set your trailing price alert at 20 % of the current price and if the stock continues to climb you adjust the trailing alert higher increasing you gains with each upward movement in price of the stock.

In the case of mutual funds, stop loss strategy is a bit different for several reasons. Mutual funds are priced only once a day after each day’s market close and risk is generally less depending on the fund and how diversified it is. Brokerage firms will not place a stop loss for mutual funds so you will need to track price movements yourself.

For many investors selling stock can be an emotional decision based on many factors and often they will assume if they take a wait and hold strategy the stock or stocks will rebound thereby ignoring the stop loss strategy all together.

Even if a stock does rebound it might takes months if not years, if you execute a stop loss order you have the opportunity to reinvest the proceeds into a better and more profitable security.

Daniel Iuculano a Certified Financial Planner specializing in financial planning which includes portfolio management and other financial planning topics.

For further information visit:
http://www.dfi-wealth-mgmt.com
http://www.dfi-wealth-mgmt.com/Wealth_Management.html

Article Source: http://EzineArticles.com/?expert=Daniel_Iuculano

I wanted to share a surprising stat with you:

A recent study from the University of California reports that over 92% of traders will be wiped out by financial institutions this year. Think about that for a second…you would probably have a better chance of getting your money back if you threw it into a burning building or put it in a blender!

This really made me think; what are so many traders doing wrong that would cause people to throw away their hard earned money, deplete savings accounts and risk their financial future?

Could they be doing too much? Over-thinking trades? Have an overly complex trading plan?

It seems to me that if you follow a few simple rules to put the odds in your favor and stick to basic money management practices these 92% failure rates should be impossible!

Now, I’m not new to this, in fact I have been in the trading industry for nearly 40 years. I was a former floor trader and managed risk exposure for a large multinational corporation.

If the market has taught me one thing it’s that you CANNOT fight the overall trend and win!

When I got into the education side of trading back in 1995, I found this to be one of the hardest things to teach. Students would get the overall idea, but wouldn’t be able to easily establish the trend consistently on different time frames. This problem led me to develop a tool that would easily show students the direction and strength of the trend for any symbol. You may have heard of the tool we call “Trade Triangles.”

Once I realized how successful and simple they were for students, I knew we were on to something. Since then, we have been constantly tweaking our system to provide entry and exit points when the trend is favorable for the trader.

Here’s what a few recent “Trade Triangle” users had to say:

-        “The Trade Triangles have taught me a life-long lesson as to how to perceive the rhythm of the market place.” – Bill Z. VA.

-        “I trade equities, options, Forex and futures. Your trade triangle technology really helps identify the trends.” – Dan D. CA.

-        “I am amazed at the confidence that your service has provided for me and the Trade Triangles have given me. It has solved my biggest question, ‘Which way is this market going?’” – Darran G AU.

There are dozens of testimonials from Trade Triangle users here.

Now, whether you are one of these 92% of traders heading off a cliff or not, I think you owe it to yourself to take a look at my “Trade Triangle” technology. This technology, when coupled with my other cutting edge indicators and charting tools in my exclusive MarketClub, can truly put the odds in your favor and confidence back into your portfolio. In fact, during the ‘08-‘09 market meltdown, the triangles pointed to 624% return during the worst economic crisis since the great depression…all while others were watching their portfolios dwindle!

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The economic news has been awful. The ‘soft-spot’ in the first half that was supposed to be temporary turned out to be worse than previously thought. GDP growth, previously reported as having been around 2% in the first half, was recently revised to being up only 0.8%.

The return of strong growth that was supposed to begin in July did not show up. Consumer and business confidence, which was expected to produce the improvement, instead deteriorated further in July, accompanied by unexpected further declines in both the manufacturing and services sectors.

The increasingly bad news has economists now saying that rather than the first-half ‘soft spot’ being temporary, the odds are 50-50 that the economy is sliding into another recession.

Globally the reports are similar, news of slowing economies, and serious government debt problems. The success of the additional bailout plan for Greece a couple of weeks ago is already being questioned, and Europe’s debt crisis is apparently now spreading to Italy and Spain, countries considered too big to bail out.

For investors, stock markets around the world have seen their bottoms drop out in serious corrections, some exceeding declines of 20%, which is the level that marks entry into a bear market.

Investors in the U.S. have seen $2.8 trillion disappear from the value of their stock market holdings in just over three months.

In my last column I said it was too soon to buy, that more declines were in store. And so they were. The Dow lost another 1,400 points, or 11%, in the first 10 days of August.

Enough is enough!

And there is at least some good news for the short term.

Technically, the market is short-term oversold again. That was a condition that created a brief but significant rally in early July.

It’s a condition that should produce another short-term rally, and have investors breathing a sigh of relief. Unfortunately, like the rally in July, it’s likely to be another opportunity for investors to take some risk off the table by selling into the strength, rather than being the end of the correction.

I base that on a number of conditions.

Based on technical analysis and charting, the major market indexes like the Dow and Nasdaq are short-term oversold beneath their 50-day moving averages to a degree that almost always brings a rally back up to the moving average. That would be a rally to roughly 12,000 on the Dow.

But intermediate-term the technical picture remains negative. Important support levels were broken by the sharp decline since the April top, and the longer-term trend seems to be down.

And investor sentiment has not reached the level of fear and pessimism usually seen at market bottoms. For instance, the latest poll of its members by the American Association of Individual Investors this week shows 33.4% still bullish and only 44.8% bearish. In market corrections, the AAII poll almost always reaches a level of at least 55% to 65% bearish, and bullishness drops below 20%, before the correction ends.

Then there is the market’s seasonality. Historically, August, September, and October tend to be the most negative three-month period of the year.

And in the background, with consumer and business confidence declining to new lows in July, it’s unlikely the economy is about to reverse to the upside anytime soon, which is what the stock market needs to see to support a sustained rally and return of the bull market.

Meanwhile, the nerve-wracking up and down volatility is likely to continue.

Next week will bring a number of potential market-moving economic reports from the housing industry, and on inflation, two areas on which there have not been reports in the last several weeks.

So summing up, the short-term oversold condition makes a short-term rally likely, but with the correction likely to resume to lower lows when it ends.

I’m confident enough of a short-term rally that I and my subscribers took our significant profits on Thursday from the ‘inverse’ exchange-traded-funds I was recommending at my sell signal on May 8. But I think it’s likely our indicators will turn negative again and we’ll be re-taking the ‘downside’ positions when the expected rally ends.

But meanwhile there should be some relief, at least temporarily, from the relentless selling that seemed to have the stock market in freefall.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

Investing need not be a crap shoot if certain simple, common sense principles are followed. But even safe investing does not mean there will be no loses along the road to increased wealth. That doesn’t mean, “Stop” investing is not for you. Think about it as driving down a road or highway. How many roads have you been on that are totally smooth, easy to drive and safe? Yes there are roads like that; ones that have just been built or resurfaced, just like there are new stocks, ETFs or funds…but how many days or weeks does that perfect road last?

Then there are roads that are bumpy, and ones filled with potholes. Or how about the broken up, dirt, gravel and rain trenched or rutted roads that can bust a tire, break an axel or tear off an oil pan? Investing can be just as dangerous, risky or safe as driving.

There are a few key principles to safe investing:

• Tell yourself, and write down how much you are willing to risk your money: a little or a lot. It’s just like deciding what roads you would prefer to avoid.

• Identify the types of investments you consider safe for either all or part of your money. This could be dividend paying stocks, funds or ETFs or bonds, or funds or ETFs that are indexed or follow certain industries or sectors of the economy

• Recognize how much time you are willing to put into managing your money for its future growth. If you are willing to spend 30 -60 minutes every day you can jump to the best performers almost instantly. If your life allows you about 30 minutes once a week then your investment process should be based on technical analysis that gives weekly buy and sell signals that meet your ‘willingness of risk’. If your time is very limited and you only want to spend an hour every month or two than you can choose between technical analysis based on this time frame or you can choose to go the fundamental route of picking investment position for the long haul.

• Just as detours pop up and routes change how we go from one place to another be prepared to change course with your investments. Perhaps today you only want to spend an hour every few months managing your portfolio but who knows what will happen that may make you switch to weekly management. Keep this in the back of your mind because as we all know, what we thought we were going to do when we left high school is probably not exactly the road we have traveled. If you are going to use a software program to help manage or make investment decisions, be sure the program is flexible enough to allow you to switch course when you want.

• And remember your exit strategy, having a signal that tells you when to hold off investing and go to cash to preserve your money when the market crashes or bounces. It’s just like knowing where you will get off a freeway when you see that sign saying ‘construction ahead’.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Article Source: http://EzineArticles.com/?expert=Raymond_Dominick

Yet in the stock market we have no hard and fast set of rules by which to judge a company performance. Ah, and there’s the rub! No matter how good a company performance might be it may have no bearing on the price performance of the stock. You can find good companies that are within a sector that is doing poorly and yet one company can be making huge profits and sales, but the stock price is going nowhere. There need not be any correlation. In a bull market almost every stock goes up – even the dogs. In a bear market almost every stock goes down – even the best ones. An 18 year bull ended market in 2000 and almost without exception every stock headed for the exit.

Bull and bear markets follow relatively standard patterns of about 16 to 18 years up and 16 to 18 years down and the valuations go right along with them. Owning stocks or especially index funds during the bear periods an investor will be lucky to have broken even at the end of the 32-year cycle not counting any loss to inflation. Cash in the mattress will outperform market returns while the bear is in charge. During bear times there will be periods when the market will have a nice advance such as the one that is going on now in 2009. These intermediate rises can ultimately bring many investors back into the market only to lose it when the rally is over and true valuation returns.

One valuation measurement for the overall market is the Price/Earnings ratio of the S&P500 Index. The median number for the historic purposes has been around 14 with the P/E for the S&P500 getting as low as 5 or 6. Today it is running about 21 which is considered high. There are other factors to be considered when buying any stock or fund, but the one thing that is most important is to have an exit strategy. Without one former profits will disappear. No one knows exactly where the top or bottom of a market move will be. Knowing conventional valuations may or may not help buying and selling decisions.

Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy It!” has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.

Article Source: http://EzineArticles.com/?expert=Al_Thomas

The main difference between corporate profits and investing profits is, the adding of value. McDonalds buys potatoes low and sells them high. They add value by peeling, cutting and frying these potatoes; then selling them as french-fries. The basic concept remains buy low/sell high.

Investors don’t add value. They can’t dip their stock certificates in chocolate and have fancier more valuable shares. A share is a share, is a share. All shares are equal.

Buying low and selling high requires valuations. How else would you know if something is high or low. You can’t trade using 20/20 hindsight. You need to know what something is worth and what it should be worth. Not just stock or option valuations, but for anything.

There are rules of thumb for everything. Example, something is only worth what someone is willing to sell it at or pay for it. Price measures value. To measure the value of a stock at any time look at the last price traded. It is the most current match of a willing buyer and a willing seller. Trades require buyers and sellers. With every trade, you truly have both opinions. Prices move based on supply and demand. More buyers cause increasing prices, more sellers and prices decline.

Free Appraisals

Antique dealers earn their living through their knowledge. Buying and selling provides their income, but their knowledge allows their transactions. They need to verify authenticity, rate condition, know market values and marketability. They use this insight to buy low/sell high.

Many antique dealers supplement their antique trading profits by offering appraisals. Often before insuring certain items, insurance policies will require professional written appraisals stating value. In the worse case scenario of a claim, a written appraisal saves untold amounts of grief.

Some antiques are too large or delicate to transit, so the appraiser must travel to inspect them. Time cost money. The appraisers need to charge for their time. None of this is done for free, well almost nothing. Many people seeking appraisals are doing so to value their item for sale. Loss leader appraisal services generate antiques coming through the doors. Many dealers offer appraisal services as a means to buy.

An antique dealer friend of mine told me a story of a client who didn’t want to pay for his services, but wanted them just the same. He explained how this person had a “valuable” piece of antique furniture. When told of the cost of the appraisal, including the travel time to come look at it, the client asked for a free appraisal over the phone. The antique dealer was used to people trying to avoid paying for his services and played a little game with any skin-flints.

Hold It Up To The Phone

He told them to bring the phone near the piece to be able to better describe it. Then he asked to have the phone held closer so he could see the item better. He asked to have the phone moved around the piece very systematically. The phone was placed inside every nook and cranny. Upon completion, the antique dealer announced the piece looked counterfeit. The person became so concerned. Was he sure? Well only in person could he know.

Knowledge also provides professional stock traders with their living. And unlike antique dealers, they give free appraisals. Every time they buy or sell, they state their opinion on what that particular stock is worth at that very moment.

The last trade gives the universally accepted valuation of a stock. Whether one share or one million shares exchanged hands, the last recorded trade sets the value of all existing shares. This skew allows profit potential. Volume is a key to stock and option traders. Price movements on low volume don’t confirm valuation changes as well as large volume moves.

The market capitalization of a company is figured by multiplying the number of shares outstanding by the current price of the stock. Theoretically, if a stock trades millions of shares at a level, then trades one last share at a much different level, the market cap is based on this last share.

This is the problem with after hours trading. The spreads are wide, with volume low. Valuations swing wildly as trades take place from low bids to outrageous offers. The willing buyers want to steal stock. The willing sellers want a small fortune. Until after hours trading gets tight bid/ask spreads, think of it like unscrupulous antique dealers trying to underpay ignorant owners or overcharge non-knowledgeable collectors.

Unlike businesses that add value, traders need to mine equity. Investors need to use knowledge, experience and research to find gold mine stocks. Not literal gold mining companies, but value waiting to be pulled out. Gold in the ground is worthless until someone stakes a claim, commits resources to extract the value.

Mike Kerfer – a 30 year trader having traded almost every asset class including options, equities, and futures.

Visit my blog at http://www.weeklyoptiontrader.info.

Article Source: http://EzineArticles.com/?expert=Mike_Kerfer

These blue-chip stocks are stable and have been for many decades. One of the key reasons penny stocks are attractive to investors is that they sell for pennies up to a couple of dollars per share. Once they mature and become larger companies or corporations, the value naturally increases. Think about that for a moment. That is long enough. Anyone can see that when you invest pennies and get dollars back you come out a winner.

However, there is a lot of volatility involved with owning penny stocks. That means that a person can either see great gains or experience extreme losses in a very short time. The thing about penny stocks is that they take a lot of guts to invest in. Of course, knowing what you are doing can change that dynamic altogether.

You might want to watch out for promotional stocks because they are pretty much just like they sound. What happens with promotional stocks is that the owners have picked them up for pennies, and they are out to make as much profit for their investment as possible. They then get busy promoting their acquisitions. As long as they are promoting them, the price is most likely going up with new owners recognizing the value they represent.

Once they have reached an often predetermined price, the promoters/owners sell their shares placing them back into the general pool of stocks. They have made a killing on the stocks they promoted, but are no longer interested in helping to drive the price up, and unless someone else steps up to do the same it is likely that the price will begin to drop. What that means to the investor that was so sure they were going to make some good money on their investment is that unless they also bail, they will be left holding the bag.

One more thing to remember when dealing with penny stocks is that many stocks that are sold for pennies are small up and coming businesses. As these businesses grow, often times larger ones will begin to buy them up either to dissolve them and get rid of the competition or consolidate them into one larger company. When this happens, the stocks are replaced with an appropriate stock. You will receive notice from your broker that this has taken place, but you may be shocked to see that the numbers have changed drastically.

For instance, you may have owned 5,000 shares in company A, but those were replaced with 2,000 shares in company B when company A consolidated with company B. That could mean a loss of at least part of your investment if company B’s stock did not compensate in value.

The object of this lesson is to encourage you to educate yourself before indulging in penny stocks. If you would like to receive a newsletter with the top penny stocks each week, check out my Penny Stock Egghead Review where I discuss the pros and cons of one of the leading penny stock advice services. If you are interested in penny stocks then I highly recommend checking it out!

Article Source: http://EzineArticles.com/?expert=Jeff_Sikes

If you are managing your own retirement account, your own investment account to develop wealth, you should be acting as a self-employed Investment Advisor. In SEC jargon that means you have a fiduciary obligation to manage the account for the best results regardless of other personal objectives. This applies equally to your spouse’s account.

In plain English this means that you should trade to meet the goals and objectives of the account owner. That’s right; a stock broker may or may not do that. A stock broker may be influenced by the research reports of his company and want to sell you what his company recommends or what pay’s him the best commission.

Financial planners and investment advisor representatives have a legal responsibility to put aside their personal objectives and desires when advising or making trades in your behalf. Hopefully you are treating yourself the same way by doing what is best for your portfolio and not for your ego.

Speaking of financial planners and investment advisors, remember that they get paid for managing your portfolio and some ways they pay themselves are more lucrative than others. They earn their money one of two primary ways:

• Commissions – when they place a trade for certain types of mutual funds they can get as much as 6% off the top. They may even get commissions for stock and ETF trades. And they may get more commissions when a position is sold.

• Flat Fee – they charge a percentage of the value of your portfolio; usually around 1% to 1.5% on an annual basis. This ties their management performance to the future value of your portfolio. A good way to do it, in my opinion.

Back to how you treat yourself.

Managing your portfolio in a fiduciary manner means:

• Emotions must be kept in check. Don’t buy or sell because you like Ford’s latest car model, or hate it or your wife thinks a certain brand lipstick stinks. If Wells Fargo is going down but that’s where you bank, don’t let your emotional bond keep you from acting in the best interest of your retirement account.

• News reports and broadcasts must be kept in perspective. What makes headlines today may be so old in a week that the effect on a stock or industry (ETF or mutual fund) may be meaningless whether the news pushed you towards buying or selling.

• Tips from friends are just that. A tip may lead you to do research and analysis but that is the only direction it should lead. Think about it; who ever decides on what to buy at a restaurant based on how much they are going to tip at the end?

Responsible investing and management of your portfolio should be based on solid analysis. If you are doing it yourself, then a good technical analysis program that allows you to customize it to fit your particular goals and objectives would be my recommendation. In this fashion you take out ego and emotions and can base your decisions on what is best for you.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.
View his software at: http://www.dynamicinvestorpro.com

Article Source: http://EzineArticles.com/?expert=Raymond_Dominick

Price action is the movement that price makes from past to present and can be observed by using price charts. There are two types of price action: expansion and contraction. Expansion takes place when price is moving in a bullish or bearish direction while contraction shows price moving sideways in a back and forth fashion.

When expansion is taking place and a stock, for example, is moving in a bullish trend which can be identified the steady series of higher highs and higher lows in its price action but then begins to consolidate within a contracted price range, it forces the stock to trade sideways. It is within this sideways price action that you can begin to observe price support and resistance form in the trading range.

These price levels form because there are sufficient number of buyers that are holding a large enough number of shares at the bottom of the trading rage to forms a support level that is strong enough to reject any downward movement from the stock’s price action, reversing it back to the upside.

Likewise, resistance is formed on top of the trading range because there a large enough number of sellers that are doing a combination of shorting the stock because they believe it is overvalued and/or taking profits which reverse the stock’s price action back down to support.

This pattern will continue until enough buyers or sellers enter the market to take control of the trend and force it back into a period of expansion.

For the trader, this sideways market action is an opportunity to make a steady series of profits until one side -buyers or sellers – takes control of the trend by buying at support, selling at resistance, shorting off of resistance, covering their short, and then basically you rinse and repeat as often as you like.

There are a couple of pointers that you should keep in mind though. First, is that trading ranges are basically locked into a static pattern so you should customize your entry method to adapt for that fact. When price touches a support level, as an example, identify the price bar that touches the price level and makes the lowest intraday low, then watch for the following price bar to close over that price bar’s price high.

This type of entry confirms that price has reversed back to the upside and you can further protect yourself by placing a stop loss order under the price bar that set the lowest intraday higher. For shorting off of resistance, just do the inverse of the previous example.

Also, trade off of the price level that would put you in the direction of the dominant trend. If the market is currently in a overall bearish trend, then it would improve your odds to stick to shorting a stock of its resistance level as it would then be moving in the direction of the stronger overall trend.

Now, you have a solid grasp of how to trade in a sideways market and a couple of tips on how to increase your odds of success. Spend time studying price charts to identify when a stock is in a period of contraction and then identifying the support and resistance levels until you’re comfortable to begin trading. Take your time, start out trading small, and always use stops to protect yourself.

To learn more about trading in a sideways market by going to www.StockOptionSystem.com and subscribe to the free newsletter, “The Intelligent Speculator,” where you’ll get a free strategy guide, “Fundamental Trading Keys for the Aspiring Trader,” at no charge.

You’ll learn effective entry methods and risk control as well as how to make winning trades in as little as an hour a day – for free!

Billy Williams is a 20 year veteran trader in the stock and options markets as well publisher of http://www.StockOptionSystem.com where he publishes a free online magazine, “The Intelligent Speculator,” specializing in helping traders profit in the stock market. His articles have been published by several magazines including Futures Magazine and Stock & Commodities Magazine.

Article Source: http://EzineArticles.com/?expert=Billy_Williams