At the age of twenty-three, on one particular day, I was having a conversation with a friend called Tim. He was a person on the same grade as me at work; he was paid the same amount and lived a similar sort of life. Tim told me that he was thinking of buying a flat and that he was going to cash in his investment bond to help fund the move. I was very shocked that he even had a bond and asked him how long he had had the bond, and how he had managed to get the money to put into it. I expected Tim to tell me that his parents had given him the money, but they hadn’t, he had saved up the money himself.
Tim told me that he tries to save as much money as he can per month and normally manages to save at least £100. When he has a £1000 saved in the bank, he then invests the money into a bond.
I was very impressed with Tim and I have to admit a little bit jealous of his money. I then thought to myself, if Tim can save, then so can I. I set myself a goal of saving up a £1000 and planned to do this within ten months. I had to be less wreckless with my money and it would be a good test for me.
It did not prove to be that difficult and it was a good feeling seeing a healthy bank balance for once. After only eight months I had saved my target of £1000. Instead of putting it into a bond, I decided to take an even bigger risk and to buy some shares. I am happy to say that two years later the share price of the company I had chosen to invest in, had risen by sixty percent. This I have to admit was pure luck as I had simply guessed at who to invest in. The company I chosen had had a dismal few years and its share price was at its lowest ever level. I had heard that the company had recently had some major changes at the top and I decided to gamble just on these few facts.
This taught me a valuable lesson in life and I have now managed to set up my own stuttering treatment center where I teach people the art of how to stop stuttering. In business and in a personal life it is essential that we save enough money into a rainy day fund in case of emergencies. I am also a partner in an affordable front doors UK business – this is something I really enjoy as it is basically the profits from all of my successful investments.
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Did you know that there are 4 mains types of trader and depending on what type you are will determine many parts of your trading strategy and trading plan. The 4 types are: scalping, day trading, swing trading and position trading. When you determine the type of trader that you are it will also determine the time period in which you will be making your trade. This will be a very important decision that you need to make when deciding how you want to learn to day trade.
1. Scalping Trader, if you scalp the markets this means that you are only looking for a few ticks profit per trade and you may only be in the trade for a few seconds or a minute at most. trading. Some people will also call this day trading but it’s really micro day trading, buying the bid and selling the offer, it’s high speed trading and you might end up doing 10-50 trades a day. This can be quite a stressful way of trading.
2. Day Trader, the true day trader opens and closes their trade within the same trading session, usually this mean the same day, but unlike a scalper the trade may be held for a few minutes up to several hours. Usually day traders make about 2-5 trades a day and most of them will be in the 5-30 minutes range. This is a less stressful way of trading than scalping but it still requires a lot of attention and quick decision making.
3. Swing Traders, swing trading usually means that a position is held for between 1 to 5-10 days, although some swing traders may keep a trade on for longer most are within this time period. For many this is the idea way to trade because it allows you to review your trade in the evening, at the very least you have several hours to make your trading decisions.
4. Position Traders, this just means that you are going to hold onto your trade for longer than 5-10 days, maybe even as long as a few months.
If you are still working out how to day trade then it may be better to go with the longer time frames as it gives you more time to think.
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Although it may seem obvious to most stock market swing traders there are a number of simple rules that you can follow which will ensure that you have more success when buying stocks:
In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.
For example the DOW 30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).
Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to quickly buy and sell at the price you want without having a delay. You will also get a lower spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.
It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime.
Another consideration is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option in order to protect your stock.
Be very cautious about buying a stock just before it’s earnings release, stocks often drop significantly if you come out with a poor report. Earnings are released 4 times a year with one of them being the annual report.
If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.
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To be victorious in stock trading, you must plan few guidelines. And if you follow these tipes consistently, you will build wealth in stock market. Naturally you will most likely lose your money if you do not follow your own guidelines. So it is advisable to follow these rules no matter what. People might suggest you to go for Stock trading software as an easier route. But sticking to your own share trading rules will absolutely be worth in the long run, it is a discipline that will help you gain huge return on ivestments. Therefore read the following rules before you enter the stock market.
Share Trading Rule No 1: Be an Expert at one trading style.
Stock traders will have different share trading methods. Don’t try to do them all. You should keep learning and testing at the one system of share trading that will relate to you the most. Don’t jump from one style to another. You have to master one style rather than become average at applying numerous method.
Stock Trading Rule No 2: Never risk over three% of your total investment on any single stock.
Protecting your initial capital is significant if you want to trade stocks successfully. Remember that you are not trying to purchase the firm, you are merely trading their shares to gain profits.
Share Trading Rule No 3: If your prediction is incorrect, cut your losses at 5% to 15%
A very important rule. Many people make the mistake of sticking a loser while intelligent traders will cut their loses and move on. The vital rule in this case is to set stop loss points and reduce your losses if your forecast went wrong. Stick to your stop losses and analyze the performance of the stock.
Share Trading Guideline No 4: Set Price targets always.
Before share trading plan price targets. Don’t be too greedy and try to get the most out of rising share price. A share price can increase sharply too quickly and can also fall too fast.
Stock Trading Guideline No 5: Don’t break the rules.
As we have discussed before you should stick to your own rules to get money in stock market.
Similar rules are applicable in foreign exchange market as well. You have automated forex trading robots like Forex Megdroid, though following the rules is the key to profits.
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Although it may seem obvious to most stock market traders there are a number of simple rules that you can follow which will ensure that you have more success when buying stocks:
In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.
For example the DOW30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).
Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to easily buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.
It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock that is below $5 at anytime.
Another consideration to make is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option in order to protect your stock.
Be very cautious about buying a stock just before it’s earnings are released, stocks often drop significantly if they come out with a poor report. Earnings are released 4 times a year with one of them being the annual report.
If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.
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Should I Buy Into A Fund? — Stock Invest (3)
Mutual or investment funds are very popular nowadays. One basic difference between an individual trader and a fund is that the former plays with his own money, whereas the latter plays with other people’s money. The following are the reasons why I won’t buy into a fund:
No Real Product
The funds only sell you a dream that your investment will multiply for the long term. They package the dream in such a way that you think you own a bunch of good companies too. In this way, they sell you one dream on top of another.
Dreams can evaporate so easily. Anchoring a dream to a good company will perpetuate it. Therefore, the selling points for a fund have to be: huge capital, technical expertise, diversified holdings in good companies, expertise in emerging markets and industries. Impressive indeed! Are they selling all of these to you or merely a dream nonetheless? If you can buy such impressive power, why can you still lose money in a fund?
Lack of Responsibility
Investment funds compete with banks for depositors’ money. The banks have a real product to sell. They sell you a specified interest rate. You are guaranteed the interest payment even if the bank loses money. Thus, the banks are responsible for the products they sell. In many countries, your deposit is even insured by the government should the bank go under.
The funds promise a dream that beat the banks’ interests by many times. However, they are not responsible for the dreams they sell. You may win or lose, even losing all of your initial investment. What a cool business to be in! People give you money and a management fee. You produce nothing but a dream. Best of all, you are not responsible for the outcome. No wonder the banks are selling investment funds to their customers, too.
In a market boom, the funds will report higher portfolio values to the customers. There is no real gain yet until you cash out. This means the dream gets inflated. The customers never question how much money the funds actually made, compared to how much was distributed to them. They have no choice but to accept a periodic report. In a downturn, the funds always blame the stock market or the economy as the scapegoat for the decreasing fortunes of their customers. It’s never their fault to cause the customers to lose money. The strange thing is that the customers also accept what the funds say.
Impressive but Irrelevant Information
The funds are really good at packaging the dream they sell. Customers are given an impressive brochure with graphs and statistics. Most people fall into the trap of studying the materials and becoming convinced. You should think about what they don’t tell you rather than savoring what they tell you.
In addition, the funds are best in creating technicalities to protect themselves and impress customers. When facing technicalities hard to comprehend, customers tend to shy away or accept. Many even admire the complexity. Very few customers refuse to be bullied or conned by sales people using technicalities.
Lack of Transparency
In good times, the funds make tons of money each trading day when billions of dollars change hands at the stock market. The customers never bother to ask how much profit is made and how much is given back to them. Instead, they only receive a periodic report showing what the funds want them to see.
In bad times, the funds still make plenty of money by shorting the shares as they fall. Don’t you ever suspect that they know how to profit in a down market too? Who initiates a downturn in the first place? Is it some big player or the herd? The profits made by their short selling on each trading day are never transparent. Thus they pocket all the profits with your thinking that they lose money like you in bad times. Consequently, besides losing a cut of this short-selling profit, the customers also lose part of their initial investments, which are tied to the falling market indexes, as cleverly designed by the funds.
In conclusion, I won’t let any “experts” to play with my money without some reasonable guarantee of returns during good times. Also, I will not accept any loss if the market comes down. I always remember that I am giving them my cash, and cash is king. I dictate the terms, not they. That’s why I will never invest in a fund.
For further information, please email to stockfessor@comcast.net.
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