Factors Affecting Share Prices

Like any other commodity, in the stock market, share prices are also dependent on so many factors. So, it is hard to point out just one or two factors that affect the price of the stocks. There are still some factors that are that directly influence the share prices.

Demand and Supply – This fundamental rule of economics holds good for the equity market as well. The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price of that stock increases and when more people are selling he stock, the price of that particular stock falls. Now it is difficult to predict the trend of the market but your stock broker can give you fair idea of the ongoing trend of the market but be careful before you blindly follow the advice.

News – News is undoubtedly a huge factor when it comes to stock price. Positive news about a company can increase buying interest in the market while a negative press release can ruin the prospect of a stock. Having said that, you must always remember that often times, despite amazingly good news, a stock can show least movement. It is the overall performance of the company that matters more than news. It is always wise to take a wait and watch policy in a volatile market or when there is mixed reaction about a particular stock.

Market Cap – If you are trying to guess the worth of a company from the price of the stock, you are making a huge mistake. It is the market capitalization of the company, rather than the stock, that is more important when it comes to determining the worth of the company. You need to multiply the stock price with the total number of outstanding stocks in the market to get the market cap of a company and that is the worth of the company.

Earning Per Share – Earning per share is the profit that the company made per share on the last quarter. It is mandatory for every public company to publish the quarterly report that states the earning per share of the company. This is perhaps the most important factor for deciding the health of any company and they influence the buying tendency in the market resulting in the increase in the price of that particular stock. So, if you want to make a profitable investment, you need to keep watch on the quarterly reports that the companies and scrutinize the possibilities before buying stocks of particular stock.

Price/Earning Ratio - Price/Earning ratio or the P/E ratio gives you fair idea of how a company’s share price compares to its earnings. If the price of the share is too much lower than the earning of the company, the stock is undervalued and it has the potential to rise in the near future. On the other hand, if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point.

Before we conclude this discussion on share prices, let me remind you that there are so many other reasons behind the fall or rise of the share price. Especially there are stock specific factors that also play its part in the price of the stock. So, it is always important that you do your research well and stock trading on the basis of your research and information that you get from your broker. To get benefit from the effective consultancy service it is therefore always better from professional stock trading companies rather than getting lured by discount brokerage advertisements that you must be coming across everyday.

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

Tips for stock market investing

“Hot Tips” can burn

Is stock market investing a game to you? Is it mainly a source of fun and stimulation? Or is investing serious business -- an important way for you to build the size of your net worth over time ... for the benefit of your family, in order to retire earlier, or to pay for college expenses?

• If you haven’t figured this out yet, you should.

Many people think stock market investing is all about getting good tips. But this is a fool’s game—better for fun and stimulation than for producing meaningful long term growth in your stock market portfolio.

It is easy to get sucked into the game of chasing stock market tips. The sources of hot tips are plentiful ... your brother-in-law, a colleague at work, even the taxi driver may have stock market tips. During the tech stock investing craze several years ago, everyone seemed to have great stock market buying tips.

The financial media is full of stock market investing tips. Go to any newsstand and you can find magazines full of interesting company profiles and interviews with investment advisors offering their latest hot stock market tips.

If your investing orientation is pursuing hot tips, most stock market brokers will happily play your game. It’s their business to push certain stocks that their firms want to sell; and it’s easy to justify their commissions when you think you’re investing in a hot stock that could soar in value.

Stock market investing is about discipline ... not tips

Here’s the problem with chasing stock market tips: When you get caught up in the game and the excitement of the hunt, you can easily bypass the fundamentals of good stock market investing. Chasing tips, you can forget to maintain good diversification and you may not apply the important investing principals of asset allocation. Another extremely important stock market investing fundamental is the avoidance of large losses ... and when you’re chasing hot tips, what kind of disciplined approach do you have to know when to cut losses or lock in profits and get out?

• Perhaps you have experienced watching temporary gains in a stock disappear and then turn into deep losses.

Our tips for stock market investing

• Pursue a Disciplined Approach: This is a key to successful stock market investing.

• Diversify: Diversify among your stock market investments as well as among various asset classes (such as bonds, real estate, international stocks and bonds, etc.). Use a disciplined asset allocation approach.

• Avoid Large Losses: Protecting your principal from significant investing losses is fundamental to generating an attractive average return over the long haul. Use asset allocation and find a disciplined approach to monitoring your investments and knowing when to cut your losses or sell out to lock in profits.

• Avoid Chasing Stock Market Tips: Unless you have a solid discipline for knowing when to exit these investments on a timely basis, don’t do it. Don’t get caught in the trap of allowing a large loss on the investment and then rationalizing it to yourself that you are a long term “buy and hold” investor. That kind of investing in stock market tips is just an exercise in denial.

Source: http://www.confidentstrategies.com

Selling Stocks To Cut Losses

Success in the stock market is as much about limiting losses as it is about riding winning stocks. A rule-based selling strategy can help you avoid heavy losses and preserve your portfolio. This lesson explains how to sell when a stock selection doesn't pan out.

Assess Your Knowledge On This Topic

Know When To Fold 'Em

Nobody's right all the time in the market, not even veteran market professionals. But as the famous investor Bernard Baruch once said, "Even being right three or four times out of 10 should yield a person a fortune if they have the sense to cut losses quickly."

Being a successful investor is just as much about limiting losses as it is about riding a winning stock. Downturns are a part of life in the market, and you must act decisively to shield yourself from excessive losses. If your stock selection doesn't work out and you're faced with a loss, don't let your pride stop you from admitting you've made a mistake and acting quickly. Cut your losses early and move on. You must make rational decisions, instead of trying to rationalize your way out of a costly mistake.

It's not just your own personal opinions that can be wrong। Analysts or market commentators can be just as erroneous, and basing your decisions on their opinions can often lead to disastrous results. Investors often buy loser stocks, justifying their decision with remarks like, "All these Wall Street analysts are saying great things about this company," or "This technology is the greatest thing since sliced bread. The market doesn't realize it yet, but it's bound to become a household item." Famous last words.

Cut Your Losses Early

The first rule is sell any stock that falls 8% below your purchase price. Why 8%? Because research shows stocks showing all the right fundamental and technical factors in place and bought at precisely the proper buy point (which is explained fully in the "Using Stock Charts To Round Out Stock Selection" lesson of the stock buying course) rarely will retreat 8%. If they do, there's something wrong with them.

You may think a stock is due to rebound. But the market could send the stock to lower depths regardless of your views or what analysts and commentators say on TV. No excuses, no alibis. You may want to sell even before an 8% loss if you see other signs of weakness in a stock (we'll explain these throughout this course).

This rule emphasizes the importance of buying at the right time. If you don't and you buy a stock that is overextended (that's reaching the end of its climb), chances are it will hit the 8% sell level as it goes through a normal pullback. Make no exceptions to the rule. The best stocks will always give you other opportunities to buy. Here's another way to look at it: Once a stock falls 8% below your cost, does it still look attractive? Is it still among the best stocks? Probably not. There's no guarantee that it will go back up, and you need to protect yourself.

The bigger the fall, the harder it is to recover. Say you bought a stock at $100 a share. It falls 20%, to $80. To get back to $100, the stock has to make a 25% gain. Another example: The stock plummets 50%, to $50 a share. It would take a 100% jump to get it back to $100 — and how often do you buy a stock that doubles? And if it does, how many weeks, months or even years does it take to get there? Wouldn't you rather cut your loss early, and free up money to purchase another stock with better chances of doubling?

Of course, it could happen that you sell a stock that falls 8%, and then watch it go up afterward. But you have to think of the 8% sell rule as your insurance policy against catastrophic losses. The rule will in effect limit any losses on your portfolio to no worse than 8%.

Nevertheless, if you've bought a fundamentally sound stock at the right point, (explained in the stock buying lessons) it will rarely plunge 8% immediately। Buying exactly right will solve half your selling questions।

How Cutting Losses Helps You

Below are a set of hypothetical trades to illustrate how cutting losses can boost your portfolio.

As you can see, even if you had made these seven trades over a period of time — and taken losses on five of them — you would still come out ahead by more than $3,700. That's because the two stocks that worked out resulted in a combined profit of $5,500. And the five losses — all capped at 8%, except for one that was cut early at 7% — added up to $1,569.

You see the point? It would take several 8% losses to wipe out the profit from just one or two good stocks.

Stock	Shares	Cost/Share	Sell Price	Profit/Loss	%Profit/Loss
A	100	$50	$46	-$400	-8%
B	100	$43	$40	-$300	-7%
C	100	$57	$98	$4,100	+72%
D	50	$24	$22	-$100	-8%
E	30	$110	$101	-$279	-8%
F	70	$85	$78	-$490	-8%
G	100	$65	$79	$1,400	+22%
			Total	$3,731

The 8% Rule Applies Only To Losses From The Purchase Price

The 8% sell rule, however, applies only to drops below your purchase price and does not apply to situations where you've already made gains on a stock। A part of being a stock investor is weathering temporary sell-offs that may be 8%, 10% or even larger. The next two lessons will teach you how to, in most cases, tell the difference between one such dip and a real problem.

Dealing With Hyperactive Stocks

About 40% of stocks pull back close to their buy point for one or two days. This is not the time to panic and sell, especially if the stock was purchased as it came out of a sound basing area at the right buy point. (For more on this, check the chart-reading lesson of the stock buying course) As long as the price doesn't drop 8% below the point at which you bought, you should, in most cases, hang on through the first pullback.

Watch how the stock performs relative to the general market and its industry group peers. Often, a stock pulls back close to the buy point for one or two days because the general market has temporarily pulled back. This is normal. On the other hand, if the market has been rallying over several days and your stock hasn't come to life, then this might be a warning sign, even if the stock hasn't dropped 8% below your purchase price.

Another thing to ponder: Stocks with 98 or 99 Relative Price Strength Ratings are usually more volatile, increasing the chance of slipping 8%, particularly if you buy them extended in price beyond the exact buy point।

Stop-Loss Orders And Other Considerations

Some investors like to use stop-loss orders, which are instructions to brokers to sell a stock at a predetermined price. This might be useful for those who can't watch their stocks closely or for those of us who may be less decisive.

Also, tax considerations and brokers' commissions should rarely enter into your sell decisions। You shouldn't always hold a stock for more than a year just because you'd pay a lower tax rate on the profit. And with lower commissions today, they should not be the most important factor. Your main goal should be to obtain and nail down gains.

Holding Losers In Your Portfolio?

You may be looking at your portfolio and seeing there's some stocks already 8% below your purchase price — or worse। Should you sell them? Probably, unless a stock is showing strong signs of recovery, such as a rising stock price on solid trading volume and improving earnings. Even then, there is no guarantee it will rebound, and the chances are it could go even lower. The greater the loss, the greater the chance of it developing into a really serious loss.

Key Points To Remember

• The first sell rule is to get rid of any stock that falls 8% below your purchase price.
  
  
• It's critical to follow this loss-cutting rule regardless of how highly you value a stock. Personal opinions get in the way of smart selling decisions.
  
  
• The larger the loss, the higher the recovery you need to get back to the break-even level. (A 50% loss on a $100 stock, for example, requires a 100% gain to get back to $100.)
  
  
• Strong stocks sometimes initially retreat close to their buy point (as determined by the stock's chart pattern). This doesn't necessarily mean you have to sell, unless the stock goes 8% below the purchase price.
  
  
• Avoid making sell decisions based on tax concerns or commission rates ।

Source: http://www.investors.com

The discipline to cut your losses when a stock drops 7-10%

If there is a golden rule of investing, it should be the discipline to cut your losses when a stock drops 7-10%. The usual protest to this idea is "what if the stock goes right back up, as I know it's going to do? I've lost 10% of my money for no good reason."

Let's take a logical look at this argument. If a company's stock price drops 8%, it can then do three things. It can go right back up (but then why did it take a big drop in the first place? Hmmm), stay right where it is, or most likely drop even further. Sorry, but dropping to even a lower price is what’s most likely to happen.

For example, you buy a stock at $25.00, it drops to $23 where you sell and take a $2 loss. Over several weeks or months, you watch it drop down and hold at a "support level" of $17 to $19. The price begins to move up so you buy back in at $20. A month later it is back to $25.00.

If you had simply held on to the shares, you are now back to a break-even point. But by getting out early then buying back in as it began to come back, you made $5, minus the $2 loss, for a gain of $3 per share. Not only that, you protected your investment from greater loses if the stock continued falling and not regaining its old price level. This happens all the time!

I know so many investors that have stocks in their portfolios of good companies, and the stock seemed fairly priced and had great potential when they purchased it. They bought IBM at $125, then watched it drop to $65.00. They bought AT&T at $60, then watched it drop to $9.00. They bought Enron at $70.00, then watched it drop to $0.00.

And what were they saying while the stock was tanking? “This is a good, solid company. The price will go right back up. I can’t sell it now, at a loss!” Then they would say something like “I’m going to hang on to it until I just get even.” Do you want stocks in your portfolio that the best that you are hoping for, is to break even?

I know this sounds silly that a person would hold on to losers, but believe me, most people do. Don't let yourself become trapped by a stock that's costing you money. The only good stock is one that's making money for you.

It is also likely that if most of your stocks are dropping in price (assuming you have selected them based on their growth and solid earnings performance), then the whole market may be in a downturn. The Nasdaq lost 75% of its value from March 8, 2000 to July 20, 2002. The S&P 500, from January 1973 to September 1974, lost 43%.

A smart investor, rather than trying to beat a bear market, will keep his cash on the side, ready to jump in when the next bull market takes off. That is the time to shop for bargains in discounted, solid companies.

So I’ll repeat this golden rule of investing: cut your losses when a stock drops 7-10%. All big losses start out as small ones.

Investing should not be ”buy, hold, and keep your fingers crossed”. Invest the right way and you won’t have to worry about your investments. You want to sleep at night।

Source: http://www.atozinvestments.com

Admit your failings and cut your losses

By Nick Louth, MSN Money special correspondent

If there is one simple thing every investor should know, and will unfailingly boost returns, it is how to cut losses।

Cutting losses quickly is probably the single most important tactic in getting market-beating investment returns। It is also without doubt the hardest technique to follow relentlessly because it usually means admitting to yourself that an original purchase was a mistake.

Trends last longer than we think

Many investors held on for years, thinking; “They just can’t fall any further.” Oh, yes they could.

• See Marconi three year chart

Instead, by having an iron rule which says sell when any stock falls, say, 20 per cent, it is possible to save thousands.

• See ‘how to take a graceful profit’

The theoretical effect on your portfolio is pretty simple। In effect, by running with profits and cutting losses you are keeping as much of your capital as possible in investments that are increasing in value.

How to set stop loss limits

The first stage in cutting losses is to formulate a policy, which you should write in bold across your investment diary, and have on a note stuck near your computer screen.

When deciding your limit, you certainly need to make room for day-to-day fluctuations in share prices, so that sales are not triggered too easily, but you must not set the limit so low that you have already lost a fortune by the time it is triggered. It will also mean some fairly regular checking, so that you are aware when your investments are adrift.

Here are a few types of stop-loss:

• An absolute fall: e.g. sell on any fall of 15/20 per cent in a week/month. This has the advantage of simplicity, but may have you selling more often towards the bottom of a bear market, even when value is apparent, than towards the top of a bull market, when it isn’t.

• See article on researching shares for more details on P/E ratios

• A relative limit: e.g. Sell if the stock underperforms the FTSE 100 by 10 per cent in any month. Though more complex, it gives you the right background against which to judge a price movement.

• • Sell at a specified price: If your broker allows you to set limit prices, you can set conditional trades, which are always expressed in absolute pence. As these instructions can be set for months ahead, you must update them regularly to reflect the right stop-loss gap underneath the current price. To do this for every stock in your portfolio would be very time consuming, but there are likely to be those which you are most concerned about. If you are going away on holiday, however, it can give great peace of mind.

What about those that recover?

Let’s not make any bones about it, if you sell loss-makers early you will not yet know for sure whether this is the start of a short period of downbeat trading in that particular stock, or the start of a calamitous decline. However, while you may miss out on those stocks which manage to reverse a 20 per cent fall, you will never be caught napping by those miserable firms which are on their way to bankruptcy and intent on destroying your wealth on the way.

• See when bad news is good news

Removing emotion from the decision

Ultimately, the success of cutting losses rests on your ability to remove emotion from your investment decisions. That is done easily if you act quickly, but once you wait until you have lost say half of a £10,000 investment in a company, it is harder by far to convince yourself to turn a paper loss into a real one. If it was a few hundred, then you can shrug your shoulders and move on. (If not, you probably should not be trying to invest in individual shares).

However, it is when you are already thousands down that the real devil may occur to you। This is the temptation to buy more shares in a losing company. This appears to have the advantage of lowering your average purchase price and therefore your breakeven level, but should be resisted at all costs.

As poet Robert Frost said: “Sell your horse before he dies. The art of life is passing losses on।”

Source: MSN Money

When bad news is good news

By Nick Louth, MSN Money special correspondent

Many new investors are confused by the apparently illogical movements of share prices।
Why does bad news often cause a share to rise, while good news makes it fall?

Here’s a guide to cutting your way through the jungle of market psychology।

Here’s a mystery. The newspapers are awash with bad news about electronic controls group Invensys – and rightly so, it would seem. The company made losses of £858 million last year, it has debts of £1.6 billion, and a pension fund shortfall of £931 million.

And it gets worse: Invensys relies for most of its sales on the US, but the recent fall in that country’s currency means each dollar it earns will look smaller when turned into pounds in its accounts।

It stopped paying dividends some time ago, and most investors expect it to be broken up and sold. The average analyst rating on the company is, understandably enough, “sell”.

Yet if you had bought Invensys shares at 10p on April’s Fool’s day, you could have more than doubled your money in ten weeks। By June 17th the shares had risen to 23p.

A sure-fire winner?

Now consider this second conundrum. On Monday computing group Autonomy announced the launch of fiendishly clever software which instantly scans all the e-mails, instant messages and telephone calls made within an organisation to check whether they comply with standards for corporate accountability laid out under various pieces of legislation both here and abroad.

So what? Well, compliance is a huge bureaucratic cost to large companies, particularly in financial services and so far has been laboriously tackled almost by hand। Yet, Autonomy’s entry into this potentially multi-billion dollar market went down like a damp squib. You might have expected a surge in its share price but it fell 10p on the day to 315p, and for the past week has lost three per cent.

What is going on?

Look to the future

Share prices are all about the constant comparison of expectations and reality. For every share traded in any market there are a series of assumptions on profits, dividend and sales which underlie the price that professional investors are willing to pay.

In the case of Invensys, the market has spent three years cutting its estimates for what the company is worth, but now some feel it has gone too far, and many feel the firm is unlikely to end up being worth nothing at all.

• See Invensys share price chart

A research note from broker Merrill Lynch put its finger on the button early this month। It read: “The bad news is probably now all on the table and, more importantly, in the share price. Although there are significant risks, we believe the risk/reward is attractive.”

Buy on the rumour, sell on the fact

For Autonomy, the news of its entry into the compliance market had been quietly leaking out for weeks. Certainly, the shares had risen by 45 per cent from 155p to over 225p since the middle of May on rumours that a major new product launch was planned.

By the time it was confirmed on Monday, the upward price movement had taken place, and some of those who had bought early had made a healthy profit and sold, hence the lower price in the last week।

This is a well known trading process, called “Buy on the rumour, sell on the fact”. It drives a great many short-term market movements.

Sell on the rumour, buy on the fact

The reverse “Sell on the rumour, buy on the fact” works just as well, except it is used where bad news rather than good is expected. That is often why a company can come out with absolutely terrible results, yet the share price rises on the day.

Almost always, the nimblest of the professional investors have been selling for weeks (or ‘going short’, which is the process of selling something you don’t own in order to buy it back again more cheaply later) in anticipation of bad news, and then buying back in when it is incorporated into the price.

It is this process of digesting news and building it ‘into the price’ which underlies the short-term movement of stock market prices. That is why brokers are always comparing prices and expected earnings for various companies, and have distilled them into a price earnings ratio (P/E) which is the standard yardstick for comparing one share to another.

Its function is just like those ‘price per 100g’ comparisons we see on supermarket shelves which tell us whether the large £3 jar of coffee is in fact cheaper than the small £1.25 one.

• See article on researching shares for more details on P/E ratios

Each sector in the market, whether it be banks or telecom firms has an average P/E ratio, just like we know roughly what we should pay for a 100g jar of coffee. If a member company of that sector gets out of line with the average there is either a special reason which merits further investigation, or it is out of line in which case a trading opportunity has arisen.

• See Autonomy financial highlights

Every day that market examines profit warnings, better-than expected results and every other kind of corporate news. These get built into the earnings side of the P/E ratio, and the price adjusts accordingly. Above all, it is the future that matters. Once a fact is incorporated into a share price it becomes history, and you are unlikely to be able to make money from it.

• See Invensys company Report
  

Source: MSN Money

How to Take a Loss?

There are numerous people who will tell you how to make money in the market. But what you don’t often see, however, are ideas written on how to lose money.

"Cut your losers and let your winners run" is common stock market trading advice, but how do you determine when a position is a loser?

Interestingly, most traders don’t formulate an answer to this question when they put on a position. They focus on the entry, but then don’t have a clear sense of exit - especially if that exit is going to put them into the red.

One of the real culprits is in the difficulty traders have in separating the reality of a losing trade from the psychological sense of feeling like a loser. At some level, many traders equate losing with being a loser. This frustrates them, depresses them, makes them anxious - in short, it interferes with their future decision-making, because their P&L is a blank check written against their self-esteem. Once a trader is self-focused and not market focused, distortions in decision-making are inevitable.

• The unsuccessful trader will respond with frustration:

"Why do I always get caught buying the highs? I can’t believe 'they' ran the market against me! This market is impossible to trade."

Because of that frustration - and the associated self-focus - the unsuccessful trader does not take any information away from that trade.

The successful trader will see the losing trade as part of a greater plan. Had the market broken nicely to the upside, he would have scaled into the long trade and likely made money. If the trade was a loser, he paid for the information that this is, at the very least, a range-bound market, and he might try to find a spot to reverse and go short in order to capitalize on a return to the bottom end of that range.

Look at it this way:

If you put on a high probability trade and the trade fails to make you money, you have just paid for an important piece of information:

The market is not behaving as it normally, historically does.

If a robust piece of economic news that normally sends the dollar screaming higher fails to budge the currency and thwarts your purchase, you have just acquired a useful bit of information:

There is an underlying lack of demand for dollars.

That information might hold far more profit potential than the money lost in the initial trade.

Instead of viewing losses as a threat, treat them as an essential part of trading. Taking a small loss reinforces a trader’s sense of discipline and control - without which may lead to overconfidence in stock trading. Losses are not failures.

• So here’s a question to all those who enter a high-probability trade:

"What will tell me that my trade is wrong, and how could I use that information to subsequently profit?"

If you’re trading well, there are no losing trades: only trades that make money and trades that give you the information to make money later.

Source: http://www.qwoter.com

Worthless Stock: How to Avoid Doubling Your Losses?

Con artists across the globe have stepped up their efforts to rip off investors, especially non-U.S. residents who have lost money in the U.S. securities markets. While it’s natural to want to recoup one’s losses as quickly and as fully as possible, the SEC warns investors to be extremely skeptical of offers to exchange worthless or poorly performing stocks for blue chips or “hot” performers.

Worthless stock is typically just that — worthless. And anyone who promises a quick way to recover from a bad investment is probably just lying to you. We encourage you to thoroughly investigate any investment opportunity, as well as the person promoting it, before you part with your money. This is especially critical if you are a non-U.S. investor seeking to invest in U.S. stocks — or if you learn about the opportunity over the telephone from a broker you don’t know. The “broker” may well be a con artist, and the deal may be a dud. Remember, if an offer sounds too good to be true, it probably isn’t true.

This alert tells you how to spot potential “stock swap” scams, how to evaluate the offers you hear about, and where to turn for help.

What to Watch Out For

Although fraudsters use a wide variety of techniques to carry out their “worthless stock swap” scams, most of these frauds boil down to a predictable formula: a persuasive pitch, which nearly always contains false assurances of legitimacy, followed by demands for money.

Here are some “red flags” to avoid:

Aggressive Cold Calls from "Boiler-Rooms" — Con artists posing as U.S. or United Kingdom brokers will first identify investors who have lost money investing in “microcap” stocks, the low-priced and thinly traded stocks issued by the smallest of U.S. companies. Operating from remote boiler-rooms, they then mount an aggressive cold calling or emailing campaign, focusing their pitch on loss recovery. They might offer to swap a poorly performing stock for an established, blue chip stock — or they will claim that their firm or an anonymous “client” wants to purchase the shares directly.

Impressive Websites Serving as Fronts for Virtual Offices — To make their schemes appear convincing, fraudsters will invite you to visit “their” website — which will have pages of detailed information and perhaps a photo or biography of the broker. But all too often the site will be nothing more than a fraudulent copy of a legitimate firm’s website — with changes made only to the name and contact information. The con artists will adopt fake yet familiar-sounding names and operate out of virtual offices, using phony addresses, remote mail drops, and redirected phone and facsimile numbers to carry out their scams.

Self-Provided References — Knowing that regulators encourage investors to investigate before they invest, fraudsters often pretend to do the same. They will falsely assure you that the investment is properly registered with the appropriate agency and purport to give you the agency’s telephone number so that you can verify that “fact.” Sometimes they will give you the name of a real agency — other times they will fabricate one. But even if the agency does exist, the contact information invariably will be false. Instead of speaking with a government official, you’ll reach the fraudsters or their colleagues — who will give the company, the promoter, or the transaction high marks.

Claims of Government “Approval” — Another ruse fraudsters use to appear credible involves the misuse of federal agency seals, including the seals of the SEC and the Federal Trade Commission. They will copy the official seal from the regulator’s website and use it to create fake letterhead for a fictitious letter of approval. But you should know that the SEC and FTC — like other state and federal regulators in the U.S. and around the world — do not “approve” or “endorse” any particular stock transactions or “loss recovery” programs.

Advance Payment Requests — Regardless of how the fraudsters pitch their offers to “help”, there’s always a catch. Before they will complete the deal, they first will ask for an upfront “security deposit” or “margin payment” — or claim that you must post an “insurance” or “performance bond.” The minute you pay the advance fee, the fraudsters nearly always disappear — leaving you with new losses. If you seem willing to make further payments, the con artists may instead keep asking for more — falsely claiming that the market price of the security has changed or that the payments will cover additional fees, taxes, bonds for the courier service, or other similar expenses. Only when you finally run out of patience or money to chase your losses do the fraudsters disappear for good.

How to Protect Yourself

Regulators often refer to worthless stock scams as “recovery room operations,” “advance fee schemes,” or “reload scams” because the perpetrators prey on individuals who lost money once and are willing to invest even more in the hope of recovering their losses. Here are several ways to arm yourself against these thieving opportunists:

Look Past Fancy Websites and Letterheads – Anyone who knows how to “cut and paste” can create impressive, legitimate-looking websites and stationery at little to no cost. Don’t be taken in by a glossy brochure, a glitzy website, or the presence of a regulator’s official seal on a web page or document. The SEC does not authorize private companies to use our seal. If you see the SEC seal on a company’s website or materials, think twice — and then think twice again.

Be Skeptical of Government “Approval” — Like most regulators around the world, the SEC does not evaluate the merits of any securities offering, nor do we determine whether a particular security is a “good” investment. Moreover, we never endorse specific firms, individuals, products, or services.

Deal Only with Real Regulators — Don’t be fooled by those who tell you how and where to check out their credentials. Go straight to a real regulator for help. Here are the URLs you’ll need to find your regulator:

International Regulators -- http://www.iosco.org/lists/ U.S. Regulators -- SEC - http://www.sec.gov or http://www.sec.gov/contact.shtml NASD -- http://www.nasd.com or http://www.nasdbrokercheck.com/ State Regulators -- http://www.nasaa.org/ or http://www.nasaa.org/QuickLinks/ContactYourRegulator.cfm

Caution: If your contact provides any of these links electronically (in an email or on a website), do not simply click on those links. Type the full URL into your web browser yourself. Even though the URL looks right, a fraudster’s link can take you to a very different destination.

Independently Determine Whether the Offering Is Registered -- In general, all securities offered in the U.S. must be registered with the SEC or qualify for an exemption. You can see whether a company has registered its securities with the SEC and download its disclosure documents using our EDGAR database.

Check Out the Broker and the Firm – Always verify whether the broker and the firm are properly licensed to do business in your state, province, or country. If the person claims to work at a U.S. brokerage firm, use NASD’s BrokerCheck website or call NASD’s Public Disclosure Program hotline at (800) 289-9999. If the person works elsewhere, contact the securities regulator for that country — and also for your home country, if more than one country is involved.

Tip: Several international regulators list on their websites the names of unlicensed firms or entities that have allegedly targeted their citizens for worthless stock scams and other frauds. Some sites that presently maintain these lists include: Australian Securities and Investment Commission Bermuda Monetary Authority Guernsey FSC Hong Kong Securities and Futures Commission Indonesian Capital Markets Supervisory Agency (BAPEPAM) Irish Financial Services Authority Isle of Man FSC Italian CONSOB Netherlands Authority for Financial Markets New Zealand Securities Commission Philippines SEC Spanish CNMV (click on "Investor Alerts" under "Cautions") Thailand Securities and Exchange Commission United Kingdom Financial Services Authority Please note that the SEC does not maintain or control these lists and cannot vouch for their accuracy.

Independently Verify References – Never rely solely on references given to you by a broker you’ve never worked with before. The “international organizations” or “satisfied clients” they suggest you contact may well be part of the scam.

Be Wary of Unusual Banking Instructions – Most reputable brokerage firms in the U.S. would not ask you to send your money to a non-U.S. bank — or to a U.S. bank for further credit to another bank or entity. In fact, a U.S. broker probably would not ever ask you to send payment to their bank at all.

Where to Turn for Help

If the case appears to involve a U.S. broker, please send your complaint in writing to the SEC using our Online Complaint Center. Be sure to include as many details as possible, including the names, addresses, telephone or fax numbers, and e-mail addresses or websites of any person or firm, the dates of each contact, and information on any specific representations and wire instructions provided by the broker.

Because many investment scams occur entirely outside the U.S., the SEC may not have jurisdiction to investigate and prosecute wrongdoers — even if the fraud involves stock issued by a U.S. company. If you run into trouble, contact the securities regulator for your home country and also the country where the broker does business.

How to Get More Information

If you want to invest wisely and steer clear of frauds, you must get the facts. Never, ever, make an investment based solely on a promoter's promises over the telephone or what you see on the Internet — especially if the investment involves a small, thinly-traded company that isn't well known. And don't even think about investing on your own in small companies that don't file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check the truth of every statement about the company.

For more information on investing wisely, please visit the Investor Information section of our website.

http://www.sec.gov/investor/pubs/worthless.htm

Be ruthless in cutting your losses

Q: I've read where you suggest selling stocks if they fall 10% from the price you paid. Is that true even if the stock pays a 10% dividend yield?

A: I don't want anyone to be confused: Investing in stocks is a risky proposition. If it wasn't risky, you wouldn't get any return.

But just because investing is risky doesn't mean you have to lose it all.

There are several ways investors can reduce their risk without harming their returns.

The first way is diversification. If you buy a basket of stocks, rather than just one, you can spread your risk over dozens of companies in different industries and financial situations. Diversification essentially eliminates your exposure to "company risk."

But what if you don't want to diversify? Maybe you think you've found a hot stock that everyone else is missing. And to be sure, sometimes investors can be smart enough or lucky enough to pick a stock that outperforms other stocks in its class. But here, you have a problem of risk.

If you buy the stock and tell yourself you're going to hang onto it no matter what happens, you're exposing yourself to huge risks and likely not being compensated for taking that risk. A logical way to avoid that kind of risk is to cut your losses.

Can a stock go down 10% from your purchase price and rally again? Certainly. But think of the cut-off rule as insurance. You are paying for the right to reduce your risk to just 10%. Keeping losses on individual stocks to 10% is important because it's possible for you to recover from a loss of that size.

But you're right, the 10% rule doesn't apply to all investments. I suppose if a stock pays a 10% dividend you could use that as somewhat of a buffer and give the stock a little more room. But I wouldn't put too much faith in the dividend. What good is a 10% dividend if the stock goes down 20%?

Also, the dividend yield may be misleading on a plummeting stock. As the stock falls, the dividend yield rises, because it is calculated by dividing the dividend by the stock price. One strategy might be to add the actual amount of dividends received on the stock to the cost basis. You can then use that adjusted cost basis as your baseline to apply the 10% rule.

Again, the 10% rule doesn't apply to an investment in a diversified portfolio of stocks. In that case, you would be foolish to sell if the basket fell 10%. Why? Because you have already reduced your risk with diversification. Sticking to diversified mutual funds may be a good strategy for investors who think the 10% rule on an individual stock is too strict.

If you'd like to learn more about the 10% rule, read The Battle for Investment Survival by investor, broker and writer Gerald Loeb. The classic, written in 1935, teaches investors why cutting losses is so important.

Matt Krantz is a financial markets reporter at USA TODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com.

Source: http://www.usatoday.com

Some Important Lessons to Know For Shares Investment

1. Don't let emotions mess you up. Market is not for the temperamental, sentimental and emotional one.

2. Understand the high risks involved in stock market investment. When market is in the bull run or over-heating, take the profits if one shares are shooting high without good reasons, don't let greed rules your mind. Otherwise, greed may turn into grief because one will never know of a sudden bad news may come unexpectedly from nowhere even during the good times and this can wipe off your 'paper gains' overnight.

When your gut feeling tells you the signs of beginning of bear run, be prepared to cut losses early if necessary. Whatever rules you may applied to suit your 'comfort' level, be it 5%, 8% or10%. If a stock falls below your purchase price level, be prepared to 'stomach the pains' and cut-loss. Better to cut small losses than to risk a possible larger losses later on. Market has no mercy to stocks falling even to blue-chips when bad news surfaced.

3. Pay attention to fundamental analysis of company earnings and future growth potential or direction. Understand the market trends related to their business. What is favorable business model yesterday may not be today. The reverse is also true.

4. Look for 'Relative Strength' of a company. Who are their competitors? Their strengths ,weaknesses and growth opportunities. Their consistently good track records...

5. Understand top management leadership capabilities from their past track records. Are their performance consistent or erratics?

6. Never invest shares consistently traded in low volume. You may find it difficult to unload your shares holding when market is heading downward or worst, market crashed.

7. Analyze different technical chart patterns so as to minimize risks involved when making decision to buy or sell shares. Look for patterns like "double top", “double bottom”, “flat base”, “cup with the handle”... If in doubt, consult your 'reliable' brokers.

8. Growth vs.Value Investing. Look for listed-companies consistently reporting good earnings and sales growth from their track records, or consider buy stocks with a low P/E ratio and strong fundamentals. Stay out of penny stocks if possible.

9. Don’t try to short-sell the market. Don't try to time the market. Even experts made mistakes sometimes. Don't get caught with your own pant down. Be cautious not careless.

10. Stay right mix for your shares portfolio. Don't over diversified and lose your focus. Don't try to put too many eggs in your baskets, focus only a few good potential growing and strong fundamental stocks like blue-chips.

All the best!

Technorati Profile

Stop Loss Strategy

Tilting the odds in your favour

“Cut your losers early and let your winners run”. Sounds obvious, doesn’t it? Yet for many investors this maxim does not form part of their investment strategy and, as an active investment manager, I have always found this omission puzzling.

A professional investor will ordinarily spend a great deal of time deciding which stocks to buy for a portfolio. Typically, he will consider such things as: the fundamentals of the business; whether the stock is cheap or expensive relative to its peers; the health of the industry, sector and economy; the breadth of the markets; the timing of the purchase. At the end of this selection process, he will have a stock he likes and perhaps a target price he expects that stock to achieve.

Yet it seems many investors spend little or no time preparing a contingency plan in case the stock does not go up as they expect. To my mind this is perhaps the first question you should ask yourself; ‘What happens if I’m wrong?’, because with the best will in the world, no one can be right all of the time.

Of course this is not a question anybody really likes to ask themselves and this reticence has been identified as one of the reasons why markets are not as efficient as theorists would have you believe.

A new branch of study has become increasingly influential in recent years, as market practitioners have attempted to explain why markets can and do remain irrational for long periods of time, the study of Investor Psychology. Research in this field has identified many common mistakes investors make when managing their portfolios. Two of the most common are ‘fear of regret’ and ‘seeking of pride’.

‘Fear of regret’ can be defined as the reluctance to sell a losing position until it returns to somewhere near the price originally paid for it. Say you buy a stock at £10, but a few weeks later the price has fallen to £7. The temptation is to hold on in the hope that the shares will at some stage recover, whilst looking upon the missing £3 as ‘only a paper loss’. The truth of the matter is, the markets are probably telling you something important: it is a bad stock.

‘Seeking of pride’ is pretty much the opposite. In this scenario, you buy the stock at £10, it goes up to £12, whereupon you immediately sell it and tell your friends about the cool 20% you made in a week, right? Wrong. If the stock goes up 20%, the market is probably telling you that something has fundamentally changed with the business. It is unlikely that the stock price will reverse in the short-term, and the weight of probability suggests more upside.

It is quite understandable that an investor can fall into either of these traps, we are all human beings after all. However, I believe it is vitally important to the successful management of any portfolio that an investor rids himself of emotional ties to his stocks and, instead adopts a rigorous methodology to manage downside risk. So, how do you achieve this? By using a ‘stop loss and stop loss of profit' strategy.

Going back to my earlier example, our investor has just bought stock at £10. What he should do immediately is set himself a price below which he would resolve to sell the stock. If our investor decides he is prepared to lose a maximum of 10%, then the stop loss price will be £9.00. If the price falls below £9.00, he will sell.

Alternatively, let us assume that the second scenario plays out, and the stock rises to £12. Instead of selling and taking profits, our investor holds the stock. What he should do now is adjust the price that would trigger a sale. If he decides to keep the 10% downside risk protection, his stop loss of profit would now be £10.80. He will continue to hold the stock as long as it keeps going up, and will continue to raise the safety net price, effectively ratcheting up the returns on the investment.

Clearly this is a simplified description of the process, and there are various other inputs that would ordinarily be factored into the decision, for example:

• For an equity with a higher beta (i.e. with more volatility of returns than the market), you should consider allowing more latitude with the price action. This will stop you from being ‘whipsawed’ out of a position, that is to say, selling when your stop loss is breached without allowing for the fact that the general trend in the stocks price is still up, despite its wild price movements.

• The more uncertain you are about market conditions generally, the tighter your stops should be. This allows you to factor in any macroeconomic ‘top down’ concerns you may have. Remember that in a general market downturn, even the best stocks will go down.

Some professional investors use ‘technical analysis’, to decide important price levels that should act as support for the stock price. Technical analysis, in its simplest form, works on the premise that a price chart provides a graphical illustration of investor psychology, and practitioners of this craft will typically use lines drawn on charts to set their stop loss points.

Fundamental investors contend that it is impossible to predict future price movements from historical charts in an efficient market and have rubbished this type of investment strategy. But, whilst admittedly the process does use a certain amount of artistic licence in determining important price levels, irrational investors do exist, and you do see prices tend to be ‘sticky’ at certain levels.

Perhaps then, the canny investor should use both methods to achieve the best results, fundamental analysis to choose the best stocks, and technical analysis to time entry and exit points from the market.

One final observation I would make is that the stop loss and stop loss of profit strategy will not be successful all of the time. There will be times when a stock that you have just cut proceeds to go flying up past its previous highs, to your utter despair.

But take heart, by being rigorous in your method and by systematically managing your portfolio to limit downside risk, you will tilt the odds of success in your favour and in the final analysis, that is the difference between success and failure.

Ian Leverington, CFA Assistant Investment Manager, Ashburton Bespoke Portfolio Service

Source: ITInews – Insurance Times and Investments Online

www.itinews.co.za

Stock Market Strategies For Investors

Do you wish to earn some good profit from the stock market? Have you ever pondered why some people become millionaires by stock trading whereas some others have to struggle in it?

The difference between the successful and the unsuccessful in stock market lies in the strategy they employ. Employing a well-educated and deliberate strategy would help you gain from the stock trade, whereas giving in to greed and haste would expose you to the risk of loss. Following are some strategies that you can use to turn the trade your way:

• THINKING LONG-TERM
  To succeed in the stock world, you need to make long-term strategies. It does not mean that you should buy stocks and keep waiting for months to see the prices change. Long-term means that you make your own wisely decided entry and exit strategies for stock trading and follow them infallibly. However, you may emend the strategy as you gain more experience.
• MARKET KNOWLEDGE
  Before going into the day trading, you want to have a good knowledge of the market. The figures at the stock exchange are influenced by a huge number of factors, many of them too subtle for a casual trader to study. The deeper you understand the economy, both nationally and internationally, the better are your chances to earn profits. This is the reason why experience counts a lot in the stock exchange.
• RISK FACTOR
  The more risk you can take, the more profits you can earn. Stock market is meant for all - those who want to take bolder risks, as well as those who want to play it safe. Before going out for trading stocks, therefore, ensure how much risk you can manage to take. For example, if you are a 25 years old guy, you can take risks greater than a 35 years old man who has his family to look after. A proper knowledge of how much risk you can afford will confer you with greater confidence while trading.
• BEWARE OF SCAMS
  Beware of scams going on in the market. Most of them are going to allure you with advertisements such as "Double your money" or "Be a millionaire in a fortnight". Don't fall after them; you will end up nowhere. Trading stocks is in no way like a gambling. It is a business - the more skills and understanding you develop, the more you earn from it.
• STOCK BROKER
  If you are hiring a stock broker to assist you in making the trading decisions, hire a good and experienced one. He can impart you with good advice, and you can also learn strategies from him for the future.
• ONLINE STOCK INVESTING
  A currently emerging mode, online stock investing, has attracted a good number of people to use it. You can use it from any location on the globe if you have a computer connected to the Internet. You can find the online stock broker not only time saving and user-friendly but also cheaper. But before going for one, you should read the terms and conditions thoroughly.
• NO SENTIMENT, NO EMOTION
  For efficiency in stock investing, you need to free yourself from the clutches of your emotions. Make it a rule - never let your decisions be guided by your emotions. You will obtain better results if they are guided by your wisdom and knowledge. Emotions make your decisions whimsical, rendering all your experience useless. Funnily enough, there are also some people who go for the stocks with names starting with S because their wife's name starts with S. This is ridiculous. If you are the prey of any such sentiment and blind beliefs, abandon the habit.

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

How to Be Successful In the Stock Market

Stock Market- a lot of speculation, a market to dream, see them shattered and still keep dreaming; a place where you fulfill your dreams or call it a gamble... what you want to view it as is really your choice!!

Today's vision is to earn as much money as possible and get as much returns with an intelligent investment plan. With the boom in the emerging markets and the advent of the Internet and computers, investment in stocks is indeed a lucrative option. And with stock trading systems such as online trading, a lot of toil and money is saved if one wants to invest in the stock market.

The market scenario is rather volatile with the emerging markets playing a significant role in them now. So, to earn the maximum amount of returns from your investment, what is absolutely essential on your part is to get a decent knowledge of the company's portfolio in which you invest. Besides this, when you do hire an online broker, remember to check the records from other clients of your broker. However, online stock brokers offer consultancy services at cheaper rates because they guide investors through a number of investing options and help them choose the best, whereby they can earn higher returns.

Online stock market trading offers an almost clear picture about the present market scenario because the unscrupulous middlemen are absent. Being your own master, you can carry out online stock market trading as your time permits. This has another advantage- while trading these stocks; you can follow the swings that the market has to offer and decide for yourself which are the weaker stocks that you want to trade away for healthy investment in the market. The advent of new trading systems along with the brokerage companies ensure to the investor that long term trading is also possible online besides day trading. A host of banking options with e-broking accounts facilitates these transactions without hassles.

In general, a financial consultant managing your funds between bonds, mutual funds and the share market, will advice you to keep your investment in stock markets for a long time- say a minimum of two years. This reduces the risks, as the effects of market volatility do not affect the price of the stocks in general. Since the trading indices always show an upward trend over a long period of time, the chances of earning a decent return is also pretty high. However, if you go for day trading, you can earn quite a bit of quick money by monitoring the market movements and trade a stock quite a few times in a day. This requires one to have a fair idea of the circumstances beyond the company's control that can affect the stock prices.

Having glorified the online trading system, it should be noted that online trading of stocks could lead to various unwanted scams that a successful stock investor should be aware of. So, try staying away from programs that promise of doubling or tripling your returns!

A successful trader is one who can balance his portfolio of risks and returns well and this of course needs a lot of research!

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

The Six Mistakes of Man

According to Marcus Cicero, a prominent philosopher who lived at the time the Romans began to lose their domainance as a civilization has this to share.

Here are what he thought were “The six mistakes of Man”

1. The delusion that personal gain is made by crushing others. - it perhaps gives us a feeling of insecurity and destroys the very foundation of our thought.
2. The tendency to worry about things that cannot be changed or corrected. - Don’t worry about the things you can fix, and don’t worry about the things you can’t fix. Worrying is a losing strategy…
3. Insisting that a thing is impossible because we cannot accomplish it.
4. Refusing to set aside trivial preferences.
5. Neglecting development and refinement of the mind, and not acquiring the habit of reading and studying.
6. Attempting to compel others to believe and live as we do.

The mistake Warren Buffett never makes

By Jackie Cameron

One basic error sets Omaha sage Warren Buffett apart from most investors - he never confuses price with value.

That was one of the many insights from Robert P Miles, best-selling author and Warren Buffett expert, on the CNBC Africa Power Lunch with Moneyweb on Monday.

Miles was speaking to Moneyweb host Alec Hogg, who has met Buffett and was among a small group of international journalists allowed to ask him questions at his Berkshire Hathaway annual general meeting in the United States earlier this year.

Buffett is known for shying away from the media and analysts.

The author, in South Africa to present at a value investor conference, told Hogg that he has been to a power lunch with Buffett twice and to Buffett's office a couple of times.

"He's very funny. He could be a stand-up comic," said Miles of Buffett's down-to-earth way of imparting advice to others.

Buffett has bought a Miles' book for his directors and has also mentioned one of Miles' books in his letter to shareholders, the Buffett-expert said, which is the equivalent of Oprah endorsing a book in the financial world.

Highlighting some of the lessons other investors can learn from the way Buffett sizes up companies when deciding whether to buy, Miles said: "Ninety-five percent of investors are investing on price and confuse price with value.

"Warren Buffett likes to play a game with himself. He likes to figure out what something is worth first, then he looks at the price."

If the price is a significant discount, then Buffett is a potential buyer. "Unfortunately most investors confuse price with value. Warren Buffett has made lots of mistakes - but not that mistake," said Miles.

Buffett is well-read, and likes to play bridge over the internet with his friends as well as surfing for information generally.

One of his best friends is bridge partner Bill Gates, yet Buffett has said he does not know Microsoft well enough to invest in it.

Miles clarified this position, saying that if Buffett "can't go out ten years and see where it will be", he can't discount to today.

Buffett says it is "important to know what you know and ignore all that you don't know". He "doesn't understand where computers will be in the next ten years", said Miles.

The investment sage from Omaha knows investors who have "made millions of dollars" owning just five or six different stocks "so it is not necessary for you to know about lots of different stocks outside your knowledge base", said Miles.

Of the many CEOs interviewed by Miles for a book on the Warren Buffett CEO, all were independently wealthy - to the tune of around US$100m each.

They all have free rein over their businesses, with Buffett attracting managers who "forget they've sold their businesses", as well as Buffett "forgetting" he has bought.

"His job is to recognise the Tiger Woods of the world, if golf were a business, and the last thing he'd want to do is tell Tiger how to play golf," said Miles.

Also of importance to Buffett when he buys a business are: earnings - they currently need to be in the region of at least a net annual US$75m; a high return on equity; little to no debt; that they are throwing off cash, not requiring it; are simple businesses; and he needs to know the price.

Buffett, Hogg discovered earlier this year, would love to make a big deal in South Africa.

Source: Moneyweb

Four Rules for Investing in Asian Stock Markets

By Tony Sagami

My Four Rules for Investing in Asia

1. Buy-hold-and-pray won't work . For the last four years, even dart-throwing monkeys made money investing in China. Going forward, I think investors will need to be more nimble. Don't hesitate to take profits after large moves, and use defensive strategies like protective stop losses to manage risk.

Just last week, for example, I instructed my Asia Stock Alert subscribers to move up their stop losses on Siliconware Precision Industries and MEMC Electronic Materials. I think those two companies have extremely bright futures, but we've doubled our money in only nine months! It only makes sense to protect our profits.

2. Don't ignore more focused investments like ADRs. Exchange-traded funds have exploded in popularity, and they're an excellent way to get a diversified stake in specific countries or regions. However, don't shy away from great individual companies, either. Some wonderful firms make it especially easy for U.S. investors by listing American Depositary Receipts (ADRs) on our exchanges.

3. Pick the right sectors and industries. In my opinion, one of the keys to profiting from the Asian growth miracle is concentrating on the right areas. For a full description of my top three investment areas, read " My Favorite Ways to Invest in Asia ."

4. Don't get stuck in just one country. While China's stocks have bounced like a super ball, many other Asian markets are still on sale. And as I mentioned earlier, a lot of them have spectacular growth prospects.

In fact, I've already booked my next trip to Asia to visit some of these countries in person. Every trip I've made to Asia has led to great gains down the road, and I think this one will be just as rewarding. Stay tuned!

Best wishes,

Tony Sagami

Source: Marketoracle

What Is Obvious Is Often Wrong In The Stock Market

What Is Obvious Is Often Wrong In The Stock Market

Beginners need to be extremely careful of how they filter news. On any day, if you listen to CNBC, you will hear people with strong beliefs that the market is about to go in a certain direction. They might be right, but if the majority of commentators are saying that things are about to fall apart, it could mean that things are ready to turn up.

In The Stock Market, What Is Obvious Is Often Wrong - By Jeanette Szwec

If you are considering trading stocks to make extra money, there are certain things you need to understand about market dynamics and market sentiment. Everything logical and sensible is often wrong. As a former professional stock trader, I learned a lot of "tips" that aren't shared with the general population. Here are a few tips that the professionals know.

If you are just getting started with the stock market, you need to be very cautious about things that seem logical, but aren’t true. As an example, you may hear about a company that is about to introduce some really exciting product - could be a new MP3 player or a drug - just any product that is really being hyped in a publicity campaign. The "logical" thought is to buy the stock just as it is being introduced. But that "logical" choice could be a very bad one.

The market often responds by “buying on anticipation of news, but selling on the actual news.” There is even a common phrase of “buy the rumor, sell the news.” The beginner who expects the news to bring good results will be punished severely. The market has its own rules of behavior, and they often don’t follow our logical beliefs.

Most likely, the stock of the company that is introducing the new, exciting product has already risen in value. The hype pushed the price up "in anticipation" of the product introduction. As soon as the product is actually introduced, the people who bought early are likely to cash out, letting the stock price drop as soon as the product is actually introduced.

Another example of this is “trader’s sentiment.” This is just a fancy term for “what do people think is going to happen to the market in the future?” When the sentiment gets very bullish, there is a great likelihood that the market will start tumbling. When the sentiment gets very bearish, there is a great likelihood that the market is ready to turn back up. Although this seems illogical, there is some underlying logic to it. When most people are very bullish, there is a good chance that they already bought stock. As more and more people are bullish, there is a good chance that these “bulls” have become fully invested and there are fewer people out there with cash in their pockets, ready to invest. Consequently, there are fewer buyers on the sidelines, and this can lead to the market turning down.

This means that beginners need to be extremely careful of how they filter news. One any day, if you listen to CNBC, you will hear people with strong beliefs that the market is about to go in a certain direction. They might be right, but if the majority of commentators are saying that things are about to fall apart, it could mean that things are ready to turn up. The best indicator of market direction is this: if most professional stock commentators are saying the market is going up, that is the best indicator that the market is ready to go down! So listen to analysts' predictions but consider that the opposite is more likely to occur.

Is this confusing? You bet it is! That is why a beginner needs to spend a lot of time observing, learning to detect these patterns, understanding sentiment analysis, and developing a list of indicators they can use to determine whether the market is more likely to move up or down. With the market, news is often expected and the effect of the news is already factored into the market pricing, so when the news is finalized, prices start to drop since there is no more anticipation of good news. The anticipation causes the price to rise. The actual news brings the end to anticipation.

Watch. Observe patterns. Never assume that things that seem logical will be true. Be an observer, not a believer. Have very few beliefs of what you think will happen. Spend more time observing what is actually happening.

Source: sap-basis-abap.com