Learn to Day Trade the Smart Way

July 17, 2010 · Posted in Penny Stocks · Comment 

What is day trading? Doesn’t everyone trade in the day? Well, traditionally yes, but the day trade is the financial term for when a trader or investor does his buying and selling of commodities or financial instruments on a single market day. All his or her positions and transactions get closed before the market closes on that particular day. All sorts of commodities can be traded this way; they include futures, interest rates, commodity futures, equities, stocks and bonds and even the Forex market.

For the Forex market – which is a true 24 hour market, day trade is when a trader chooses a certain continental market to trade in, and liquidates his investments on that particular day – for example, someone in Europe could be trading the Asian market exclusively in the EUR – USD commodities (currency), and thus wins or loses on a daily basis. His trading begins again on the following day and so on and so forth. While the day trading option is the mainstay of casual investors who usually do this at home or on leisure time, it is also the gold standard of banks and financial institutions. While day trading is a good option for a low risk, starting guide to investing, there are some pointers to learn to day trade the smart way.

You have to be able to look at the trade frequency of any commodity that you choose and you have to plan strategies way before hand to look for potential trading setups so that your options are open when you start to speculate in the market. Having a good strategy and knowledge of aspects like market frequency and psychology will help you have more and more trades (increased volume of trading) within a single day, sometimes over several markets, which means you can have a higher potential of making more profits. Don’t believe the hype that you can make tremendous amounts of money in day trading and start pumping in huge amounts of money on speculative commodities like futures or even the more dangerous Forex.

While huge profits are possible in day trading, treat it like poker and start small. Remember, with day trading, you do not want your profits to run and that doesn’t mean that you should let your losses run either. You should trade in something that is almost certain, and with a smaller profit margin, you should always have good discipline and stick to tried and true strategies (while being flexible enough to change at the flip of a coin) and you should always have ‘risk capital’ on the side for a market bailout (to cover your losses); bad credit in the market stinks to high heaven and you might be barred from trading by your broker.

At the end of the day, it is about money management and it is slightly harder because this is when the market is more dynamic and the long term is not in the question. Once you have the discipline to run the market in the day trade, only then will you be successful.

Author: Christopher M Lee
Article Source: EzineArticles.com
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Stock Market Indices and the Stock Exchange

July 13, 2010 · Posted in Stock Market · Comment 

The analogy of the world’s stock markets can perhaps be traced to the town market place, where all villagers brought their goods to trade and sell. Over centuries this has led to the present stock exchange. Stock market trading in the United States can be traced back to over 200 years ago, when the colonial government was forced to finance the war by selling bonds and government notes, promising to pay back at a profit at a later date. Around the same time private banks began to raise money by issuing stocks, or shares of the company to raise their own money. Further in 1792, a meeting of twenty four large merchants resulted into a creation of a market known as the New York Stock Exchange (NYSE). The merchants agreed to meet daily on Wall Street to trade stocks and bonds. Soon an average person also realized the value of investing in stocks in comparison to traditional assets like land, house or Gold.

In a stock exchange the stock or shares of companies are listed and can be traded i.e. bought or sold. Depending on the economic performance of the company and its financial health as well as economic and investment scenario in the country, where the stock exchange is located, the shares listed have a certain market value. These share prices fluctuate depending on a number of factors including market health, investment climate and company performance.

On a stock exchange we have something called the average value of all companies listed. This is the index number. It’s a statistically calculated reference number. It is calculated on a daily basis. This reference number is the stock index of that stock market for that day. This number varies and has a liquidity of its own .In fact in case it is plotted on a graph it will show a zig zag result. But a central line through it will show whether the stock is stable or going up or going down. There is lot of talk of the market going ‘up’ or going ‘down’. When the market goes up it means that the ‘bulls’ are in action and if going down the ‘bears” hold sway.

The index number of the stock exchange is a summary of the market and the financial health of a nation. It encompasses the total value of the stocks that are listed. Presently some of them have become a bench mark for evaluation of a nation’s financial health. They are often referred to when an investment is to be made or loans granted to a nation.

Two of the most famous market indices in the world are American. They are Dow Jones Index and SP 500 index. Charles H. Dow takes the credit as the man the Dow Jones Index in 1896. At that time Charles calculated the index by a simple method. He added all the stock prices and then divided the total by number of stocks listed. Presently the system is a little more complex and the calculation takes into account the market weightage of the stock. Also the Index refers to the heavy weight i.e. stocks that have the greater value and market capitalization.

Other market indices are also well known.They include the FTSE of Britain, CAC 40 of the French republic, DAX for Germany and Nikkei 225 for Japan. Among the emerging markets NSE Nifty is important from India.

An index is an imaginary number that represents portfolio of securities that are listed on the exchange. This number is like a reference bench mark that is used by investors and CA’s and money managers to assess the state of health of the financial market of a country. The creation of this benchmark has also encouraged a large number of investing population to opt for the first time in investing in stocks, despite having very little financial knowledge. There are now indexes for technology stocks, pharmaceuticals etc also. In 1985, the NASDAQ introduced its own index to compete with the S&P. The Nasdaq 100 contained more companies from the technology sector. The NASDAQ itself has been growing in importance as both the computer and the internet have taken technology inside peoples homes.

Presently the names of indexes such as the Dow Jones Industrial Average

(DJIA), S&P 500 and NASDAQ composite have become part of our everyday vocabulary. For example, two of the best known indexes for the stock market in the United States are the Dow Jones Industrial Average and the S&P 500 index. These are Global standards.

Indexes help track the performance of the market. So, if you hear that the S&P 500 was up 5%, you know that the stock market (as represented by the S&P 500) has gone up around 5% in value.

The impact of indexes on investing is huge. This is because these indices from Tokyo to New York have brought about greater transparency all around. Other prominent indexes include the DJ Wilshire 5000 and the MSCI EAFE (foreign stocks in Europe, Australasia, Far East). Each index has its own methodology for calculation and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

Presently Standard & Poor’s 500 is one of the world’s best known indexes. This index is a bench mark for a lot of experts around the globe. The challenge for investors presently is not to get reliable market information, but how to utilize the information available.

Author: Madan G Singh
Article Source: EzineArticles.com
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How to Buy Penny Stocks

March 9, 2010 · Posted in Stock Market · Comment 

Trading and buying penny stocks has become increasingly popular over the past fifteen to twenty years in Europe and throughout America. More and more people want to get involved with buying penny stocks and trading them to hopefully make a profit. To buy penny stock with success and vigor you must first get a grip on the fundamentals of this kind of investing as it is similar to more conventional investing but it also exemplifies many unique characteristics that almost any new trader should understand before taking the next step forward.

If you want to buy penny stocks then you need to know what a penny stock is. A penny stock is essentially a low-cost stock that trades for less than about five dollars a share on over the counter quotation services such as Pink Sheets and the OTC bulletin board. Although many argue that penny stocks are not traded at high volumes, many penny stocks exemplify high trading volumes somewhere in the neighborhood of the hundreds of millions. Penny stocks are ultimately high risk investments that can make their investors a lot of money but at the same time can cost an investor who may have been speculating their entire bankroll if they’re not too careful.

If you want to get involved trading and buying penny stock then it is always best to educate yourself first before you actually start trading. It doesn’t take that long to learn the fundamentals of penny stock trading but it is important that any new investor first get a grip on such vital information because it will serve them well going forward into the future. Once you have educated yourself to the point that you feel that you are ready to trade penny stock then you simply need to open an account with a brokerage, make a deposit and start trading.

Some of the best brokerages allow you to open an account online and use their online software to make trades thus taking the human element almost entirely out of the picture. You should be careful though because trading this way is so easy, and it can become easy to overlook the fact that you are dealing with real money and not just pixels on a screen. In the end you should just remember that to succeed with trading penny stocks you must learn to make smart and strategic decisions over time, and if you can do this you should have no trouble eventually making a profit with penny stocks.

Author: Seth Lionni
Article Source: EzineArticles.com
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