|Stocks & Mutual Fund Information|
Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2
Fundamentals analysis says the best way to predict the future trends of a stock is to understand the financial figures of the underlying company. The fundamental analyst would calculate a theoretical value of the company using cash flow analysis, recent dividends and earnings, future dividends and earnings projections plus a host of other economic numbers. If the current stock price is lower than the calculated value, a trader who uses fundamental analysis would buy this stock.
This writer has the opinion that fundamental analysis is difficult to master for it to be useful as a forecasting tool. Understanding and analyzing balance sheets and profit and loss accounts is not enough. You will need to analyze the micro and macroeconomic picture as well. Often you will need to be have the same knowledge equivalent to senior-management of a company you want to analyze ? minus the leadership and management skills.
Take the example of Google's free 2 GB e-mail service. How much does it cost them? Probably about $2 yearly for each customer. Assuming 100 million internet users sign up, the advertising revenues from this segment alone would provide a tidy profit. It is the analyst job to provide a good educated-guess of this number. More importantly, this new signings will provide a customer base to challenge Yahoo and Microsoft. With Google's dominance in the search engine market, the data mining of such a huge pool of internet users will provide them with an edge in deciding future strategies over its two nearest rivals. Try translating this to what can Google earn in the next two quarters.
One of the better tools is the Z-Score, developed by Edward Altman, a financial economist and professor at New York University's Stern School of Business, in 1968 to predict corporate bankruptcies within a two-year period. This formula has a 70-plus percent accuracy rate
The "price action discounts everything" premise is central to charting, also known as technical analysis. Technical analysis uses graphic representations for prices and makes uses of various quantitative techniques to forecast price trends.
A technician makes profits in any market by having positions in line with the price trend. When the trend is up, then buy. Conversely, when the trend is down, then look to sell. Technical analysis is not an exact science, but it is easy to learn and effective.
Technical analysis is a good starting point for beginners. The foundation should include classical technical analysis, Japanese candlesticks, trendlines, RSI, MACD, ADX, stochastics and moving averages. Learners can complete these core topics within three to six months. With constant practice, you should be able to independently analyze and identify the current trends in the stock market.
Most users of stock charts may only focus on daily charts. However, if users pay equal attention to weekly as well as monthly charts, the picture is intuitively more complete. This is equivalent to understanding how the short, medium and long-term investors are viewing the markets, after all three main types of investors form the market. A handful of stock charting software has this feature of showing say, the relative strength index for the daily, weekly and monthly values on a single screen.
One last point - no single method in technical analysis is sufficient for real-world investing. For example, even if you master Elliott Wave Theory or Gann techniques, by itself it would bring more heartache and disappointment. Often, you will need knowledge from other disciplines and sources to improve your overall investing skills.
Some tips for successful investing in stock markets.
1. Investing is a business. The rules of running a profitable business are the same as investing in stock markets.
2. Learn to spot your own mistakes fast. When a mistake is made, exit your position and live to fight any day. The faster you realize your own mistake and the faster you react will reduce your losses, hence increasing your chances of winning in the long run. A useful method is using a 10% stop loss exit strategy. If you are long, and your stock price goes down by 10%, exit. If this same stock reverses and starts to surge, take this as your mistake of not identifying a more accurate (lower) entry point.
3. Understand yourself inside out. What makes you happy, sad, excited, depressed, ecstatic - the whole spectrum of human emotions are merely states of the mind. This is easier said than done but you have to keep improving your own control mechanisms.
4. Learn the methods of successful fund managers ? diversification, emotional detachment and having realistic expectations. Investing is a marathon not a sprint.
5. Money management skills. Whether the amount is $10,000 or $10 billion, the same rules apply. There are plenty of sources of information on this subject from the internet.
6. Learn technical analysis.
The main thrust of this article is to avoid making mistakes that will cost you dearly. How you prepare yourself for bear markets, sideways markets and market crashes are vital to your success.
There are no secrets in investing ? no magic formula, no discovery of some useful ancient secrets. Just knowledge, hard work, common sense and discipline will serve you well in the years ahead. This verse from a 2500-years-old text is a useful reminder:
"Those who know do not speak,
Those who speak do not know."
Stan Seecrets' Postulate: "There are two types of people in the world ? those who know what they don't know and those who don't know what they don't know."
You may freely reprint this article provided you publish it in its entirety, including the author's bio and activating the link to the URL below.
The author, Stan Seecrets, is a veteran software developer with 25+ years experience at (http://www.seecrets.biz) which specializes in protecting digital assets. He has developed real-time prices delivery systems and has witnessed stock markets collapse of 1987 and 2000/2001 in real-time. You can contact him via email (Stan at Seecrets.biz).
© Copyright 2005, Stan Seecrets. All rights reserved.
Long Term Investing
In his wonderful book, 'Multiple Streams of Income', best selling author Robert Allen advises Investors to divide their Stock Market investment and trading capital into three portions -50% invested long term (forever) in an Index Fund, 30% invested in Accelerated Stock strategies and 20% in options or high risk investment strategies.
Forces that Move Stock Prices
Among the largest forces that affect stock prices are inflation, interest rates, bonds, commodities and currencies. At times the stock market suddenly reverses itself followed typically by published explanations phrased to suggest that the writer's keen observation allowed him to predict the market turn. Such circumstances leave investors somewhat awed and amazed at the infinite amount of continuing factual input and infallible interpretation needed to avoid going against the market. While there are continuing sources of input that one needs in order to invest successfully in the stock market, they are finite. If you contact me at my web site, I'll be glad to share some with you. What is more important though is to have a robust model for interpreting any new information that comes along. The model should take into account human nature, as well as, major market forces. The following is a personal working cyclical model that is neither perfect nor comprehensive. It is simply a lens through which sector rotation, industry behavior and changing market sentiment can be viewed.
I love roller coasters. The steeper the better. High and fast and curvy. Yahoo! Let's go again. But to get to the drop off point you have a slow grind up.
To become a successful trader you must have some kind of method or system to follow that will keep you on track. You may be buying and selling on tips, the weather or phases of the moon (there is a system like that).
Planning Your Dive and Diving Your Plan ? Trading!
A colleague of mine just returned from a scuba diving trip in Cozumel, which just happens to be one of my favorite places to dive. Anyway, she was telling me about an unexpected difficulty she encountered while swimming around the corral reef down about 85 feet. It wasn't anything serious but her story reminded me of something my scuba instructor used to say over and over again. "Plan your dive, and dive your plan".
DIY Portfolio Management
Exchange Traded Funds (ETFs) are growing. Investors are choosing low annual expense and market return over high annual expense and promised performance.
The Winter Games for the Olympics are coming up soon and many will want to go to see the giant slalom event. That's the one where the skier starts off from the little hut at the top of a long slope, picks up speed and makes his way around poles on the way down. Each turn about a pole is precarious and some fall on the way down and are wiped out.
No Load Mutual Funds: Investment Hype vs. Investment Help
With the internet such a huge part of our daily lives, many investors have access to a wide range of instant investment information.
The POWER of a Proven Stock Investment Plan
When you invest in the stock market for ever-increasing cash dividend income, verses trying to make a buck in the stock market, your mindset will change. There will no longer be a fear of losing money in the stock market. With the right type of investment plan and investment choices all worries of losing money in the stock market will disappear.
There are so many kinds of work that needs to be done and you are doing one of those jobs right now ? unless you are one of those two and a half million that have been laid off during the past 3 years. The press continues to blame China and India for stealing away all these forms of employment, but they don't have it right.
Having lived aboard a sailboat for 2 years I was stricken when I saw the movie "PERFECT STORM". I know these are things you want to avoid at all costs. Even little storms can play havoc with your life style on a boat.
Who are the successful investors?
The Top 10 Reasons to Invest in Mutual Funds
Everyone who follows the financial news has heard of mutual funds and knows the stock market has generally risen (with various ups-and-downs) for over 200 years. In fact, by most measures, the stock market has made more money for more people, and done it more reliably, than any other investment over the past 100 years! If you want to accumulate substantial wealth, you must include stocks in your investments!
Discover the Biggest Trading & Investing Online Mistake
Any online investor / trader seeks an excellent off or online future trading career opportunity. Despite this goal, did you know 95 percent of all traders go broke within the first two months? Why do investors lose vast amounts of wealth in one or more of the following markets ? option trading, forex trading or currency trading, stock trading, future or commodity trading etc? in such a short amount of time?
Investment Capital Gains
Have you bought any mutual funds this year or late last year while the market was doing its skyrocket thing? Last year it was hard to lose money. This year it has been easy.
This Market Is Different
All of the talking heads have been telling us that this market is different. You are going to have to be patient and soon (hopefully in your lifetime) the DOW and the Nasdaq will be back at their old highs. They cite all the statistics about how the economy is improving - consumers are spending, the consumer confidence index looks OK, unemployment is getting better, blah, blah, blah.
Different Types of Mutual Funds
This is a guide to the different types of mutual funds. When it comes to investing in mutual funds, investors have literally thousands of choices.
How Much Money Can I Make With Trading? What Account Size Do I Need To Start?
What account size do I need?
No Load Mutual Funds: Boost Your Portfolios Returns
Investors who exclusively use broadly diversified, no load mutual funds for their stock investments often lose out on opportunities to increase the reward potential of their portfolios. This article looks at two methods investors may use to enhance the performance of their portfolio of diversifed, no load mutual funds.
Jack and Jill
Jack and Jill went up the hill to fetch a bucket of ?money. Money? They are continuing to fill their bucket with stocks without any consideration to the value of these equities. They are not worried at all as they are buying "safe" mutual funds.
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