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It doesnt matter what you call them micro caps, bulletin board stocks, or even penny stocks. Some traders make a fortune trading them. However, those traders arent necessarily brilliant; theyre just armed with the right information.

While volumes of books have been written on the matter, five core principles may be more than enough to really establish a framework for success in the penny stock market.

Successful penny stock traders must first grasp the difference between trading and investing. Sound simple, doesnt it? Yet, its surprising how many novice traders waffle between one approach and the other for each and every trade. Its difficult to make any net progress with a portfolio by trying to have your cake and eat it too.

The second idea a small cap stock trader must be in tine with is recognition that the smaller the company, the more apt the stock is to be volatile. This can be a good thing, if good news is announced while youre in a trade. Conversely, it can work against a trader if youre on the wrong side of a rapid move.

The third concept small cap speculators need to accept is simply that these stocks dont always move towards appropriate valuations the same way large caps do. Large companies have a massive audience, and errant valuations are noticed pretty quickly. Small and micro caps, on the other hand, can rest sit at inappropriate for long periods of time. Thats why these traders are as concerned about charts as much as they are values.

The fourth concept micro cap traders need to be comfortable with is that much of the gains from these stocks can be created even before the company turns a profit. Most everyone wants to invest in a worthy concept, even if its not yet creating revenue. However, if enough traders are piling into the same pre-revenue stock based only on potential, it can still drive the stock higher. In other words, hype is a factor worth mentally incorporating into the stock selection process.

The fifth characteristic most successful bulletin board stock traders have is the willingness to take profits. Thats not to say these speculators lock down a gain every time they can, as the longer you can hold a stock the more money you can make. But, too many traders never realize that losing big is far worse than not winning big with absolutely every single trade.

Its not really that complicated, is it? These are just five simple ideas, yet five very powerful ideas. Their simplicity may surprise a lot of traders, in fact (new-comers in particular). Adding layers and layers of modeling and analysis should translate into better small cap picks, but all that analysis can obscure the most important basic ideas like these.

Small and micro cap stocks are going to reward someone – it may as well be you. Applying these five concepts can help make that happen.

Penny stocks do have some pros and cons that must be reviewed prior to investing. As with any risky investments, there is high volatility and risk, but there is also a risk to reward trade-off which can enable you to receive high returns. You must review the major benefits and drawbacks before investing with penny stocks.

There can be a high upside to trading penny stocks. There is no need to have a large investment to turn a nice profit with pennies. You must do your due diligence when investing. By failing to do so could possibly mean that yo will lose a large portion of what you investment. Preparation is essential to ensure successful trades. Know where to research as information and statistics you are relying on, may not be viable or accurate. Having the right information and tools could yield strong returns, but fake or incorrect data can be detrimental. There are many winners in this market, but there are just as many, if not more losers, so be careful.

Do not rush to make trades without being educated. Proper information and due diligence is necessary and crucial for your success. Having a circle of investors who have traded with penny stocks is a good way to get information that is more likely to be unbiased. Obviously, relying on sellers is not necessarily going to be your best source, especially if they are telling you to by.

You must diversify in the penny stock market. It isn’t wise to carry all your eggs in a one basket, especially as an investor. In doing so, you can win big, but as risky as it is, you can lose everything. Be sure to be aware of a company’s return on equity and this will help you to determine whether it’s wise to be purchasing their stock.

Modern technology has allowed us to do research much easier than before. You have tools to do research and tools to ensure quick trades. Easily buying stocks and easily watching stocks enables you to do quick profitable trades.

By keeping these things in mind you stand to make some money in the penny stock market. One word of caution however; this is not likely to make you a millionaire overnight. There is a good deal of research to be done and you need to do a good deal of careful planning to reach your investment goals. You will gain valuable knowledge of the market on the way and this will benefit you in the long run.

There can definitely be an upside to trading in penny stocks. If you plan carefully you can reap the rewards. Taking a look at the financial health of a company can lead you to an informed decision on whether or not you should be investing with them or with their counterparts in the same industry.

Before you buy your stocks, you need to do your research. Fundamental analysis is one of the most common and widely used types of stock research.

Would you just take a job without looking into it such as if it offers benefits, if you’re required to work over-time, what the working conditions are, or even how much it pays? Your jobs biggest or maybe even sole purpose is to make you money, but you want it to work well with your life so that you don’t end up quitting and having no money.

The same goes for stock investing. The purpose of buying stock is to earn money and increase your wealth, but without prior research, you could lose money instead of make money.

Technical analysis focuses on researching stocks using charts, whereas fundamental analysis looks into the fundamentals of a corporation. Let’s start by discussing financial statements. Chances are, unless you are an accounting or have taken business classes, you probably don’t know what financial statements are.

Financial statements are exactly what they sound like. They are the statements that describe the corporation’s financial whereabouts. These include the Balance Sheet, Income Statement, Retained Earnings Statement, and Cash Flows Statement. It’s important to be able to reads these. Get a good investing book that will teach you what these mean.

A financial statement can tell a lot about a company. The balance sheet shows how much they own and how much debt they have. The income statement tells how much money they made in the past year. The retained earnings statement shows how much money they are retaining in the business, and the statement of cash flows details where they are spending their cash on and where it is coming from.

The next piece of fundamental analysis is to look at management. In the past, have the decisions they’ve made improved the company and spurred growth? Do they give good plans for the future promising growth in the company with a good plan to get their? Management is a very important of part in every corporation and should not be overlooked.

Overall, you need to look at a company and decide if what they’ve done in the past will predict what they will do in the future and if they are a potential candidate for growth. Look at their past dividend history. If they pay well and often, they are perfect for the dividend seeking investor. Look at the price to earnings ration, their cash flow, and how much debt they have. A little bit of research and thought can go a long way.

Penny stocks can be a great investment if done wisely. You have to keep in mind at all times that investing in them is very risky and you can loose a substantial amount of money if you loose too often. When you are prepared a head of time and have your strategy ready, you can make a good income from them.

Why is there no information about certain penny stocks?

Due to the nature of penny stocks and the fact that most of them are not listed on any major index, information is scarce. However, you can still find information on some stocks when you take the time to look for them.

Can I loose a lot investing in pennies?

You can only loose as much as you are willing to invest. This goes true no matter what types of stocks you are investing in. If you are willing to invest a thousand dollars, then you should be willing to loose it all should the trade go bad.

What is a penny?

When you see stocks that are selling for less then $5 per share, these are penny stocks. While some may be found on the major indexes like NYSE, most of them are not and many are worth even less per share.

Where are pennies traded?

Your broker is able to give you access to trading in penny stocks if you ask. If you are using an online broker, then chances are this is already an option.

Can I expect to become a millionaire from pennies?

Due to their low value, there will be a point in time in which you will have more money to invest then there will be shares available. While you can make great money from penny stocks, at some point you will level out and making more will become much harder.

As long as you are able to set your emotions aside and make decisions based on the facts, you can make some great money from penny stocks. It is important to remember that you should also diversify so that you are covered incase you find yourself in a bad run. Know how much you are willing to loose and when you get there, stop investing in them or you may just loose your shirt too.

If you are thinking about getting into stock market investing for some extra cash, then penny stocks may be able to help you. While they are very risky, their profit potential is none the less amazing with a share being able to double or triple its value in a relatively short period of time. However because of this fact they are also risky and you can lose money just as fast

What are penny stocks?

In all simplicity, a penny stock is a share of company stock whose value is extremely low and usually falls well under the $5 per share mark. In only a matter of minutes, these shares can easily double or triple in value.

Why trade Penny Stocks?

If you had a hundred dollars to invest in the stock market, would you purchase one share of stock at $100 or purchase 100 shares of stock at $1 each? For the quickest return you would get the lower valued shares because they can double or triple their value in a few minutes time.

Does everyone trade them?

Just as pennies can increase in value quickly, they can also decrease in value. If you bought a hundred dollars in them at a dollar a piece and they suddenly fell to $0.25 per share, you would have lost 75% of your initial investment.

How to pick a good penny stock?

Finding information and resources on pennies is no easy task. Most of them do not belong to a major index and therefore are susceptible to incorrect and also tainted numbers to make them seem more appealing.

Are pennies worth the risk?

This depends, some people stand by investing in pennies while others will steer clear of them. If you are willing to accept the risks, then the profit potential can easily outweigh them.

You need to remember that you have to take precautions when choosing penny stocks. Stay away from gut instincts as these are emotions which can cause you to loose big. When in doubt about a particular stock because there is little or no information about them; simply stay away from that particular stock and invest elsewhere. Maintain an expansive portfolio when investing in pennies to help you recuperate should you loose a lot.

NASDAQ though called an exchange works in method called double action whereby the highest bidder buyer competes with all other buyers and the same thing happens for the sellers. NASDAQ as an exchange is not very old but has been giving good competition to the established exchange like the NYSE.

In NASDAQ much like in the real world each broker or the dealer as you may want to call it has an inventory of shares which they are willing to sell and that means that they can easily assume that their inventory along with other broker’s inventory will be taken care of. In effect each order if fulfilled based on how much inventory or shares you are holding.

Now there are two types of orders market order and limit order. Let us say that you have a limit order which means that you are neither willing to buy above that set limit nor willing to sell below that price. Market order means that you are saying that at whatever price the dealer is holding the inventory the system should go ahead an buy that. So what happens when the dealer only has 500 shares and you place an order for buying 1000 shares at market price? For the fulfillment of this order you will get 500 shares of the order at the stated price and another 500 shares at the price the dealer says it got somebody to sell the shares to you. Now this price may be higher or below the price at which you got the initial 500 shares.

NASDAQ has a way of providing you with the bid offer, ask size and size of each offer by way of SOES which is the Small Order Execution System. A broker who helps create a market for buyers and sellers is known as the market maker.

As small investors NASDAQ is the one which provides a very option for trading apart from American Stock Exchange.

If you need to trade in penny stocks then what you need is trading in OTCBB. But be careful as penny stock trading is very risky and volatile.

Making trading decisions, either to buy or sell at one point of time and at one type of market condition is not easy at all. Many made an error and lost all their money. However, there is now an inspired computer program that makes these trading decisions, easy as a pie for us to make! It is called the FOREX Robot Software. A set of signals derived from technical analysis charting such as Metatrader 4 charting is used by the software to ensure that right decisions for your account would be made. With this software, there is no such thing as too huge of trading volume, too long of trading hours and too many of trading locations!

Fap Turbo Trades in Real Time

Transactions can be done in real time with FAP Turbo, which sets it miles ahead from other FOREX Robot Software out there, since there is greater diversification. This benefit allows you a multiple exchange model option. You can use varying trading models to evaluate short-term data. Hence, a shorter period of time would be necessary in order to predict the trend. Each minute spent less is really important faced with market volatility, so this just spelled success!

FAP Turbo Forex Robot is Easy to Use

Using this Forex Trading Robot Software is quite easy! It’s simple to set-up and you should be up and going within 5-10 minutes from downloading to installation. It has a plug and play design plus total hands free feature that everyone can just use it, even a newbie! It could trade various currency pairs based on long term and short term strategies while maximizing profits and importantly minimizing risks. It could also trade small steps and cuts profits from the market. Hey, even experts would be amazed! It was observed too that it could even back test to 1999 with great results!

Two flavors of FAP Turbo To Use

Traders could choose to either own a web based FAP Turbo or a desktop based software. It all depends on the trader’s lifestyle and comfort. Those who are comfortable with laptops and not those just stationed in a desk, and those who travel a lot would find the former more fitting for them. Even though they do not check and monitor 24/7, they would be happy to know that it is working by itself and they could access their accounts anytime and anywhere! But people have the option to trade on the remote server 24hr, 5 days, such that they do not even have to power up your computer if they choose not to, so a desktop based software would be good too, especially for those who are just on one location most of the time anyway.

No Emotional Trading

Traders are familiar with the risk of emotional trading. This is the situation when they find themselves unable to let go of their trading positions which induce them to make the wrong trading decisions (buying when they should sell already) and lose money. Fap Turbo eliminates the emotion factors within trading decisions. Therefore, anyone could trade logically and practically and be successful in the not-so-scary-anymore FOREX market!

Money management in the Forex market requires educating yourself in a variety of financial areas in order for you to become a successful trader. The reason that you need to have great money management skills is because of factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. So there are many things that can affect the price of a particular currency.

Throughout the world there are 5 major forex exchange markets, New York, London, Frankfurt, Paris, Tokyo and Zurich. Forex trading occurs 24 hours per day 6 days per week, for example when Asia stops trading the European markets open, so on and so forth.

The largest trading markets in the world are the Forex Markets and they turnover in excess of $2 trillion dollars every day. In order to be successful forex trader you need to have good money management skills and an excellent understanding of the bid/ask price.

So what it is the bid/ask price? The easiest explanation is the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for. Many of today’s forex traders trade on margin which can vary depending on the Forex Broker from 1;50 to 1:400. Trading on margin is buying and selling assets that are worth more than the money in your account. Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin. To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account. This means the trade has leverage of 50 to one. This amount of leverage allows a trader to make good profits very quickly. Of course, with the chance of high profits also comes high risk. So you must make sure that when you are trading that you have stop losses in place.

Finding a Great Forex Broker that offers great leverage, guaranteed stop losses can be quiet difficult, so the CFD FX REPORT has recently reviewed all the Forex Brokers and have come up with who they believe to be the best. For more information feel free to visit them.

As with many other speculative investments the real key is money management and you should always make sure that you only trade with money that you can afford to lose. While with a great system the chances of you winning can be high you should also be aware that you can lose. So making sure you have good rules such as never investing more than 10% of your capital, always use stop losses are all things that will improve your chances of becoming a successful forex trader.

Also to become a more successful trader you should ensure that you have the right knowledge and education, the Best Forex Broker offers free educational lessons to help you become a more successful trader.

There are many different ways and methods of investing, and often they will depend on your own personality for investing. Many of us will have a friend or associate who is very aggressive with their investments, while others are very conservative, and struggle even to invest in low risk ventures.

While it is not the intention of this article to pass judgment, we feel a blend of the two is the best way to increase your holdings over time.

All of us desire to be winners in the market, increasing our nest egg, and achieving our financial goals and dreams, however it’s important to take action so your dreams can become a reality.

Our positions will rise and fall based on the economic and global climate, or possibly because of a small investment mistake such as jumping onto a “Buying Frenzy” too late, then watching it tank. Rather than beating a dead horse, learne from your mistakes and live to invest another day.

Here are a few points to help make an informed decision…

one of the key points an investor must determine is how soon they require the return of their capital. Some will be investing for the long term, others will be hoping for quick gains, and the ability to use these gains to enhance their lifestyle. This is certainly an indication of your investment personality, and whether you’re willing to do the necessary research to buy quality stocks before everyone jumps on board.

Do you have a particular area of the market that interests you such as CDs, mutual funds, currencies, commodities, or blue chips? If you have a particular area, it’s wise to become an expert, or be aligned with established experts in a financial niche. Again this will depend on your investment personaility.

PENNY STOCKS OFFER GREAT UPSIDE POTENTIAL: The term penny stocks is actually a misnomer, since the price of the stock’s range from fractions of a penny, up to $4.99 per share. Since these stocks are initially priced low, they have the greatest opportunity for quick upside potential.

Becoming an investor in today’s market is a challenging enterprise, however using sound strategies and proper picks, your upside potential can be enormous.

Take the time to determine your own investment personality, then decide if you’re prepared and have the time to do your own research, or whether it would be smarter to subscribe to a quality investment newsletter.

It would be wise to take the time to open a brokerage account, no matter the state of the market as you read this, this will give you the necessary foundation to make your investment moves when the timing is right.

Is there anyone among us, who doesn’t wish to make money when they invest? it’s doubtful that there is however many people are fearful of the stock market, and this might simply be based on your own investing thinking. While I can’t answer that specific question, I can advise that you make certain crucial decisions before making your first investment, since no one should invest with scared money. I’m very enthusiastic about what will happen in the coming fiscal quarter, however everyone should first take stock of their own financial health and requirements.

House Note IRS and State Income Tax Credit cards and bank loans What it take to live daily and weekly Funding an emergency fund (very important) Cost of getting to and from work Entertainment and leisure College or Grad school debts Other finacial obligations

When we begin thinking about investing, we need to first look at our own financial situation to determine what amount we can safely invest each month. It’s always wise (that should read crucial) to invest with your surplus, and not your rent (by rent we mean any monthly expense you know will be spent).

If you’ve made the decision to invest, but are wondering where you will find the necessary money, save something from every paycheck. Tell yourself that this is money you’ll use for investments. While the particular percentage you put aside will be based on your needs and temperament, experts suggest 10% for emergencies, and an additional 10% for investments.

Depending upon whether or not, you have children, or a spouse, always consider the needs of your family before making an investment. While we strongly suggest investing, we do not want you to put your family in jeopardy, because no matter the best intentions, sometimes things do go wrong. Be certain that your needs, and the needs of your family, including insurance, shelter, utilities, and debts are paid, then consider your investments.

We are each individual’s, and deal with life in different ways, many of us enjoy the riskier investments, while others take a more conservative route. Take the time to determine what type of investor you are, then slowly but surely expand your investment horizons. While we recommend penny stocks as an excellent part of your portfolio, they are certainly not for everyone, and that is a decision you’ll need to make personally.

In real estate it’s location, location, location, on Wall Street its diversify, diversify, diversify. While I believe strongly in penny stocks, I never put all of my eggs in one basket, since there are new penny stocks to invest in almost everyday.

Always take the time to either research before you invest, or be involved with a quality expert or a newsletter that knows your niche. Often times you’ll find the best investments are those that run contrary to what your financial advisor, (usually very conservative) may advise. Just like investors, there are conservative and risky financial advisors. Take anything that is said as advice, not fact then research on your own. There is no such thing as a Wall Street crystal ball, but there are ways to obtain good information.

Never chase a losing stock, this is most often throwing good money after bad, it is much better to take your losses, learn from your mistakes, and live to invest another day. While we have seen many penny stocks rise as much as 25% in a single day, many continuing to increase 100, 200, even 500% in a week, this is not always the case. When you’re on board with a winner, take your profits, reinvest and celebrate your success.

FAP Turbo is an automated Forex trading system for Metatrader4 that can actually make trades for you auto-magically as you direct. Three IT programmers built the robot, and compared to the previous version called Forex Autopilot it is much improved.

The foreign exchange market has been rocked by the FAP Turbo system for many reasons. The first is if you just set it up once it can run on it’s own after that. By storing your data with a remote hosting service your computer does not have to be powered on constantly.

This robot has been proven with real live trading accounts, not just computer models. It’s excellent video tutorials will show you how to install the system yourself if you want.

Once setup this program will never stop working for you. This little tool will analyze market trends twenty-four hours a day, 5 days of week. So if you want to be a trader, you can start by just following the simple instructions provided with the software and you can succeed. Their customer service is beyond reproach. The team provides prompt answers to all inquiries.

When comparing this type of software, there are some important factors that can be used to determine their profitability. The winning rate of the system is the first factor. Live testing is showing an even higher success rate than FAP Turbo’s back testing over the past 9 years has been 95% on average.

Something else that needs to be considered is the draw down of the system. Draw down is the number that reveals what the biggest sum of investment that FAP Turbo has lost in back testing. Draw downs of 10% to 20% are typical for Forex trading software. But the draw down on the FAP turbo is only 0.35%. That’s zero point thirty-five percent which is an explanation for why the equity graphs on their site are so even and not constantly going up and down.

It is the best software out there made to find more profits yet also has more strenuous risk controls. You may purchase the software to test on a demo account, and if you are not satisfied with the results, there is a 60-day money-back guarantee. This robot is inexpensive and you can trade with an initial investment of only $50.00.

The Forex market has expanded into the private sector and that means that everyday investors can take advantage of the income stream that can be made with one of the fastest growing home business opportunities in the US. All you need is a willingness to take the leap into the market.

The Forex market relies on the fluctuations of currency in regards to their purchasing power. This means that there are a great number and variety of factors has an effect on the fluctuations. Things like the rates of bonds, the political bills even the action of buying and selling currency can affect its value.

Consider this example, if the Euro is worth $1.50 when you buy it and you then sell it for $1.52 that means that you make $0.02 per unit on the transaction. This works out to only a small percentage of the overall transaction, but don’t think that this means there’s no money to be made!

This may not seem like much but doing this over a number of transactions adds up and can end up providing you with a significant source of income. Even if you are only getting between 3-5% in gains on your transactions you can still make a good living.

Knowing how to play the fluctuations in the currency market and knowing when to buy and sell different currencies is the driving force of the market.

How Traders Know What to Trade

There are a number of things that traders need to know in order to make the determinations on what to purchase and what to sell and when to do it. The first thing is to look into what drives the particular currency. For the US, it is the interest rate and the price of the bonds. When these fluctuate so does the value of the US Dollar. A trader looks at the main driving forces of the currency to know when and what to trade.

The Internet as well as other media provides unlimited resources when it comes to research and information about how to make investments in the Forex market. When making investments, knowledge is power and it can provide a welcome relief when the market declines. The more you know, the easier it is to maximize your gains and minimizes your losses when things start to go south.

Traders usually restrict themselves to a few pairs of currency and pay special attenton to them. They try to become specialists in these currencies in order to increase their profit potential.

There are also research services available however, while these may provide you with a wealth of information it is information that is determined to be important by a third party.

Most people who trade on the Forex market are going to make use of things called robots. These robots are programs, which are designed to pull market information for the trader and signal that trader when opportunities present themselves as potentially profitable.

For those considering the options that Forex gives when it comes to creating additional income, looking into these types of programs can be a great asset especially when just starting out in the market.

There are a few things to consider when you are looking into these types of programs.

The initial step is to make sure that the application being looked at has some kind of demo program or account which allows you to test the program prior to making an actual investment. This period should last between 1-2 weeks in order to provide you with a good idea of the functions of the program and to see if it creates profitable trades.

Money back guarantee is the second thing to look for. A company that trusts its products will back it.

The perfect way to pick the best robot program for you is to purchase, test and make your decision. If it does not work simply return the program during the return period.

There is candlestick pattern for just about every high probability price action. The wise investors and traders use these to their advantage. Here are 10 of the most popular candlestick patterns you should probably get to know.

* Dark Cloud Cover: This is a two-day formation which arises when the candlestick formed on the first day has a long white body followed by an opposite colored candlestick, which opened at a new high only to close below is the midpoint of the previous day’s trading. This pattern is considered a bearish reversal signal.

* Doji: Sometimes called a Doji star because the candlestick resembles a star. The doji star forms when the buyers and sellers are equal and price remains relatively static. There can be variances in the high and low a little, but the open and close are very close.

* The engulfing pattern: The classic engulfing pattern consists of two candlesticks. The first candlestick open then closes, then the second has an open and close outside the open and close of the previous candlestick, thereby engulfing the previous session.

* Evening star candlestick: This is a 3 bar bearish candlestick pattern. The first candlestick will be a rather strong white candlestick the second is a gap up short bodied candlestick indicating a weakness in bullish strength, then the final is a gap down bearish black candlestick where typically the low reaches beyond the 50% mark of candlestick #1.

* The Hammer: This is a single candlestick. The hammer is always bullish It will indicate a continuation in a bull trend and a reversal in a bearish one. It just a small body and a long tail. The tail is imply the bears trying their best to push price down and failing by end of day to keep it there.

* Hanging Man: Identical to the Hammer, this candlestick pattern occurs during an uptrend, and signals a continuation of the price movement.

* The Harami: The is like a mirror image of the engulfing pattern. With the harami the first candlestick engulfs the second. So the second and last candlesticks open and close are within the real body of the first. Depending on the color of the candlestick it can be bullish or bearish but the bottom line is that it’s telling you the short term trend is reaching exhaustion.

* Morning star: This is a 3 bar candlestick pattern. Its a bullish reversal pattern and a very high probability one at that. The first candlestick will continue the bearish trend by closing well below the open. Next the second candlestick will gap down and close a bit higher than the open, but not much. Last the third and final candlestick in the pattern will gap up and rally to close well within the body of the first candlestick.

* The piercing line: This pattern is just two candlesticks. It is a bullish reversal pattern. What happens here is the first candlestick will continue the bearish trend down and the next will appear to be following suite on the open but will surprise you as it closes much higher and exceed the 50% level of the first candlestick.

* Shooting star: This is a single candlestick pattern. It looks like an upside down hammer and signals a bearish reversal. As such it’s best when found on a bullish uptrend. Look to the long upper witch for the intuitiveness in this candlestick. The bulls pushed hard like they did in the prevailing trend but the bears won the race by days end closing near the low / open.

Every day, the stock market seems to continue its precipitous drop towards worthlessness, crushing hopes, dreams, and investors in a flurry of dizzying price movements. Yet there is an answer; a light in the darkness, used by the masters of investment to generate excess returns even ” no, scratch that, – especially in falling markets like this one.

Masters of short term stock speculation have long known about an ill-understood trading technique shunned by the masses. This technique makes money as stock prices fall, rather then profiting as they rise. This technique is known as shorting stock. Unlike purchasing a stock, where you buy it, and then hope that it goes up in value, or that you can collect the dividends from the stock far into the future, shorting a stock is a simple technique the masters use when they believe the stock will go DOWN. A risky play under normal conditions, but in a market like this, where most everything is dropping like a rock, its much safer then buying stocks.

To short a stock is essentially to sell it, and then buy it at a later date. Counter-intuitive, no? In the shorting process, you borrow the stock from your broker, sell it on the open market, and when the price has fallen sufficiently, you buy it back again, and return it to your broker.

An example… In late September 2008, Bank of America was trading for around $35.00. Shorting the stock at that point in time wouldve been extremely lucrative, as by late November, it was trading for around 15.00$. Shorting even 100 shares of bank of America, you would have made 2000$ (100 shares * $20 price drop). The process is something like the following. 100 shares of the stock, in this case, bank of America are borrowed from your broker, and then sold. You pocket the $3500. 2 months later, you buy back the shares for $1500, and return them to your broker, keeping the $2000 difference between what you bought them for, and what you sold them for.

A more abstract, but ultimately easier way to think of shorting is a way of owning a negative number of shares. If when you own 10 shares, and a stock goes down by $100 , you lose $1000. If you own negative 10 shares, and a stock goes down by $100, you gain $1000. Simple as that. Naturally, an increase in price works the same way ” a price increase means owning a negative number of shares leads to a loss, but in a bear market, thats a rare thing.

Of course, when playing the markets, there is always potential for losses. When shorting during a bear market, you should keep an eye on recent developments. A bailout such as the one received by financial stocks could easily send some once floundering stocks into a new uptrend, and when such things occur, you must be quick to cut your losses. Perhaps the biggest risk to a short play is the end of the bear market. The end of bear markets are typically highlighted by a powerful upwards move, regardless of the bad news going on at the time. When in doubt, get out.

One standard practice among investment professionals is the 5% rule. This rule is used when deciding how many shares of a company to buy/short, and is an invaluable tool when shorting stocks. Lets say you want to short a $15 stock, but your not sure how many shares to short. First take the amount of money in your portfolio, say, $10000. Then, take 5% of that. $500. That is the amount you can risk on this transaction. Next determine the most logical stop loss. Lets say you decide if the stock goes above $17.50, youll sell your shares using a stop loss. If you can lose 2.50 per share, and your willing to risk $500, then you would short 200 shares of the stock, maximum. Many risk adverse investors choose only 2 or 3%, but 5% serves as a good maximum for even most risk-tolerant investors.

When it comes to stock picking, some people would call this a challenging market. And traditionally, we have been taught that buying low and selling high is the idea scenario, so looked at from that sense, perhaps it is a challenging market. Or is it? With everything covered already in this short document, you have already learned that a so called “challenging market” can be a bonanza for those who have learned how to short a stock or etf.

This is the final part of the series on principles of investment in the stock market. The last seven principles was discussed in the past articles. We will be discussing the last three principles in this article. Visit my blog if you want to see the whole article.

8.) Take time to study- Investing in the stock market requires that you should take time to study what it’s all about. You can’t expect to succeed if think that you can just place in your money and hope that it will somehow grow by itself. Studying a lot of books and materials on the stock market will certainly help. When I first started investing I searched for materials in the internet regarding the stock market especially the Philippine stock market. I bought the “investor’s primer” from the Philippine stock exchange. This is a great material for those who are new to the Philippine stock market.

Attending seminars on how to trade in the stock market can further add to your knowledge. Some brokerage firms conduct free seminars for those who are new investors. Last year I attended a 2 day seminar by CITISEC Online. They are one of the most active, most innovative and well managed brokerage firms in the Philippines. The information that you learn in the seminar will certainly help you in your quest to suceed in the stock market. Continous study is required if you want to be succesful in investing in the stock market. Do not not stop learning.

You should read all the materials and attend all the seminars you can to further expand your knowledge You should not give up when there are terms you could not understand. For example reading this article alone may give you a headache since there are words that you can’t relate to. Words such as “points, “Philippine Stock Exchange Index (PSEi), “Blue Chips” or “Bull run” may sound foreign to you. What is worse is that you don’t even understand what a stock is. It does not matter. I started out not knowing what some of these things are.

You can never learn these things in school. However I learned these things by reading a lot about the subject and through experience. In order that you might be inspired, I suggest you watch the movie “Pursuit of Happyness.” This inspired-by-a-true-story movie is about a man who overcame all odds to learn the stock market letting him make millions later on through stock market trading.For sure, you will be inspired by watching the film.

9.) You must know your current events – A lot of factors can affect the stock market. You should read the news paper as this may give you a clue on what direction the market may take. More importantly you should read the business news as this may give you an idea as to which stock you should buy. I read the Philippine Daily Inquirer everyday in order to have an idea where the market is headed.

10.) Don’t delay today is the best day to start – Experience is the best way to learn. You may start small but the most important thing is that you start right away. Put off procrastination. Study how to go about it without rushing, but don’t delay. If you already know the basics about investments start buying your first stock. Making your first profit from your first sale is truly rewarding.

This is part three on our discussion about the basic principles of investing in the stock market. Previously, the first three principles of investment was discussed. The first principle given was that you must realize that the stock market is just another vehicle of investment. The second principle dealt with realizing that investing in the stock market is a roller coaster ride. The third principle talks about determining what type of investor you are. In this article the next 4 principles will be discussed. Please visit my blog should you wish to view the entire article.

4.) You must realize that investing in the stock market does not take a lot of money but if you really want to make an impact on your portfolio you have to place in a substantial amount. – You don’t need millions or hundreds of thousands of pesos to invest in the Philippine Stock market. You only need at least P 20,000.00 to somehow play it out. I started out with only this amount. In fact you can invest if you only have P 10,000.00 but for me that is too small an amount. For example Jollibee (JFC) shares cost only 51.50 per share as of today. The board lot (which is the minimum amount of stocks that you could invest in) is 100. 51.50 x 100 = P 5,150.00. This is the only amount you need to be a stock holder of Jollibee. Let’s say in 1 year time Jollibee stocks climbed to P 100.00 per share, you have gained P 5,000.00 more. But if you had invested 200 shares you could have gained more than just investing in 100 shares.

5.) The key to growing your investment is consistency – Don’t be contented to stay small. Aim high ! Aim to play with the big players. You must have the discipline to slowly but consistently invest a part of your income to the stock market. By doing this your portfolio will grow since you have more capital to invest. I did not just stop at P 20,000.00, I slowly added to my investment. Consistent investment is a good habit to develop.

6.) Minimize your losses, Maximize your profits – The loss is only on paper if your stock goes down. The actual loss occurs when you sell your stock at the “losing” price. The best thing to do therefore is to never ever sell at a loss. This is the reason why it is very important that the money that you invest in the stock market is considered as surplus money, not your emergency fund. If you invest your savings or emergency fund, you will be forced to withdraw sell your stock at a loss if you deperately need the money. To maximize your profit you must utilize profits you gained from the sales of stocks and the dividends you recieve to buy more shares of stocks.

7.) You must realize that the stock market is not a get rich quick scheme – Don’t ever expect to get rich overnight in the stock market. In all investment scheme always remember that money takes time to grow. Investments that give you unbelievable rates of return in a very short period of time are mere scams. The stock market, especially the Philippine stock market takes several months or even years in order for you to really profit. There may be times that it will just take weeks or days perhaps but these are rare occasions like when there is a consistent bull run that is going on or that there is an unusual drop or climb of prices in a short period of time.

We are now on the second part of this series. This is a discussion on the principles of investment in the stock market. We have already discussed the first principle. The first principle dealt with realizing that the stock market is just another investment vehicles. Before deciding to invest in the stock market, you must know about other vehicles of investments. Let us proceed by discussing the next two principles. If you wish to view the article in its entirety, visit my blog.

2.) A roller coaster ride – It could be said that the biggest advantage in investing in the stock market is the huge profits that are made when the market goes up. However this is also conversely true because huge losses can also be made when the market goes down.

The general strategy is to sell when the market is up and to buy when the market goes down. About two years ago when I started investing, the Philippine Stock exchange index was only about 2000 + points. I’ve seen it go up to 2500 points and slide back to the 2000 level in the middle of 2006. It slowly and steadily climbed up to the 3200 level in the 1st quarter of 2007 and dropped in a very short period of time during the last days of the 1st quarter of 2007. It climbed steadily to a high of 3700+ points in July 2007 but slid back below 3000 points a month after. By October 2007 it climbed steadily to its highest at 3800+ points. A month after it dropped to 3600+ points.

There is only one conclusion that can be drawn here, that is it is really a roller coaster ride. Huge Profits and losses are made during those times that the market is up or down.

3.) Long term or short term ? – You should determine what type of investor you are. Ask yourself the question on whether you are a long term investor or a short term investor. This question is very important and should be asked by every serious new investor. The reason for such is because it affects whether you should buy or sell a certain stock.

If you are a long term investor, meaning that you hold your stocks for 5 to 10 years or more it means that you believe in the company that you are investing in and that you have extra money for other things because you can afford to put in your money for a long period of time.

One of the main benefits of being long term investors is that you do not have to worry about monitoring the day to day technical analysis. There is no problem if the stock is held for a long period of time since what is considered is the strong fundamentals of the company. On the other hand, short term investor,who decide to cash in within a months time to 6 months time, will have to monitor the day to day market activities to ensure that they are making a profit.

Short term investors have also to consider if they can afford to put in their money for a long period of time however the time element is not as long as that of the long term investor. This is so because during the short period wherein you buy and sell stocks, you might incur losses during this time so you may decide to wait longer a little bit more.

Most of the stocks I hold are considered as medium and long term investments. This is because when I started out I determined to be more of a long term investor. There are stocks that I hold that I consider as short term investments. However majority of the stocks that I hold are considered as mediume to long term investments.

Many people believe trading the markets is akin to gambling. This comparison is certainly true a lot of the time, especially when a person throws all caution to the wind.

But it is unfair to make such a broad generalization. Many people treat their option trading very seriously. The best of them treat it like a business.

Example: If you were a business owner, you would be most interested in cutting your losses, maximizing your profits, and limiting your risks. All of which are true in option trading.

Minimizing Risk

Naturally, if there is no demand for a product or service, a business owner is not going to try to sell it. That involves a high degree of risk. He will only sell products for which there is already healthy demand.

Similarly, if a stock is not “trade-able,” an option trader will avoid it. That’s because it’s extremely risky to trade a stock that has no clear trend or pattern.

Boosting Profits

In business, some offers perform better than others. And when a business owner stumbles upon an offer that outperforms others, he’ll run it repeatedly. In other words, he’ll “get while the getting is good.”

Likewise, if a trader is in a winning trade, he will ride it until the movement runs out of steam. Along the way, he will tighten his stops so he cashes out as soon as the price reverses.

Cutting Losses

If a businessperson discovers he’s got a dog of a product, he’ll try to get rid of it, even if that means taking a hit. That’s because it’s better to cash out than to keep money tied up in inventory.

The same is true for the savvy option trader. If a trade moves against him, he will quickly admit his mistake, sell his position for a small loss, and move on to the next trade.

As you can see, being reckless is a sin both in business and in trading. But with the proper attitude and approach, option trading can be serious business.

So you’ve delved into the wonderful world of Forex and you’re as confused and paralyzed as a deer at a headlight. No worries, let this article enlighten you on some of the most fundamental types of trading systems.

Trend Following

Trend following is the most common type of trading system. Because the majority of the market follows a clear direction, it means that the majority of the market participants agree on the direction as well.

Trend following, to a certain extent, means going with the crowd. If the market is rising most of the time, you’ll have an easier time riding the market’s waves. What’s so good about this trading method? First, the accuracy, the probability of you making a winning trade, is higher. You won’t have to make too many trades, but you’ll make plenty of profit.

Of course, you’ll still have to know the exact rules of when and how to enter and exit. But here some tips:

Trend Following Tips:

1. Try entering on corrections and retracements. How do you know when the market might trend following again? Enter on support and look at price action. If the trend if up, and you see buying, that’s a good place to enter.

2. Trail your trade using the continuously forming mini-supports to maximize your profit.

Trend following is a very common, basic trading method. To qualify the common saying, “The trend is your friend, until it ends.” Let’s take a look at another trading style.

Fading

Fading is the opposite of trend following; it’s arguing with the market’s trend. Essentially, it’s bottom picking. What’re the potential rewards for fading?

The first obvious advantage is that when your trade is a winner, the rewards are significantly bigger. For example, if the reward to risk ratio was 8:1, you could’ve had 7 losing trades but still come out net positive. Keep in mind that your system still needs an edge; you can’t just gamble and hope for the best. Do your homework!

Maybe the market has been going up for the past few months but now you see a huge doji. You might want to short it now, or you might want to wait for a close below the recent low. The point is, fading is a very different trading style from trend following. Now, let’s explore the final trading style.

Breakouts

All you have to remember regarding the breakout method is the keyword “breach”: you enter whenever the market breaches the highest high or the lowest low. This can be the 52 week high/low or even the 20 day high/low, it’s up to you. Next, you’ll need to determine how you will exit your trades.

So what’s the difference between trend following and breakout trading? Ok, they might seem pretty similar, and they kind of are. The key difference is the entry. With breakout trading, you enter with the breach of a prior high or low. With trend following, a breach doesn’t have to occur, but rather you can enter on a dip.

So Now What?

Realize that you can splice and dice the methods to suite your taste. You could enter only in the market’s primary direction, and use the close above a recent high as a signal, or even the doji.

What is a Double Bottom Chart Pattern?

A Double Bottom is a reversal pattern that happens at the height of a downward slope and can indicate the commencing of an up trend.

How To Recognize a Double Bottom Chart Pattern

A double bottom chart pattern takes place in four steps: 1. A new low for price is reached 2. The price finds support and rises to a new high, creating a new resistance point 3. The price commences to move back down to support, but then rises again towards resistance 4. The price breaks through resistance, building an upward trend

What Does a Double Bottom Chart Pattern Mean?

A double bottom chart pattern can signify a tug of war between buyers and sellers. As sellers attempt to push the contract, buyers resist the down trend. When once again the bottom of the pattern isn’t broken, the sellers begin to back off, leading the buyers to dominate and send the price up.

Watch the new up trend, as it may drop back down to the breakout point to test the new support.

Big W

Note that a similar chart pattern is the Big W, which has all the principles of a Double Bottom, but with much steeper moves.

Online currency trading is the fastest growing market. A currency trader may take advantage of all market conditions at any time. Online Forex trading is when you buy and sell the foreign currencies of different countries online. Through online forex trading, you can put your money to work for you like millionaires and billionaires do, instead of you working for your money.

Investing in foreign exchange is different from most financial markets. If you buy or sell a stock, a bond or another type of investment, you are hoping that, investment and that investment only will gain or fall in value.

Foreign Exchange (FOREX) is the arena where a nation’s currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined.

Forex trading opportunities are a reality for more and more people everyday people just like you and me. Forex market participants are active 24 hours a day and seven days a week. The free forex (currency) trading forums provide a high level of support to foreign exchange traders of all experience levels. Forex market is open 24 hours a day. It provides a great opportunity for traders to trade any time of the day or at night.

Forex traders are generating incredible wealth day after day from the comfort of their home and you could be one of them. In fact there is $1.5 Trillion traded on forex each day. Forex scalping is not accepted, all other strategies are. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets. This enables traders to take positions anticipating the impact on the exchange rate of important news items. Traders looking for quick intraday moves need to keep their finger on the trigger at all times – especially when they are already in a trade. The game changes quickly, so be ready for action at a moment’s notice. Trade dealing is done with careful observation of confidentiality and is absolutely safe. If required, you always have the history of completed trade deals.

Futures and options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Futures and Forex trading contain substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment.Risk capital is money that can be lost without jeopardizing ones financial security or life style.Only risk capital should be used for trading and only those with sufficient risk capital should consider trading.

Political stability also influences the exchange rate at Forex. Political stability also influences the exchange rate. Policy of the Central Bank has a special role, as concentrated interventions or refusal from them greatly influence the exchange rate.