How A Forex Or Stock Broker Can Help You Succeed

Submitted by: Gerald Mason

A Forex broker or Stock broker will be of great importance to you In every investor's life the "broker" is a figure of prime importance. It is through him that all securities transactions are handled; there is no way you can buy or sell stocks listed on any national exchange except through his services.

In the trade, he is known as a registered representative, a title that has now supplanted the old designation, "customer's man." He is a registered employee of a brokerage firm, preferably one which is a member of the New York Stock Exchange. He is not a broker as such, but is the liaison between you, the customer, and the firm's commission broker who executes orders on the exchange floor.

What He Does

The representative's job is to extend to investors all the services of his firm. He will, first of all, transmit your orders to buy or sell securities stocks or bonds, listed or unlisted (over-the-counter), domestic or foreign, in round lots, odd lots, or piecemeal through the Monthly Investment Plan. He will also buy or sell rights or warrants which, in simplest terms, are options to purchase a certain number of shares of a stock issue. He will arrange the purchase or sale of commodity futures grains, coffee, cotton, soybeans, whatever you are interested in.

He will place any type of order you specify: at the market, limit, stop. He will buy on margin or arrange a short sale.

He will be available for consultation on the merits of particular stocks or industrial groups, or for analysis of your entire portfolio. He will supply stock studies, newsletters, market analyses, and whatever other literature his firm issues. He will hold your securities for you in the firm's vault, collect your stock dividends or bond interest, and send you a periodic statement on any shares held for your ac¬count.

His fee: the standard commission you pay on the purchase or sale of securities. There are no other charges for his services (although you will pay interest, naturally, on money you borrow from him for a margin purchase).

What He Doesn't

Your representative will not and should not serve as a stock market tout or tipster. Unless you request him to, he will not volunteer advice on buying or selling. He will not choose for you between two stocks that seem equally attractive. He will not hustle you into the market and then sell you out; the fast turn-around is not his way of doing business.

What a Brokerage House Is Like

Brokerage houses are pretty much like offices everywhere, except for the presence of the fascinating paraphernalia of the market. The customers' room in the usual large brokerage house has a quotation board on one wall. The arrangement of items may vary, but basically they all offer the same data.

For each stock listed—and it is a pretty large board that shows much more than the leaders in any particular group— the quote board will indicate the present and past year's high and low, the previous day's opening, high, low, and closing prices, and the successive prices of the current day's sales.

There may also be a panel of commodity prices. Very likely there will be either a ticker machine or a projection of its tape on a screen which enlarges the figures sufficiently for them to be read across the room. There may also be a Dow-Jones ticker which taps out news, statistics, and whatever economic and financial information the extensive D-J organization may dig up.

Generally, chairs or benches are ranged in front of the quote board so that customers may take their ease while learning what the new day brings.

This is all for your convenience. Of course, you can get the same information simply by phoning your broker, but his office welcomes your visit.

What you do not see is your firm's research department, accounting department, and vault—though you can if you wish. The research department consists of a staff of securities analysts who study and report on the performance and prospects of various stocks. Many analysts hit the road frequently to examine companies firsthand.

Some specialize in oils, others in railroads or utilities. Much of their work is continuing study of one company after another, but they are also available for specific analyzes at a customer's request. (No one will do a special run-down on duPont to see whether you should buy 10 shares, however!)

The accounting department is, of course, responsible for keeping track of the thousands of transactions completed, and for maintaining records of each customer's position.

Many brokerage houses are also investment banking firms, prepared to share in underwriting new securities issued by companies seeking more capital. As will be explained in more detail further on, a company issuing stock does not sell directly to the public. It sells the entire issue to a syndicate of underwriters, which resells it at a small mark-up, or "spread," to the public.

In this case, no commission is charged because the broker's expenses and profit on the distribution are included in the premium you pay. (When 10.2 million common shares of Ford Motor Company were issued in 1956, the largest distribution in financial history, they were sold to a syndicate of more than 700 underwriters at $63 per share.

The price to the public was $64.50 per share or a spread of $1.50. As spreads go, this was very small—even though it meant a total of $15,300,000 to the syndicate.)

Brokerage houses may also "take a position" in a stock. This simply means that partners or officers, or the brokerage company itself, may follow their own advice and buy one stock or another. Since the subsequent performance of these stocks may depend on how many other people become interested in them, brokerage houses scrupulously report their holdings to the public.

As a customer, you can then decide whether Blank stock is a good buy because your smart broker has a piece, or whether his report on Blank is tinged with undue enthusiasm because he holds it.

If you are using a Forex broker he will be doing a similar job for you, but he will sell you the currency pairs you are interested in.

About the Author: Free Forex Software For You To Use: Download Free Forex Software http://www.greatpublications.com/forex.htm

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The Evolution of Stock Brokers with Online Trading

An online stock broker is an investor's means of buying and selling shares via the Internet, just like a regular stock broker, wherein an individual or a brokerage firm acts asandnbsp; link to the stock exchange. Are such services necessary? Is it, after all, not true thatandnbsp; anyone can engage in online trading today, and that it is possible to invest in stocks with own computer? The fact is, only a registered (SEBI) stock broker can buy and sell shares in the stock market. Such an individual is registered on one or many stock exchanges and is authorized to transact on behalf of others. Apart from that, an online stock broker is very valuable to investors who are not technically inclined and have no or little prior knowledge of stock trading. Such investors can use their own online stock trading accounts to obtain necessary information and place online trades at any time of the day. Others, however, still require a human interface - a real person who will place trades on their behalf.

An online stock brokerandiuml;'s (online service of stock broker) services definitely transcend the traditional format of trading in stocks personally or via the telephone. By using an online stock broker, the investor no longer faces the constraints of location and busy telephone lines. Information technology has made stock market software reliable means of trading in stock on the Internet, and an online stock broker uses this on his client's behalf. An online stock broker requires considerable working knowledge of the stock market to help investors trade in stocks. Though they are independent of established brokerage firms, they are still bound by the same SEBI regulations that govern offline as well as online stock firms. They have in-depth experience in dealing with actively traded commodities and stocks.

By using such a stock broker, one gains greater access and can also save money on stock trades. Because of this, there are now many investors in the stock market than there have ever been previously. There are now any number of investment choices available, and online brokers can leverage these by the power of the Internet coupled with their own expertise and experience. There can be occasional hiccups while using the services of one's online stock broker. For instance, the accelerated growth of online trading can cause busy servers at certain times of the day. This makes it difficult to log on to one's broker's website. This is not a serious limitation, and invariably applies only to the first and last thirty minutes of a stock market day. Even this limitation will become history as online trading matures. The most successful traders often have as many as four or five brokers, though a single reliable broker suffices for those who only trade occasionally.

 About the Author

Article Written By: conancare 

Requirements For Stock Broker License

Brokers know the complete understanding of the stock market and hold considerable experience in trading in stocks. Thus they are able to give advice and counsel their clients about their investments and carry out transactions at the stock market. 

However, there are certain prerequisites for becoming a certified stock broker at the stock exchange and carry out transactions as well. You need to hold a stockbroker license in order to trade at the stock exchange. Unless you hold this full broker license, you are not authorized to trade at the stock exchange. 

You do not need a degree for becoming a stock broker but most of the brokers do have a degree. But you need to pass the General Securities Registered Representatives Examination to obtain a stockbroker license. Initially you need to work with a firm for nearly four months or more to be eligible to give the exam. This minimum four months period is taken to be as an on-job training period for preparing for the exam. Apart from the General Securities Exam, certain states in United States may also require you to take an additional exam for Uniform Securities Agents State Law Examination. 

These two examinations prepare you for getting into the stock market and understand things like terminology, trading, legal aspects, etc. After you pass the exam, you are considered as a trainee. You need to get trained further and take classes and courses for another two years to further enhance your skills and understanding of the stock market. If you wish to stay ahead in the trade, then even after you obtain your license, you need to keep on updating yourself with the latest industry trends and market changes. This would make you the most successful stock broker in the market. 

It takes more than a simple stock broker license to become the best and reputable in the industry. You should necessarily possess the business acumen to stand out. You should have strong analytical skills, sharp memory and ability to interpret situations and circumstances. Moreover, it is not necessary that you need to essentially become a trader at the stock market after obtaining the license. You can also become business analyst, stock accountant, stock market analyst, etc. All you need to do is to find the best job for yourself that suits your personality. If you do not want to become a full service stock broker, you can also start your own online business and become a discount stock broker. There are many people who need stock brokers who can buy and sell stocks based on their instructions. 

There are numerous opportunities in the stock market after obtaining a stock broker license. All you need to do is to find the best job and climb the success of ladder that suits your personality the most.

Ayna Miah Ayna Miah

Ayna Miah is the author of the popular book "Stock Brokers: Who are they and what do they do". Now he wants to share his money-making... (show bio)

Stock Market Trading Styles - Scalping, Momentum Trading, Swing Trading And Trend Trading

Submitted by: Arkaitz Arteaga

There are a number of stock market trading styles that different kind of traders use. There is no best kind of style, but each is suited to a trader’s needs and situation. The following are a few of the styles that are common in the market. There are generally four primary stock market trading styles. These are swing trading, trend trading, momentum trading and scalping.

Choosing which style you wish to use depends on your situation. An investor’s time frame is the main aspect to look at when deciding which style is best for them. The correct pairing of trading style and pairing will ensure you are profitable in your efforts in the stock market. This ranges from the aggressive day traders to the conservative long-term-investors.

Scalping

Scalping are trades that are done (bought and sold) during a very short period of time. This can mean that a buy and sell in just a matter of minutes. Each trade makes very small margins but a trader generally would make many transactions in a day. Scalpers, usually aim for high volume stocks which are liquid. They try to buy on daily lows and sell immediately when the stock goes up. It is also a good method for investors who do not have a lot of capital and reuse their capital n every trade.

Momentum Trading

Momentum trading is when a trader sees a stock price picking up and joins it. The investor will take a short or long position in the stock anticipating that the momentum of the stock will continue. This is generally how bubbles grow, due to many traders jumping onto an accelerating stock. Investing period for momentum trading is around a day.

Swing Trading

The general time frame for swing trading is one to four days. This is most common among mom and dad investors. Stocks are often chosen on the basis of technical analysis. Swing traders generally have the advantage of not having too much competition form major traders. Technical analysis I used to looked for indicators of short term price movements. Swing traders rarely do any fundamental analysis as they are looking for short term fluctuations. The majority of their decisions are based on price trends and patterns.

Trend Trading

The time frame for trend traders is around a month. This looks at a securities’ long-term momentum direction. As investors are holding the stock for longer there is a greater deal of risk involved. It is wise for trend traders to do fundamental and technical analysis on the stock. The main indicators that trend traders look for are higher highs. This indicates that a stock is trending upward.

It is very important for a trader to choose the correct style of trading depending on their time frame. Each requires a totally different kind of analysis and each style of trader will have a different set of securities in their portfolio. There are risks associated with all styles with Trend Trading being the riskiest and Scalping being the safest.

About the Author: Arkaitz Arteaga - Market Stock I have a degree in Computer Systems Engineering. I've been working in the world of forex trading and stock market investing. I also have been building a variety of websites for the last 3 years. Visit our website if you want more information about stock market quotes, forex market, day trading...

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Day Trading, Swing Trading, Or Long-Term Trading - How Do You Choose To Profit?

Submitted by: Reginald T. Hobbss

There are many different ways to profit in todays exciting stock market. Long term investing in the stock market is a good option for those who put their trust in companies that are reliable and are continuing to grow. This can yield excellent results for investors and has long been the norm in stock investing. This is not the only way to profit from today's vibrant market as there are many different trading opportunities available.

Short-term traders can also find investment opportunities in the market. Market prices can change rapidly when traders get nervous and sell their stocks or go into a buying frenzy. This type of trader psychology can make stock prices fall quickly, and sometimes rise rapidly. This may happen even when the fundamental financial numbers don’t reflect this.

Why do traders get nervous about their stocks? It could be as simple as a rumor, or more reliable resources like news reports and government concerns about the economy. This could cause an investor to think that a company will find financial trouble or increase in value. If a stock goes up or down, some traders will dive into the stock and cause the price per stock to rise quickly. The market will once again fall back into place, but quick-witted. short-term traders are smart to watch the market and take advantage of price changes that may offer a profit.

Position Traders - Of the three styles of trading, position trading has the longest term of trading. Position trading stocks may be kept for a long time as compared with day trading and others short-term stock trading methods. These traders will choose to hold on to their stocks for months to several years. Position traders will wait for a fundamental change in the financial reports, industry analysis, or stock value before they consider selling their stock. Position trading requires little time from the investor. The stock holder will simply check the market reports daily to plan their trading strategies. This is great for the person who is just looking to make a little income on the side. The investor may work a half hour a day after their regular day of work.

Swing Traders - A swing trader is an trader who generally holds stock for a short period of time, typically from one to five days. A swing trader looks to jump on market swings. This technique of trading will require a lot of time, but also can often yield sizeable return on investment. They will usually research stocks and plan investments for several hours a day. Swing traders look for trends in the market to help map out their opportunities. They use intraday and daily charts to predict how their stock may move.

Day Traders - For those who enjoy taking risks and like fast-paced trading action, day trading is a perfect way to play the market. Those who are educated day traders have learned how to decrease their risk and maximize potential profit. A day trader is someone who buys and sells stocks very quickly. The stocks could be bought and sold for a few minutes or a few hours, but always held on to for less than a day. Day traders frequently analyze data on the tick, minute, and hourly levels. This is not the place for an emotional trader. Because this type of trade requires so much time, it is only recommended for someone who wants to do this full-time.

About the Author: Discover the best Stock Trading Game info, tricks, and methods at Effective Stock Trading. Get the inside scoop with our free stock trading ebook. Grab your free copy at http://www.EffectiveStockTrading.com today.

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Long-term Trading Vs. Short-term Trading

There are several ways to operate in the currency market. One of the choices you can make in this regard is to opt for long-term trading or short-term trading. What are the differences between these two trading styles and what is right for you?

If you choose to trade in the long-term period you can spend less time at the computer. In fact you can open only 1 or 2 transactions a week, sometimes even less. The timeframe to trade based on the long term is to 4 hours. This means that you can watch the graph only once every 4 hours.

So you can open a position, set a stop loss and a take profit; then you walk away from your computer easily. After four hours you can go back to see if you need to make changes or if the position has been closed. Depending on how you moved, you may also have already received a fair return.

If you have never done long-term trading, you might try openin a demo account to be used for this purpose. All forex brokers should also give us the opportunity to open a demo account. It is important to learn to trade. For starters it is important to begin to practice, and for those already experienced can be equally important to test new trading strategies. It helps giving us the opportunity to test strategies without running the risk of losing real money. Choosing a good forex broker is crucial to success in this world. Better take a few more days to choose calmly and with knowledge of the facts, not doing things in a hasty fashion and regret later.

Remember that when you do trading, the important thing to succeed in the long run is to have the patience to wait for the right occasion. Do not be hasty and try to open positions even if the market indicates that there is not a good time, otherwise you can lose money.

But in the short-term trading, following graphs such as every 5 or 15 minutes, then you must necessarily have the time to stand in front of the computer to watch the charts steadily trying to find the right time to enter. The opportunities come and go, do not last long and have a low income level, so you have to open more positions to make a good monthly income. 

About the Author

Article Written By: WolfingerStain 

CFDs Futures Trading

If you are looking to accent your monthly income then chances are that you have thought about investing in the stock markets. If you have been doing your research, then chances are that you have also heard about the Contract for Difference. The CFD s, or Contract for Difference, which are not allowed in the US, are commonplace in markets around the globe.

In a CFD a buyer and seller of a share of stock agree that the seller will pay the buyer the difference between the current market value of the share of stock and what it is expected to be at, at a later time. Should the stock never actually reach the assessed value, the buyer will still be responsible for paying any losses.

An investor is able to speculate as to whether a particular share of stock is going to increase in value later on. They never actually purchase the share of stock as with a normal trade, but instead they make their profits through the speculation of the share's value.

As an investor, you can take the long or short positions with a share or even an entire index. On the index level it is similar to that of trading futures except that with Contracts for Difference, there is no expiry date. The buyer chooses to keep the trade open until they feel like closing it. Upon the closure of the CFD, the trade is considered to be complete unless there is a difference caused by a loss.

You may even be able to use a margin in trading Contracts for Difference. These margins which range from 1% to 30% allow you to make the most profit possible with a particular trade. However, because of this, the margins can easily multiply any losses as well.

In most of the world, Contracts for Difference are a viable means of investing in the stock markets. Some exchanges even list these CFD s while others only make them available to you upon request.

While not as risky as penny stocks, trading Contracts for Difference is a risky investment. In order to minimize the potential for losses, one should only deal with CFD s in a stable market. This risk can be minimized even further by not using a margin in the trade. If you loose a margin, yes the profits can be simply amazing, but so too can the losses should the share not go the way you had planned it too.

Of course, always remember to never invest more then you are willing to loose.

About the Author

Article Written By: Blooobs 

Free Online Stock Trading Information Makes Trading Even More Profitable

Submitted by: David Jenyns

Since the late 1990`s, online stock trading has grown from humble beginnings into a burgeoning worldwide money making machine; and it`s poised to get even bigger as advances in stock trading technology continue to reach new levels.

However, it`s not so much the improvements in trading technologies that have contributed to the popularity of this exciting investment trait...but rather the explosive increase in free online stock trading information.

Let`s face it... whether you`re an experienced online stock trader or a complete novice, you`ll know all too well that while trading techniques and disciplines are important, knowledge is everything! Especially when the vast majority of that knowledge` is completely one hundred percent free!

Where On The Internet Can You Find Free Online Stock Trading Information?

Over the years, I`ve narrowed down my sites of choice` to just two: MSN.com and BigCharts.com. We`ll look MSN.com for the sake of this article, but I strongly recommend you take the time to check out BigCharts.com as well.

Ok, for MSN.com...

Go to the Home Page. Click on Money in the alphabetical links. Then, click on Investing in the navigation bar. This will bring you to a page that is chock a block full of valuable free online stock trading information!

To actually check out a specific stock, enter its stock symbol into the symbol box located near the top right of the screen. Play around with the drop down menu next to it and decide whether you want to get a quote, a chart, or do some hardcore research.

NB: While writing this article I checked out Bill Gates piggy bank` by entering his company`s symbol MSFT into the symbol box...clicking on Go...and studying the data that was presented to me...

Ouch!...that stock is not looking well right now!

Another interesting link found at the bottom of the stock information box on any given stock info page within this site is the Stock Scouter Rating. It`s based on a 1 being the worst possible forecast outcome for a stock, and a 10 being the best. For the record, MSFT, Microsoft, has a current rating of 5.

Immediately to the right of the Stock Scouter Rating figure you`ll find a link entitled: What do these terms mean? Click on it and you`ll see a new window appear to the right of your screen... totally packed with free online stock trading terminologies and definitions. For newbies`, it`s a goldmine of valuable information!

Another helpful tool on this page is the Expected Risk Return indicator. Here you`ll find that Risk is estimated by the expected volatility of the stock`s price that is, how much it goes up and down. Return is how much money you might make if you owned the stock. The ideal investment would have very low risk and very high return. Call me a cynic, but I doubt such investments actually exist in the real world. Personally, I love volatility.

Other Recommended Links And Info Sources On MSN.com

Jubak`s Journal is always worth a read. Plus, you can see at a glance how the three main indices are doing i.e. Dow, Nasdaq and S and P. You can research stocks and funds, get market reports, check out the latest IPO`s, get the expert`s picks, see the latest news on stocks and world markets, check out the charts, SEC filings, company reports, interest rate and currency reports... and you know what? You can even get a birds eye view of what the executives at the helm of your chosen company have been doing with their own shares!

I must admit, I tend to feel all warm and fuzzy inside when I see that executives of any company I hold stock in are buying up like crazy. It`s not a fail proof indicator, but it`s mighty reassuring all the same.

So there you have it... ample proof that the internet is bursting at the cyber walls with free online stock trading information.

In fact, when you type in the key phrase free online stock trading information into Google search, you`ll see that there are over 54,200,000 results, i.e. web pages featuring some form of free online stock trading in formation, ...

Incredibly, all the information contained in this article comes from less than 10 of them!

About the Author: Discover How Nicholas Darvas, A 25 Year Old Ballroom Dancer, Turned $25,000 into $2.25 million ... A Remarkable Trader, A Remarkable Amount Of Money And Remarkably Easy. http://www.nicolasdarvas.org/

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Online Trading: How to do trading with minimum risk

Trading in any market inevitably involves risk factors. Exactly the same applies to the Forex market. If there is no risk, there would be no volatility in the foreign exchange market and, therefore, could not be any kind of trading. Traders can expect to be rewarded within the transaction only when there is a risk factor.

To succeed in the foreign exchange market, the trader must learn how to minimize risk and maximize profit.

A trader or investor should consider the risk involved in each transaction and determine whether it is appropriate to deal with it or not. This is achieved through a dual analysis: technical and fundamental analysis.

All possible means must be used to determine the potential risk to verify the times of entry and exit from a given market. Thus opening a transition, developing and finally closing it, you must meet the minimum of danger.

Obviously you cannot avoid losses, even in Forex, and any experienced trader will confirm it. But anyway, if a trader makes a thorough analysis, risk assessment and implementing an effective strategy, this risk can be minimized, making it an opportunity to make a profit.

The Free Forex Market is a market much followed, in which volatility reaches its highest peaks. Investors and traders should always take account of the events that fuel the volatility of the market, so it does not go against their interests.

In the foreign exchange market, the risks do not provide any kind of warning, then traders must be prepared for any unexpected event. The prediction of a risk is so important that its resolution can be considered as half of the work in the field of Forex. 

About the Author

Article Written By: LonelyPen 

Penny Stocks Buying Selling: Day Trading Penny Stocks Is Risky And Profitable

Submitted by: Star Smith

The world of penny stock day trading is often compared to gambling.

Why?

Because when you win, you win big. If you lose, you can lose a whole bunch of money. The speculative nature of penny stocks or microcap trading is well known. Companies that offer cheap stock are not the same companies you’ll find in the blue chip market. On the contrary, they are often very risky investments.

The reason why their stock is so cheap is because they are just starting out in business or they have mismanaged their business and need a quick bail out. Selling inexpensive stock is a way to raise some fast cash for their enterprise.

Determining which small cap stocks are a good buy is very difficult and not for amateur investors. The truth is, most microcap stocks are pure junk. It’s really common for a novice investor to lose money after being lured into buying a cheap stock that is supposed to make them rich.

Very often, these sure deals are nothing but scams that are designed to make the insider stock picking services big money. They count on your lack of experience and knowledge to make them rich.

Only about 5% of the small cap market is truly worth investing in – the rest should be tossed aside like yesterday’s garbage.

The good news is that with the right information and guidance, you can make really great profits in this market. Most smart investors will sign up for a newsletter that specializes in penny stock picks. The reputable newsletters will only analyze the top 5% of companies that they feel are worth putting money on. They will usually recommend three to five good picks. You then decide whether you want to go with their picks or not.

Another reason why it’s a good idea to go with a newsletter is that you can greatly minimize your risk. Wise investing is all about picking more winners than losers and not putting all your eggs into one basket.

Since you probably have a full-time job, you don’t have time to spend pouring over endless data about thousands of companies out there offering cheap stock. You definitely need experts to do this for you, and you also need the tools to make your investment decisions easier.

Many people get into day trading penny stocks for the thrill of making big money in a short amount of time. While this is totally possible, you must also temper your enthusiasm a bit in order to make good decisions based on factual information.

Here’s an example of a typical microcap stock trade:

Let’s say you find a start up company that’s in the software business. They create medical software for hospitals. This sounds like a pretty good business to you so you take a look at their stock offering.

You see that they are selling shares at 50 cents a piece. So, you decide to buy 500 shares for $250. You sit on the stock for a while then you see that it starts to go up. It peaks at $3 per share and you decide to sell. You’ve just made a nice $1,250 profit from that one stock. That’s a 600% rate of return!

This kind of profit is what excites most people about small cap stocks, however, if the opposite should happen and that stock goes down by even inches, you’ll lose all of your initial investment money. This is why you should never invest money that you need to pay your bills and buy food.

Only invest extra money that you can spare. It’s similar to if you were going to Las Vegas for a vacation and you budgeted a certain amount of money to spend on gambling at the casinos. If you lose it, no sweat - it’s fun money anyways.

Day trading penny stocks can be looked at in the same way. It’s fun and profitable when you win, but not so much when you lose. Unfortunately, many investors gamble with money they shouldn’t be risking and lose it all with one or two bad trades. I know this isn’t going to happen to you because you’re going to learn how to invest the smart way, and in this topsy turvy market, that’s the only way you’ll end up being a winner.

About the Author: Unbelievable! A robot that trades penny stocks better than many humans. Find out how you can use Marl the stock trading robot to earn a steady stream of profits. http://pennystocktradingmadeeasy.blogspot.com

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Function And Purpose Of Stock Market

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via banks' traditional lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 per cent of households' financial wealth, compared to less than 20 per cent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. 

Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.

Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).

This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett.[2] Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st.

About the Author

Tarun Jaswani 

Get Top Share Tips and investment tips that work. (show bio)

Types Of Stock Market Investors

There are as many different types of stock market investors as there are stocks to invest in. There is no one 'bad' type of investor, and there is no group of investors who will do better than the rest of the pack. Each personality type works in a different way. The stock markets need all types of investors to maintain a healthy balance.

Active Investors

These investors sometimes border on fanatics. They read everything on investing, study the stocks, and subscribe to magazines, associations, or newsletters. Their motivation can be to flip stocks and make money fast, or it can be the satisfaction of finding a treasure missed by Wall Street pundits. Whether driven by wealth or ego, this type of investor turns investing into their hobby and even passion.

These investors learn how to read financial statements, market predictions, economic analysis reports, and editorials. They learn the names of the world's best economists, and are familiar with the London and New York Times Newspapers.

These investors prefer stocks that are rising and promise to be a forerunner for future outperformance. They have one focus, accelerating earnings, from a company which has tapped into a new product or innovation that promises to hit the market hard. There are many approaches to picking stocks, based on a number of factors including stock price behavior, markets, and earnings growth.

Passive Investors

These people are often interested in investing their money, but they do not want to spend their weekends studying financial statements, markets, and even weather reports. This type of investor laughs at the good luck mantras and charms used by some investors. They are often happy to put their money in the hands of a broker and walk away.

The passive investor creates a plan, researches stocks, invests, and then patiently waits for a return in the future. A passive investor takes a look at the company's value, assets, debt, and financial health. They consider market and competition when estimating the company's opportunity for success. They are not aggressive, or looking for a quick gain.

As long as their looses are not in the high-risk level, they leave their portfolio along. They follow the 10% rule when estimated acceptable loss. Once a stock falls 10% below what they paid, it is time to sell to the bargain hunters.

Bargain Hunter Investor

These investors circle like eagles waiting for the weak and wounded to fall, then they pick up the pieces. Many companies owe their survival in hard times to the bargain hunter. Kmart is one company that pulled through and recovered after Wall Street left it for dead.

The Player

At first glance this person may not seem to have a viable place in the market, but looks can be deceiving. This person wants to roll their money over and trade stocks constantly - that is part of the game. They are only interested in research and learning as long as there is money to play with.

There is a fundamental place for Chaos in the universe. Without Chaos there is no balance. The same applies to the stock market. Whether the player is using cash, or self-direct in their 401K, their main goal is to increase their money quickly, creating a feeding frenzy among some stocks, and then walking away before the market balances itself out.

There is a place for all investors, and while there are winners and losers in the market, the important thing is to pick a comfortable place and don't let anyone force investors out of their comfort zones.

About the Author

Mark Walters is a third generation entrepreneur and author. He offers free training and investing videos designed to speed you towards... (show bio)

Present Indian Stock Market Scenario

The Indian Stock Market is a collection of various regional and national level stock exchanges in India. It is platform for the masses of the country to invest their savings and also as a source of funds for various organizations and institutions that feature in business category.

What is Indian Stock Market ?

Indian Stock Market contains more then 20 Stock Exchanges, some of which are popular nationally as well as regionally. The first stock market started in the country was the Bombay Stock Exchange (BSE). Its the oldest stock market in Asia and was established as “the Native Share and Stock Broker's Association” in the year 1875.It has around 5000 listings and a volume of more than US$ 1 Trillion. The other most popular Stock Exchange is the National Stock Exchange (NSE). Its also the largest Stock Exchange in the country and third in the world. These two exchanges constitute a major part of the Indian Capital Market.

What is their purpose ?

Stock markets basic role is to provide a platform for the masses of the country to invest their savings and also as a source of funds for various organizations and institutions. It provides an opportunity for any person to become a part-owner of the company by buying the companies shares. These shares can be sold and exchanged as well as used as collateral in certain cases. One can deal in a variety of financial instruments in a stock market such as Equity which has already been explained, Future's, Retail Debt, Wholesale Debt, Currency Future's, Derivatives, Bonds etc. Trading can only be performed by a registered broker of the respective stock one wants to deal in or through a broker.

Impact on The Economy

The stock market has both positive and negative effects on the Indian Economy. Some of which are listed below

Provides a source of funding for organizations

An investment avenue

A source of income for investors

A source of revenue for the government in the form of taxes

A source of employment opportunities

Meeting place for investors and organizations

Idle funds of common investors can be used for profitable purposes

Present Scenario

The current condition of Indian markets have drastically improved. There is absolute transparency and instant transactions. All Indian Stock markets are now computerized and Internet Trading has become a common phenomenon. Indian stock markets have also developed a dynamic nature and can change from a bullish temperament to a bearish slide. Any small bit of information or even a rumour from any part of the country can affect the market and is a fairly accurate indicator of the prevalent atmosphere in the region or country. People from across the country and globe get in touch with minute wise readings on the stock market and gain a lot of trading aptitude after daily seeing BSE Stock Gainers or BSE top losers list which does a world of good to their investment portfolio. 

Conclusion

The Indian Stock Markets can be a very rewarding avenue of investment but the constant changes and the inherent dynamic nature of the markets can wipe out your funds or savings within a minute. Thus, the key words for every retail investor is to be constantly alert and very observant. Don't always rely on the daily list of BSE top gainers or BSE top losers as it only takes a minute to get the things changed here. Keeping ones eyes and ears open can the insure the investor against any major losses. Following such rules and with some experience and practice, one can emerge victorious and can churn out a fortune for himself as well. Hence, it is a way to turn your savings into a fortune.

About the Author

addi vardhaman 

For more to know on Indian stock market visit http://www.paisawaisa.com/ (show bio)

Reader Comments

Do Operators run the stock market

There is a general belief among most investors that markets are controlled by operators and it is no place for small investors. It is believed that the operators enriched themselves at the cost of small investors. Two scams of 1992 and 2002 had certain operators at the center of the storm. There were other star players in the market also in the past that had a big role to play in the market movements. Let us examine the validity of the statement that Stock Markets are run by operators.

An operator is a person who is supposed to drive the market price of a particular share that is he decides what should be the pricing of the share and whether it should go up or down. It is also believed that operators in association with the management of the company first acquire certain stocks in the market and subsequently through rumors and such other communication mechanism create a mass interest in the share. Subsequently once the general public starts believing in the company s prosperity the operators sells the shares and makes handsome profits. Some operators also use circuit mechanism of stock exchanges to hike the price. The circuit mechanism allows the operator to put an order at a price which is 3 to 8% above the previous days closing. Once the share hits upper circuit there are very few sellers in the market since they believe that if the share has hit upper circuit it is likely to go up further. This is the modus operandi of an operator. For an operator to be successful some factors are very important. Such as connivance with the management, low capital base of the company so that manipulation can be done with very little capital and a mass following.

Is manipulation possible in high volume shares? Let us now look at the trading statistics reported by stock exchanges (data of a particular date). Top 30 scripts i.e. 10 in each group, account for 41% of turnover in NSE and 37% of the turnover in BSE. Both the Exchanges put together this translates in to a value of about 4100 crores on a daily basis. As per the market share reported of brokers by NSE (NSE Bulletin) top 10 trading members account for just 24% of the market share i.e. on an average each broker would have about 2.4% of the market across all company shares traded by the company. Hence, the dominance that a single broker can have on the volumes in the market is minimal in highly traded scrips.

Then we move to low value high volume traded scrips. As per the data is provided by newspapers separately on Quotations page, the aggregate value of shares traded in this category on a particular date was studied. The turnover for BSE in such scrips was Rs.34,03,470 i.e. .01% of total turnover and for NSE is Rs.20,28,050 i.e. 0.003% and in terms of number of shares traded it is 1.5 % in case of BSE and in case of NSE 0.45%. This is one area where low funds can help to move the prices and give a false sense of liquidity. Hence investors are advised to refrain from investing in scrip just because it is low value; the merit of the share should be looked into before making the investments.

The Stock exchanges have a system of guiding the investors on stock selection by way of classifying the companies into various groups. A group stocks are highly liquid and good performing companies. B1 group are again good performing companies with lesser liquidity then A group stocks. B2 are stocks that have low capital bases and less liquid. Companies that do not adhere to Listing agreement are categorized as Z group. These companies do not attend to investor complaints and fail to file various investor related information with the stock exchange such as quarterly working, book closure dates etc. Shares which have concentrated activity and unusual price movements are categorized in T 2 T or trade for trade settlement, ie every sale and purchase must result in delivery and positions cannot be squared off during the day. This classification should be kept in mind while selecting a company for investment. Stock exchanges also verify the news items appearing in leading newspapers and get companies to clarify on rumours. This information is also of vital importance since operators and company managements at times plant false stories in newspaper to mislead the public.

Special laws have been put in place to act as deterrent to such manipulation. The Insider Trading Regulations and Fraudulent and Unfair Trade Practices regulations are the tools available to SEBI to taken action against those manipulating the markets. The punishment is maximum penalty of Rs. 25 crores and imprisonment. Both these laws have been enacted in early 2000. Hence their effectiveness will be proved only with efflux of time. Till the enactment of these laws the prosecution of persons indulging in market manipulation had to be tried under the general legal system, the delays in the same are not unknown to us.

We always blame the regulators, brokers and exchanges if scams happen in markets. However the menace of operators will go only if we stop following their leads in the market. Tips given by operators are widely followed, and so long as you make money on these tips we do not blame anyone. However once the operator weakens then there is fall in prices and the blame game starts. Operators are creations of society and the greed inherent in all of us. Easy money by riding the operator s tips is a strong attraction. Scams bring down the prices of not only the shares which were manipulated by the operators but also all other fundamentally good shares also held by us.

Mass following that the operators thrives on would be absent if we refrain from buying those shares that are remotely associated with any operator. Reporting wrongful activities of company managements, dabba traders and other market participants will help the regulator in directing their efforts on the wrong doers. Remember, being a spectator to a wrongdoing and not reporting the same is as bad as committing the crime.

About the Author

Article Written By: Angela121 

Financial Practices To Deal With Stock Market Volatility

The recent downturn of financial markets and companies around the world has made many people worried about their economic growth and security. This insecurity is followed by an active realization about wealth-building through secondary means like trading, investing and organized speculations.

Since some years, customers have witnessed certain financial bubbles which blasted numerous financial companies and their clients and share-holders, and this has led traders to explore various ways to gain financial prowess.

It is always advisable for traders, in order to better deal with their personal finances in the midst of economic instabilities, due to a volatile stock options market, to follow certain safety policies and financial habits, which would provide long term benefits irrespective of the stock options market conditions.

To start with, know the correct investment process and do not go with the flow or with the opinions of other investors. It may happen that the market is going down and low and other traders are finding it difficult to invest, but that should not hold you back from investing in case you are clear about your goals and your unfailing trading strategy. Investing in safer trades will only add to your portfolio and would help you reap the gains during favorable times.

The next thing that you should do as a trader is to analyze your capacity to tolerate the maximum amount of risk. Although time decay of options trading determines the risk factor of any particular stock, it also depends upon your personal choice or risk avoiding and risk bearing tendencies and tactics. In order to weigh your ability to bear risk, it is important to judge your asset allocation skills and the outcome of the same. If you still loose sleep over a 7% loss, you need to revise your allocation of asset and trading style and strategy.

A trader is supposed to deal with the market and the price movements with a calm mind, without reacting to each and every news and views he comes to know from various sources. Hence, it is advisable to filter tendency to gather all information from every possible sources.

The next important thing is to make sure that your family emergency fund is in a good shape and your trading decisions and practices should not disturb it. Any trading activities which requires you to invest from your emergency fund is generally not a good idea.

The most important factor that helps an options trader to maintain consistent profit and least losses, is discipline, regularity and tenacity.

Many traders ignore their job to give maximum attention to the trading activities. Well, it is still advised that a trader should pay attention to his job, as the unpredictability of the trading world is enormous, and can anytime bring upon a financial situation which can lead to utter financial insecurity. 

About the Author

Article Written By: Christina Benson 

Stock Market Trading Tip - Personal Balanced Stock Portfolios Guard Against Recession

Submitted by: Mike Ashley

Creating an evenly balanced investment portfolio by dividing assets among such diverse classes as stocks both foreign and domestic, bonds, mutual funds, real estate, cash equivalents, and private equity can help guard against recessions. Determining how much to invest in each asset group depends upon the investor’s individual situation and future needs.

Throughout most of American history it has been more profitable to invest in stocks rather than bonds. However, there have been times when stocks are unattractive compared to other assets. For example, right before the tech bubble burst in late 1999 these stocks had prices so high earnings yields were non-existent. The wary investor could have weathered this situation by diversifying stock investments into real estate investments or other types proven to be less risky.

Making major changes in one’s portfolio should be done at various stages in the investor’s life. A young investor is less risk-averse, that is, he is less susceptible to market corrections for the simple fact that he has a lot of years left to make up for the losses. This investor is looking more to the long-term and wealth accumulation in the distant future. This investor’s portfolio would be mostly invested in the riskier assets such as carefully researched foreign and domestic stocks. Still, the young investor needs to have some balance to guard against market setbacks.

As retirement approaches, perhaps 10 years before, the investor should start diversifying holdings into income-oriented assets. These include government and corporate bonds that pay a fixed return rate on the investment. Certain blue chip stocks with long, proven track records of dividend payments can also be included as an income-oriented asset. Yearly, as retirement approaches, a larger percentage of the investor’s portfolio should be income-oriented until that total is 100% at retirement. After all, as an investor, the ultimate goal should be a comfortable retirement. Once at retirement the time to take risks is over and income must be guaranteed.

About the Author: Discover stock market trading tips on approach balanced investing value when you visit http://www.tradingsphere.com

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Stock Market For Beginners - Your Guide to Stock Market Basics

Submitted by: Reginald T. Hobbss

Understanding the stock market for beginners starts with understanding some stock market basics.

Buying a stock means that you own a part of a company. A stock is the smallest share that is possible. A stock is issued by companies who raise capital to sell a portion of their company. Those who hold stock also hold the right to voice opinions about how a company runs and share the profits (if any). Even though stock owners have some rights, they do not face responsibility if the company faces a lawsuit or defaults. The worst that can happen to an investor is that their stock will have no value and they will lose their investment.

When a company sells stock, they want to raise capital. They might need extra cash or need to purchase new property. A stock issue has a limit to the number of shares. When they are issued, the stocks are assigned a par value. However, the market will soon adjust par value due to the success of the company and its projected value to grow.

An investor decides to purchase stocks when they think that a company will find success and the stocks will rise in value. Those who buy stock from a new company are taking on a greater risk because there is no guarantee that the company will be successful. Those who invest in a well-established company will have a lower potential risk, but their potential for gain is less. For example, those who purchased and held onto Microsoft shares in the beginning saw a great return on their investment.

Stock trading takes place within stock exchanges such as the NASDAQ (National Association of Securities Dealers Automated Quotation System) and the New York Stock Exchange (NYSE). This means that companies who are on this system of public exchange can have shares that are sold on the open market. An investor could also choose to purchase a small company that isn’t on the stock exchange. That type of purchase is completely different than just buying stocks.

An investor should have a broker help make transactions for him because stocks must be sold and bought on a stock exchange. A broker’s job is to take orders from a client and buy or sell certain stocks. The investor may give the broker orders to trade when a stock hits a particular price or what the market can take. When a broker gets a specific instruction, they try to fulfill it by finding an appropriate buyer or seller. The broker works with another broker who represents another buyer or seller. Each broker will get a commission for the sale.

Stocks can be more beneficial than other savings investments. They represent owning a portion of a company and the right to help make company decisions. A share equals one vote. In most cases, shareholders are asked to voice their opinions on important decisions. A stockholder also will get money from profits that the company acquires. Profits are give as dividends that could be doled out once or twice a year as the company sees fit.

When a company is successful, stocks will rise accordingly and profits will increase. However, if a company is not doing well, the value of the stock could plummet.

Stocks have the potential to gain more money than the average investment, like bank certificates of deposit and bonds. However, they also carry a greater risk. Investors should be educating themselves about the stock market and find the right type of strategy to use to make the greatest profit. Many will find that they will make more profit in stocks than other type of investment.

About the Author: Master profitable stock trading with our exclusive info, tools, and tips. Trade stocks with super confidence with our complimentary Stock Market For Beginners stock market report and newsletter. Get your free copy here at Effective Stock Trading today.

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Stock Market And Stock Exchange Basics - More Info To Help To Help You Master Stock Trading

Submitted by: Reginald T. Hobbss

'Stock Market' as it is used in general conversation has taken on the meaning of both the business being conducted in investment markets and the physical place where most of the transactions are taking place. We can speak in broad terms about the Market being up or down and mean the general performance of many individual stock exchanges in the country, such as NYSE or Nasdaq in the United States. To use more specific language for where stocks are actually traded, the term 'Stock Exchange' is used.

Each company will generally trade its stock on one Exchange, unless the company is very large and, for example, trade in multiple countries. Each country may have several Exchanges where different companies are listed. As long as operating hours are obeyed, people around the world can trade in any country's Exchanges. Trading times are similar to, but slightly shorter than, a regular business day. Exchanges in New York are open from 9:30am to 4:00pm Eastern Time and other exchanges have similar trading hours in their local time zones. Japan, India, England, Germany, Switzerland, China, and the United States host the major world Stock Exchanges. Notable among these big players are the Tokyo Stock Exchange, Shanghai Stock Exchange, the Nasdaq, the NYSE, the AMEX, the London Stock Exchange, Frankfurt Stock Exchange, and the Bombay Stock Exchange.

Stock markets can be used as a barometer for economic health of a country. When production is high, unemployment is low, and inflation is low the market gains total value. This rise is a bull market. When stock prices start falling in a bear market, the economy is generally on a downturn. High inflation and high unemployment are usually seen at this time.

Changes in stock prices aren't entirely dictated by the health of the economy. A large part has to do with investor psychology and how it relates to changes in supply and demand. When one stock becomes a hot commodity, other investors try to join in and the price is driven ever higher. Conversely, if a number of people start to sell a stock and the price drops, others will try to sell before it drops more. This push to sell just drives down the price faster though. These psychologically driven market changes tend to be short lived and balance out in the long run. It is the economic health over time that is reflected in the long-term trends of the market.

Stocks are not the only place to invest though. Other major investment markets include Foreign Currency Exchange, Futures, and Options markets. Globally, the largest single segment of the investment sector is in Foreign Currency Exchange. Currency traders move very large sums of money between different currencies very quickly to take advantage of small fluctuations in the exchange rate. These trades usually are only owned for a day and are only profitable if the trader is very attentive to factors influencing the day's rates.

Futures Markets are designed to give buyers and sellers in volatile markets fixed prices at set times. The price for a quantity of goods is fixed in the contract, as is the time of the delivery. When the market then fluctuates, the locked in price for the contracted good means that the value of the contract itself changes. Traders in Futures are less interested in the price obtained in the contract for the goods, but are interested in the value of having that price fixed against the changing actual price of the goods.

The Options Market also deals with contracts for future prices. The difference from the Futures market is that Options allow the owner to buy at a specified price before the date given, but does not force the owner to buy that item. The Options themselves may be bought and sold, or used on a higher-risk investment as insurance. These investment tools have a high risk of loss. It requires a specialized knowledge of the option itself as well as the market it is trading in to make a profit. Most traders also benefit from having experience in a market. Stocks require less specialized knowledge to invest in with relative safety because the market as a whole changes more gradually than options on the market change. Stock traders can invest in certain ways intended to change the value of holdings very quickly, but the majority of investors put their long-term investments into stocks.

About the Author: Learn to trade like a winner. Trade stocks with confidence with exclusive tips, free tools, and techniques. Start to trade profitably with our no cost Stock Trading report for traders of all skill levels. Grab a free copy here Stock Trading Software today.

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Day Trading, Forex Or Currencies Back Testing - A Way To Improve Your Trading Score

Submitted by: David Jenyns

You can draw some useful parallels between running a business and Day Trading, Forex or Currencies trading. For instance, most successful businesses keep statistics on everything from their conversion rate, to their average dollar sale, to the number of people that come in the door. Businesses do this to keep on top of how they are doing on a day to day basis and businesses must first take score before begining to improve on that score. Using a Day Trading, Forex or Currencies back testing plan in your trading works exactly the same way.

Now that you`re looking at Day Trading, Forex or Currencies trading as a business, you need to learn some valuable statistics about your system so you can improve it`s performance. You would use a Day Trading, Forex or Currencies back testing method. You can`t improve your system unless you have something to measure it against. How could you expect to improve your trading unless you knew what it was you were looking to improve? You can discover these measurements and other valuable information about your trading system, by using a Day Trading, Forex or Currencies back testing plan.

There are two ways that you can use a Day Trading, Forex or Currencies back testing plan to back test a system. You can do it manually, which can be a drawn out and labour intensive process, or you can do it with the aid of some software packages. Unfortunately, I recommend you do it by hand when you first start out. You`ll get a much better feel for your system, and you`ll understand exactly how using a Day Trading, Forex or Currencies back testing plan works in all its intricacies. Once you have the Day Trading, Forex or Currencies back testing plan and the in depth knowledge, you could look at finding a software package that does it for you.

There are a few major statistics on your Day Trading, Forex or Currencies back testing plan that you need that you will uncover through back testing. The first statistic you need to become familiar with is the R multiple principal. R stands for risk, the risk you take on any trade when you enter the market. The R multiple of a trade is the ratio of the profit or loss compared to the amount of money risked to make the profit or loss.

Therefore, if you risk $200 dollars in your initial purchase, and you make a profit of $1,000, you have made five times the amount you risked in the trade. You have an R multiple of five. This statistic gives you a good idea of the relative size of your profits to your losses. You can compare the average size of your winning trades with the average size of your losing trades.

The next statistic you`ll find useful is your win to loss ratio. This is how many times you get a winning trade in proportion to how many times you get a losing trade. For example, if you had ten trades, four of those trades were winners, and six were losers, your win to loss ratio is simply four to six. This is your hit rate; you`ll get 40% of your trades correct.

With these two simple statistics, you can calculate the average size of your profits and of your losses, multiply these figures with your win to loss ratio, and calculate on average how much money you make with every dollar you risk.

For those of you who think this sounds like a too much work, particularly using a Day Trading, Forex or Currencies back testing plan that you need to do to uncover these statistics, consider this scenario: Imagine yourself trading a system that you knew had a win to loss ratio of 60/40. You made profit on every six trades and lost one out of every four. How do you think you would feel, where would your confidence level be, after you traded the system for a little while and you received a string of 11 losses in a row?

Now, you know that this system has a win to loss ratio of six to four. Would you have the confidence to open another trade if your system brought up another buy signal after getting 11 trades wrong?

Unless you use Day Trading, Forex or Currencies back testing plan to back tested your system, I doubt that your confidence level will remain high. That trading system may be a fantastic profitable system. However, since you didn`t use your Day Trading, Forex or Currencies back testing plan to back test it, you don`t know that historically this system received up to 13 losses in a row, but was still profitable.

Here`s another point you may not have picked up unless you used your Day Trading, Forex or Currencies back testing plan. Once you`ve set your money management rules and you begin to trade, you will likely experience a string of losses. Countless times, I`ve had clients who get disheartened by this fact because they don`t understand the nature of setting good management. If you`re adhering to the rules of cutting your losses short and letting your profits run, because you`re cutting your losses short, those trades are going to last for a shorter amount of time.

This means once you begin trading the odds of getting losses early in the game are much higher than getting a winning trade. This is particularly true when you consider that many successful trading systems run on a 40/60 win to loss ratio. However, you will never know the intricacies of your system unless you use a Day Trading, Forex or Currencies back testing plan and back test it.

Using a Day Trading, Forex or Currencies back testing plan, will help you to understand what works and what doesn`t. It will give you the statistics to gauge the effectiveness of your trades. It fills in your scorecard, and allows you to make improvements. But, you shouldn`t simply believe everything I`ve told you. Instead, you need to prove it to yourself by using some Day Trading, Forex or Currencies back testing plans and back test your system.

About the Author: David Jenyns, leading expert in designing profitable trading systems, offers a huge free collection of trading related tips and tricks. http://forexcurrencytradingsystems.com/index.php

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Day Trading, Swing Trading, Or Long-Term Trading - How Do You Choose To Profit?

Submitted by: Reginald T. Hobbss

There are many different ways to profit in todays exciting stock market. Long term investing in the stock market is a good option for those who put their trust in companies that are reliable and are continuing to grow. This can yield excellent results for investors and has long been the norm in stock investing. This is not the only way to profit from today's vibrant market as there are many different trading opportunities available.

Short-term traders can also find investment opportunities in the market. Market prices can change rapidly when traders get nervous and sell their stocks or go into a buying frenzy. This type of trader psychology can make stock prices fall quickly, and sometimes rise rapidly. This may happen even when the fundamental financial numbers don’t reflect this.

Why do traders get nervous about their stocks? It could be as simple as a rumor, or more reliable resources like news reports and government concerns about the economy. This could cause an investor to think that a company will find financial trouble or increase in value. If a stock goes up or down, some traders will dive into the stock and cause the price per stock to rise quickly. The market will once again fall back into place, but quick-witted. short-term traders are smart to watch the market and take advantage of price changes that may offer a profit.

Position Traders - Of the three styles of trading, position trading has the longest term of trading. Position trading stocks may be kept for a long time as compared with day trading and others short-term stock trading methods. These traders will choose to hold on to their stocks for months to several years. Position traders will wait for a fundamental change in the financial reports, industry analysis, or stock value before they consider selling their stock. Position trading requires little time from the investor. The stock holder will simply check the market reports daily to plan their trading strategies. This is great for the person who is just looking to make a little income on the side. The investor may work a half hour a day after their regular day of work.

Swing Traders - A swing trader is an trader who generally holds stock for a short period of time, typically from one to five days. A swing trader looks to jump on market swings. This technique of trading will require a lot of time, but also can often yield sizeable return on investment. They will usually research stocks and plan investments for several hours a day. Swing traders look for trends in the market to help map out their opportunities. They use intraday and daily charts to predict how their stock may move.

Day Traders - For those who enjoy taking risks and like fast-paced trading action, day trading is a perfect way to play the market. Those who are educated day traders have learned how to decrease their risk and maximize potential profit. A day trader is someone who buys and sells stocks very quickly. The stocks could be bought and sold for a few minutes or a few hours, but always held on to for less than a day. Day traders frequently analyze data on the tick, minute, and hourly levels. This is not the place for an emotional trader. Because this type of trade requires so much time, it is only recommended for someone who wants to do this full-time.

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What is Day Trading?

Day trading offers the potential to realize a financial freedom. Today trading is much easier compared to the past with the low cost of trading technology as well as broad access to the markets. 

Traders can develop their individual trading system, execute a simple trading strategy and realize the profits on a daily basis. 

Many traders begin with mini trading accounts less than $250. A small percentage of new traders learn technical analysis and able to turn small amounts into serious sums. But a vast majority of traders lose money. 

Low capital requirements of modern trading markets make possible to try your skills first with little sums, and take a decision to continue or not.

Day trading requires time and this can be very challenging for those traders with busy lives. Sometimes plenty of time needed to sit in front of monitor for trading opportunities. 

If you are willing to execute day trading, please note that it produces high levels of stress. If you cannot challenge this situation, it is better not to day trade, because it may further lead to trading errors and increased overall risk. 

Trading in general requires steely discipline. The most successful traders are the most disciplined ones. You can read about winning trade system by clicking on the banners around this page.