The Seven Mistakes All Novice Traders Make and How to Correct Them
Posted on July 10, 2008 - Filed Under Tips, Trading, Tutorials
The Seven Mistakes All Novice Traders Make and How to Correct Them
We learnt the following the hard way! If any of these things applies to you, don’t worry – there is an easy solution!
MISTAKE ONE
> Lack of Knowledge and No Plan
It amazes us that some people expect to trade the stock market successfully without any effort. Yet if they want to take up golf, for example, they will happily take some lessons or at least read a book before heading out onto the course.
The stock market is not the place for the ill informed. But learning what you need is straightforward – you just need someone to show you the way.
The opposite extreme of this is those traders who spend their life looking for the Holy Grail of trading! Been there, done that!
The truth is, there is no Holy Grail. But the good news is that you don’t need it. Our trading system is highly successful, easy to learn and low risk.
MISTAKE TWO
> Unrealistic Expectations
Many novice traders expect to make a gazillion dollars by next Thursday. Or they start to write out their resignation letter before they have even placed their first trade!
Now, don’t get us wrong. The stock market can be a great way to replace your current income and for creating wealth but it does require time. Not a lot, but some.
So don’t tell your boss where to put his job, just yet!
Other beginners think that trading can be 100% accurate all the time. Of course this is unrealistic. But the best thing is that with our methods you only need to get 50-60% of your trades “right” to be successful and highly profitable.
MISTAKE THREE
> Listening to Others
When traders first start out they often feel like they know nothing and that everyone else has the answers. So they listen to all the news reports and so called “experts” and get totally confused.
And they take “tips” from their buddy, who got it from some cab driver…
We will show you how you can get to know everything you need to know and so never have to listen to anyone else, ever again!
MISTAKE FOUR
> Getting in the Way
By this we mean letting your ego or your emotions get in the way of doing what you know you need to do.
When you first start to trade it is very difficult to control your emotions. Fear and greed can be overwhelming. Lack of discipline; lack of patience and over confidence are just some of the other problems that we all face.
It is critical you understand how to control this side of trading. There is also one other key that almost no one seems to talk about. But more on this another time!
MISTAKE FIVE
> Poor Money Management
It never ceases to amaze us how many traders don’t understand the critical nature of money management and the related area of risk management.
This is a critical aspect of trading. If you don’t get this right you not only won’t be successful, you won’t survive!
Fortunately, it is not complex to address and the simple steps we can show you will ensure that you don’t “blow up” and that you get to keep your profits.
MISTAKE SIX
> Only Trading Market in One Direction
Most new traders only learn how to trade a rising market. And very few traders know really good strategies for trading in a falling market.
If you don’t learn to trade “both” sides of the market, you are drastically limiting the number of trades you can take. And this limits the amount of money you can make.
We can show you a simple strategy that allows you to profit when stocks fall.
MISTAKE SEVEN
> Overtrading
Most traders new to trading feel they have to be in the market all the time to make any real money. And they see trading opportunities when they’re not even there (we’ve been there too).
We can show you simple techniques that ensure you only “pull the trigger” when you should. And how trading less can actually make you more!
What are Dividends and When they’re Issued?
Posted on July 10, 2008 - Filed Under Tutorials
What are Dividends and When they’re Issued?
If you’ve ever owned stocks or held certain other types of investments, you might already be familiar with the concept of dividends.
Even those people who have made investments that paid dividends may still be a little confused as to exactly what dividends are, however… after all, just because a person has received a dividend payment doesn’t mean that they fully appreciate where the payment is coming from and what its purpose is.
If you have ever found yourself wondering exactly what dividends are and why they’re issued, then the information below might just be what you’ve been looking for.
Defining the Dividend
Dividends are payments made by companies to their stockholders in order to share a portion of the profits from a particular quarter or year. The amount that any particular stockholder receives is dependent upon how many shares of stock they own and how much the total amount being divided up among the stockholders amounts to. This means that after a particularly profitable quarter a company might set aside a lump sum to be divided up amongst all of their stockholders, though each individual share might be worth only a very small amount potentially fractions of a cent, depending upon the total number of shares issued and the total amount being divided. Individuals who own large amounts of stock receive much more from the dividends than those who own only a little, but the total per-share amount is usually the same.
When Dividends Are Paid
How often dividends are paid can vary from one company to the next, but in general they are paid whenever the company reports a profit. Since most companies are required to report their profits or losses quarterly, this means that most of them have the potential to pay dividends up to four times each year. Some companies pay dividends more often than this, however, and others may pay only once per year. The more time there is between dividend payments can indicate financial and profit problems within a company, but if the company simply chooses to pay all of their dividends at once it may also lead to higher per-share payments on those dividends.
Why Dividends Are Paid
Dividends are paid by companies as a method of sharing their profitable times with the stockholders that have faith in the company, as well as a way of luring other investors into purchasing stock in the company that is paying the dividends. The more a particular company pays in dividend payments, the more likely it is to sell additional common stock… after all, if the company is well-known for high dividend payments then more people will want to get in on the action. This can actually lead to increases in stock price and additional profit for the company which can result in even more dividend payments.
Getting the Most Out of Your Dividends
In order to get the most out of the dividends that you receive on your investments, it is generally recommended that you reinvest the dividends into the companies that pay them. While this may seem as though you’re simply giving them their money back, you’re receiving additional shares of the company’s stock in exchange for the dividend. This will increase future dividend payments (since they’re based upon how much stock that you own), and can set you up to make a lot more money than the actual dividend payment was for since increases in stock prices will affect the newly-purchased stock as well.
What is a Bull Market
Posted on July 10, 2008 - Filed Under Stock Market
There are two classic market types used to characterize the general direction of the market. Bull markets are when the market is generally rising, typically the result of a strong economy. A bull market is typified by generally rising stock prices, high economic growth, and strong investor confidence in the economy. Bear markets are the opposite. A bear market is typified by falling stock prices, bad economic news, and low investor confidence in the economy.
A bull market is a financial market where prices of instruments (e.g., stocks) are, on average, trending higher. The bull market tends to be associated with rising investor confidence and expectations of further capital gains.
A market in which prices are rising. A market participant who believes prices will move higher is called a “bull”. A news item is considered bullish if it is expected to result in higher prices.An advancing trend in stock prices that usually occurs for a time period of months or years. Bull markets are generally characterized by high trading volume.
Simply put, bull markets are movements in the stock market in which prices are rising and the consensus is that prices will continue moving upward. During this time, economic production is high, jobs are plentiful and inflation is low. Bear markets are the opposite–stock prices are falling, and the view is that they will continue falling. The economy will slow down, coupled with a rise in unemployment and inflation.
A key to successful investing during a bull market is to take advantage of the rising prices. For most, this means buying securities early, watching them rise in value and then selling them when they reach a high. However, as simple as it sounds, this practice involves timing the market. Since no one knows exactly when the market will begin its climb or reach its peak, virtually no one can time the market perfectly. Investors often attempt to buy securities as they demonstrate a strong and steady rise and sell them as the market begins a strong move downward.
Portfolios with larger percentages of stocks can work well when the market is moving upward. Investors who believe in watching the market will buy and sell accordingly to change their portfolios.Speculators and risk-takers can fare relatively well in bull markets. They believe they can make profits from rising prices, so they buy stocks, options, futures and currencies they believe will gain value. Growth is what most bull investors seek.
What is a Bear Market?
The opposite of a bull market is a bear market when prices are falling in a financial market for a prolonged period of time. A bear market tends to be accompanied by widespread pessimism.A bear market is slang for when stock prices have decreased for an extended period of time. If an investor is “bearish” they are referred to as a bear because they believe a particular company, industry, sector, or market in general is going to go down.
Stock Market Analysis
Posted on June 16, 2008 - Filed Under Stock Market
Stock Market Analysis
There are two main types of stock market analysis utilized by investors. They include other concepts, some of which will be explained in this article. When performing analysis on the stock market, there are many factors to consider, but first you must decide which method you would like to utilize. Stock market analysis includes fundamental and technical analysis. Investors will typically stick to one method or the other and will typically not use both in tandem.
Stock Market Analysis includes the concept of fundamental analysis. Fundamental analysis is the long-term assessment of a company’s financials in order to calculate how much the business is worth. This tells investors how much the company’s stock is worth to determine the potential shares the investor is willing to buy for that company. Investors who utilize this method also practice other concepts. These concepts include knowing the price to earnings ratio of a company, meaning that investors need to know what the company’s share price is compared to its earnings per share.
Investors also need to know the dividend yield which is the company’s annual dividend payments and also need to know what the dividend per share divided by the price per share is for that company. There are other concepts included in this type of stock market analysis, but the main idea of fundamental analysis is bases on long-term investing.Another form of Stock Market Analysis includes technical analysis. This type of analysis includes the forecasting of future financial price movements based on past price movements. This method can assist investors to anticipate what is likely to happen to prices over time. Technical analysts are not interested in the intrinsic value of a company but prefer to identify patterns that suggest future activity.
These investors use technical analysis tools, including the use of stock charts. The use of charts in this type of stock market analysis enables the investor to identify the underlying trends or stock chart patterns for that stock. They look for stock charts with rising trends and the familiarity with trend line formations can help to measure the overall attitude of investors towards stock and companies. When performing technical stock market analysis the investor will take part and learn about stock charting. When learning how to read stock charts the beginner investor should learn now to read four types of charts. Those include bar charts, line charts, point and figure charts, and candlestick charts. Many successful traders believe that candlestick chart patterns are the easiest and most beneficial to read. Unlike bar chart that illustrates what price movements did during a specific timeframe, candlestick charts reveal ‘how’ that price moved. Candlestick charts demonstrate what investor sentiment was doing during the timeframe and how it did it.
This additional information creates a huge advantage for the candlestick investor when participating in stock market analysis.When deciding which type of stock market analysis is right for you, please note that there are two arguments against stock fundamental analysis. The first is that a lot of the fundamental type of information is very subjective since it is based on each individual investor’s interpretation. The second reason is that stock technical analysis investors believe that fundamental analysis provides no real advantage. They believe this is due to the fact that all of the investing information is based on information that investors in publicly traded markets already know.
If you have decided to participate in stock market analysis, be sure you understand the advantages and disadvantages of both types. This will help you to make a decision as to which method you would like to practice when playing the stock market.
Indian Stock Market Golden Rules
Posted on June 16, 2008 - Filed Under Rules, Stock Market
Indian Stock Market Golden Rules
We are mentioning few golden rules for trading and investing in Indian stock market or in any other Stock market.If you want to be a successful intraday / day trader or Positional / Delivery investor then simply follow these golden rules.”Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly” Think in terms of probabilities and act upon them.
There are no certainties in trading. You can keep yourself out of trouble by thinking in terms of probabilities. Get comfortable with approximate predictions and interpretations.”To trade/invest successfully, think like a fundamentalist; trade like a technician”Along with economic fundamentals that will drive a market higher or lower, but we must try to understand the technical as well.”Don’t be a hero. Don’t fight the trend. Follow the money flow” You should forget the news, remember the chart as chart already knows the news is coming and buy on rumors; sell on news.”In trading/investing, an understanding of mass psychology is often more important than an understanding of economics”Trading is a psychological game. Most people think that they’re playing against the market, but the market doesn’t care. You’re really playing against yourself. Hope, fear and greed are not strategies: they are emotions. Simple emotions are not an effective strategy.
Positive emotions could cause us to fail to apply risk precautions. Negative emotion could cause us to hesitate.”Learn to monitor yourself and draw conclusions from your mistakes. “Predetermine maximum losses in every potential trade. Do not risk more than 5% of your capital on any trade. Don’t average your losses.”Buy that which is showing strength - sell that which is showing weakness”The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to “buy low, sell high”, but to “buy higher and sell higher”. Furthermore, when comparing various stocks within a group buys only the strongest and sells the weakest.”Think like a guerrilla warrior.”We wish to fight on the side of the market that is winning, not wasting our time and capital on futile efforts to gain fame by buying the lows or selling the highs of some market movement. Our duty is to earn profits by fighting alongside the winning forces. If neither side is winning, then we don’t need to fight at all.”When you lose, don’t lose the lesson!”Forget the names but remember the events.
Those who don’t remember the past are doomed to repeat it.
Make mistakes with composure and character, without blaming others, and don’t dwell on mistakes.”Evaluate your results at least monthly”.Monitor your P&L, your win/loss ratio, and the relationship between your biggest wins and worst losses. Reviewing these results helps you continually improve your understanding of the markets and yourself.”When in doubt, get out.”Scrutinize your positions at all times, each day, and you will not be left holding a stock without reason. Be willing to change direction at any time, because your flexibility as an individual investor is a big advantage which should be embraced! “There is no “genius” in these rules. They are common sense and nothing else, but as Voltaire said, “Common sense is uncommon.” Trading is a common-sense business. When we trade contrary to common sense, we will lose. Perhaps not always, but enormously and eventually. Trade simply. Avoid complex methodologies concerning obscure technical systems and trade according to the major trends only”.indian share market is one of the most volatile share markets in the world, that is why SEBI is so strict and demanding in terms of compliance.
This website is meant for technical analysis only, as we dont follow news much, its only the quarterly results and the normal news related to stocks like bonus and splits important for us, some news, like recent SEBI declaring a scam done by prominent share brokers, this type of news comes very rarely but if it comes then it is by chance and techncial analysis does not follow by chance news.Technical analysis follows mathetical methods like statistics and technical analysis involves lot of stats, which is performed automatically by the softwares, like Metastock Professional, supercharts, tradestation, Advanced Get, and so on.
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