There are many good penny stock investments available, which could turn a small amount of capital into a small fortune very quickly. However, to discover these you need to know what to look for and what to avoid. When searching for that one big payoff, steer clear of the following examples.

The Phone Salesman – Anyone who is attempting to sell you investments over the phone should be considered an enemy. They have high-pressure sales tactics, and effective, believable arguments. However, they are not doing you any favors, no matter how good they make an investment sound.
They are operating in their best interest to dump over-the-counter stock on you, and the money you pay in will go into their own pockets, or the pockets of their company.
There has never been a need for good companies that are going places to resort to these type of tactics, but there has always been a need for poor, sinking, or shady companies to do so. If you choose to ignore this advice you deserve what happens to your investment.
You may also run into difficulty trying to find a buyer for your shares once you decide it is time to sell.

Very Low Volume Stocks – Without much trading activity it becomes increasingly difficult to buy or sell for the prices you want. As well, it becomes nearly impossible to get an understanding of where the stock price is heading, or to calculate fair valuations for the company’s stock price.
Not only that, but companies subject to low trading volume generally do not have a lot of positive interest.

The Hot Tip Stock – There are actually professional promoters who make a very good living generating and nurturing rumors about some penny stock that’s guaranteed to go through the roof. The entire concept hinges on the rumor being spread from person to person, at the office, over the phone, or at social venues.
The promotional ploys can be very costly for investors who get involved without special knowledge about the company or the actions of the promoter. In most cases if a stock really is going through the roof you won’t hear a word about it, because a select few individuals will be very intent on keeping the information to themselves.

Guaranteed Performance – If a stock is guaranteed to go up, it will almost always go down. Nothing is ever certain, especially on the stock market. When someone guarantees certain performance out of a stock, they may be a promoter, naive investor, self-serving broker, or have heard the guarantee from another source. In any case, don’t believe them. Instead check into the company yourself and if you feel it is a good investment, you may want to proceed.

Sinking Ships – When a stock has dropped a lot you may think that, “it can’t go any lower,” or that it is “a good bargain.” Especially with penny stocks, you need to avoid this type of thinking because many sinking ships don’t ever rebound, and they can go lower, and they aren’t good bargains just because they cost less than before.

Commission Free – If you are interested in getting stock commission free you may think you are saving money, but it generally means that you are buying over the counter stock directly from a promoter or the company.
Either way, they take their own invisible ‘commission’ from you, either by selling to you for an arbitrary amount which is unfairly high, or selling to you for the asking price rather than the bid price based on their own current valuations.

International Penny Stock – We’re not talking about living in the U.S. and steering clear of Canadian stock, or vice versa. We are talking about penny stock issues from Africa, Australia, European, Russian, or South American penny stock markets. First of all, you won’t be too impressed with the level of investor protection and exchange honesty in some of these regions, and you most certainly won’t be too impressed with the broker fees you incur when trying to purchase internationally.
Besides, if you can’t find good penny stock investments in North America, you won’t be able to find them anywhere else either.

Warrants and Rights – These are not technically stocks, but instead are derivative investments based on an underlying company’s shares. However, they often appear like penny stocks because they sometimes get listed in the stock pages, and often trade for pennies.
It is unlikely that you will accidentally purchase derivatives, but make sure you know what you are trying to buy by understanding the listing criteria of the paper you are reading, or verifying your purchase with your broker.

To get free information about investing in penny stocks visit http://www.pennystocks.com. They offer information on the definition of penny stocks, getting started, benefits, risks and how to find a good penny stock.

Peter Leeds, one of North America’s leading Investment Coaches, is a self-made millionaire who has created his fortunes on the stock markets. He has also empowered thousands of individuals to do the same. His personal success and incredible ability to consistently pick money-making stocks has earned him a loyal following of successful investors and has generated significant attention from the financial world.

Trading psychology has become so widely discussed and promoted through books and consultants that it has become a very convenient rationalization and excuse for losing. Why take the responsibility for a lack of work ethic and trading without any concept of plan, an honest assessment which would be a ‘hit’ on the trader’s self-esteem – when you can just blame it on trading psychology instead?

Trading psychology is ‘something’ that a trader creates from existing personality traits that are not initially related to trading, but surface from trading without method understanding. The outcome of course is fear, but wouldn’t this be the case when doing anything that was perceived as ‘dangerous’, and which was being done without the necessary understanding and skills? Trading, with its inherent characteristic of accepting financial risk while participating in unknown outcomes, is certainly ‘dangerous’, and thus the more preparation and understanding that is needed.

Trading Scenario

Consider the a trading plan which has the following three setup types: (1) initial which your intended trade entry (2) first continuation which is used to enter a trade in case you have either missed your initial entry, or you decided that you wanted more confirmation because it was a counter direction trade (3) second continuation which is intended as a trade addon setup, but is also one ‘last’ chance to enter a trade.

You get an initial sell setup that triggers, but you do not take the trade = trade1. The trade breaks cleanly and goes to what would have resulted in a partial profit, and then before price goes down further, it retraces back to the area where the sell was done. This price holds so the swing remains short, and from this hold of what is now resistance, you get the trigger of your first continuation setup BUT you don’t take this trade either = trade2. Why wasn’t the trade taken? You decide that after missing the initial entry that you have missed the trade; your emotions and biases tell you that the ‘move’ has gone too far. Again, this trade breaks cleanly, not only adding to the gains of trade1, but also giving a partial profit on trade2.

Price now consolidates between the lows and the price resistance that you would typically be using to stay short if you had taken either the initial trade, or the first continuation trade. Instead of the swing reversing after consolidating, it continues down again, and with this continuation your second continuation setup triggers = trade3. AND AGAIN – you don’t take the trade. After all, if you didn’t take either of the first two trades, how can you possibly take this trade; maybe you were wrong when you thought that the move had gone too far to take trade2, but certainly that’s the case for trader3.

Like trade1 and trade2, trade3 is a profitable trade. This swing has really turned into a great directional move, with each break holding on weak retests – a textbook example of the strengths of your trading method, but YOU have never entered a trade. You are going nuts! You are getting into this damn swing – you just can’t take it any more. Another retrace holds as a lower high. You don’t have an entry setup, but that doesn’t matter, the other three trades were profitable after a lower high. Isn’t it interesting, the same emotions which wouldn’t let you enter your plan trades, are now ‘forcing’ you to take a non-plan trade.

Instead of YOUR trade going to a lower low and to a profit, it instead goes to a higher low and then reverses into an initial buy. Bad just got worse, you also don’t exit when the swing goes into buy. After what you went through to finally get into the trade, you have to try and make it work, and after all the trend is down – right? TraderA uses this initial buy to exit their profitable sell and sell addon; they decide that they want more confirmation of swing reverse before trading the counter direction. A first continuation setup triggers and they go long, the swing has reversed, and this trade reaches its first profit target.

TraderB finally ‘gives up’ and exits THEIR short, although with a two point loss instead of the intended one point, and without any consideration of taking their next plan trade, the first continuation buy. This trader is done for the day, but at least they were ‘right’ all along; the swing had gone too far to enter, and their fears had been warranted – this was a losing trade that they should not enter.

Is this a trading method or trading psychology issue? What ‘message’ is TraderB going to take from what has just happened. Will they take the attitude that they should not be blamed, they just can’t trade because of trading psychology? Or, will they acknowledge that the method did win, that the resulting loss was not a method trade, and even if it was, the loss would have been offset by the prior winners. Will they acknowledge that THEY made their worst fears come true and not only turned this into a losing trade, they also increased he size of that loss, and then avoiding another method winning trade.

Granted, psychology was involved with what has happened in the described trading scenario, but that is a function of the individual’s ‘core’ personality, and would most probably be an issue regardless of what was being done; if there is ‘risk’ involved, there will be an ‘emotional’ response. Thus, it is first necessary to separate personal psychology from trading psychology, and the use of this concept as an excuse for trading actions. Then, if trading psychology is going to be controlled, this will be done through the development and implementation of a tested plan that the trader is willing to follow. Do not trade with ‘built-in’ excuses for failing, you will have lost before you begin, and will continue to do so with a continued ‘snowballing’ of emotion to the extent where trading will no longer be possible.

Barry Lutz has been trading, as well as teaching others to trade since 1997, through his firm Tactical Trading, LLC., http://www.tactrade.com. He also writes a daily trading teaching lesson called the Trade Journal, which can be found, along with other resources on trading psychology and trading method at The Tactical Trader, http://www.tactrading.com.

The debate rages all over Eastern and Central Europe, in countries in transition as well as in Western Europe. It raged in Britain during the 80s: Is privatization really the robbery in disguise of state assets by a select few, cronies of the political regime? Margaret Thatcher was accuse of it – and so was the Agency of Transformation in the Republic of Macedonia. At what price should the companies owned by the State have been sold? This question is not as simple and straight forward as it sounds.

There is a gigantic stock pricing mechanism known as the Stock Exchange. Willing buyers and willing sellers meet there to freely negotiate deals of stock purchases and sale. Every day new information, macro-economic and micro-economic, determines the value of companies.

Greenspan testifies, the economic figures are too good to be true and the rumour mill starts working: interest rates might go up. The stock market reacts with a frenzy – it crashes. Why?

A top executive is asked how profitable will his firm be this quarter. He winks, he grins – this is interpreted by Wall Street to mean that they WILL go up. The share goes up frantically: no one wants to sell it, everyone want to buy it. The result: a sharp rise in the price. Why?

Moreover: the price of the stock prices of companies A with an identical size, similar financial ratios (and in the same industry) barely budges. Why didn’t it display the same behaviour?

We say that the stocks of the two companies have different elasticity (their prices move up and down differently), probably the result of different sensitivities to changes in interest rates and in earnings estimates. But this is just to rename the problem. The question remains: why? Why do the shares of similar companies react differently?

Economy is a branch of psychology and wherever and whenever humans are involved, answers don’t come easy. A few models have been developed and are in wide use but it is difficult to say that any of them has real predictive or even explanatory value. Some of these models are “technical” in nature: they ignore the fundamentals of the company. Such models assume that all the relevant information is already incorporated in the price of the stock and that changes in expectations, hopes, fears and attitudes will be reflected in the prices immediately. Others are fundamental: these models rely on the company’s performance and assets. The former models are applicable mostly to companies whose shares are traded publicly, in stock exchanges. They are not very useful in trying to attach a value to the stock of a private firm. The latter type (fundamental) models can be applied more broadly.

The value of a stock (a bond, a firm, real estate, or any asset) is the sum of the income (cash flow) that a reasonable investor would expect to get in the future, discounted at the appropriate discount (usually, interest) rates. The discounting reflects the fact that money received in the future has lower (discounted) purchasing power than money received now. Moreover, we can invest money received now and get interest on it (which should normally equal the discount). Put differently: the discount reflects the loss in purchasing power of money not received at present or the interest that we lose by not being able to invest the money currently (because we will receive it only in the future). This is the time value of money. Another problem is the uncertainty of future payments, or the risk that we will not receive them. The longer the period, the higher the risk, of course. A model exists which links the time, the value of the stock, the cash flows expected in the future and the discount (interest) rates.

We said that the rate that we use to discount future cash flows is the prevailing interest rate and this is partly true in stable, predictable and certain economies. But the discount rate depends on the inflation rate in the country where the firm is (or in all the countries where it operates in case it is a multinational), on the projected supply of the shares and demand for it and on the aforementioned risk of non-payment. In certain places, additional factors must be taken into consideration (for example: country risk or foreign exchange risks).

The supply of a stock and, to a lesser extent, the demand for it determine its distribution (how many shareowners are there) and, as a result, its liquidity. Liquidity means how freely can one buy and sell it and at which quantities sought or sold do prices become rigid. Example: if a lot of shares is sold that gives the buyer the control of a company – the buyer will normally pay a “control premium”. Another example: in thin markets it is easier to manipulate the price of a stock by artificially increasing the demand or decreasing the supply (“cornering” the market).

In a liquid market (no problems to buy and to sell), the discount rate is made up of two elements: one is the risk-free rate (normally, the interest payable on government bonds), the other being the risk related rate (the rate which reflects the risk related to the specific stock).

But: what is this risk rate?

The most widely used model to evaluate specific risks is the Capital Asset Pricing Model (CAPM).

According to it, the discount rate is the risk-free rate plus a coefficient (called beta) multiplied by a risk premium general to all stocks (in the USA it was calculated to be 5.5%). Beta is a measure of the volatility of the return of the stock relative to that of the return of the market. A stock’s Beta can be obtained by calculating the coefficient of the regression line between the weekly returns of the stock and those of the stock market during a selected period of time.

Unfortunately, different betas can be calculated by selecting different parameters (for instance, the length of the period on which the calculation is performed). Another problem is that betas change with every new datum. Professionals resort to sensitivity tests which neutralize the changes that betas undergo with time.

Still, with all its shortcomings and disputed assumptions, the CAPM should be used to determine the discount rate. But to use the discount rate we must have what to discount, future cash flows.

The only relatively certain cash flows are the dividends paid to the shareholders. So, Dividend Discount Models (DDM) were developed.

Other models relate to the projected growth of the company (which is supposed to increase the payable dividends and to cause the stock to appreciate in value).

Still, DDM require, as input, the ultimate value of the stock and growth models are only suitable for mature firms with a stable and not too high dividend growth. Two-stage models are more powerful because they combine both emphases: on dividends and on growth. This is because of the life-cycle of firms: at first, they tend to have a high and unstable dividend growth rate (the DDM tackles this adequately). As the firm matures, it is expected to have a lower and stable growth rate, suitable for the treatment of Growth Models.

But how many years of future income (from dividends) should we use in a our calculations? If a firm is profitable now, is there any guarantee that it will continue to be so in the next year, the next decade? If it does continue to be profitable – who can guarantee that its dividend policy will not change and that the same rate of dividends will continue to be distributed?

The number of periods (normally, years) selected for the calculation is called the “price to earnings (P/E) multiple”. The multiple denotes by how much we multiply the (after tax) earnings of the firm to obtain its value. It depends on the industry (growth or dying), the country (stable or geopolitically perilous), on the ownership structure (family or public), on the management in place (committed or mobile), on the product (new or old technology) and a myriad of other factors. It is almost impossible to objectively quantify or formulate this process of analysis and decision making. In telecommunications, the range of numbers used for valuing stocks oa private firm is between 7 and 10, for instance. If the company is in the public domain, the number can shoot up to 20 times the net earnings.

While some companies pay dividends (some even borrow to do so), others just do not pay. So in stock valuation, dividends are not the only future incomes you expect to get. Capital gains (profits which are the result of the appreciation in the value of the stock) also count. This is the result of expectations regarding the firm’s free cash flow, in particular the free cash flow that goes to the shareholders.

There is no agreement as to what constitutes free cash flow. In general, it is the cash which a firm has after sufficiently investing in its development, research and (predetermined) growth. Cash Flow Statements have become a standard accounting requirement in the 80s (starting with the USA). Because “free” cash flow can be easily extracted from these reports, stock valuation based on free cash flow became increasingly popular and feasible. It is considered independent of the idiosyncratic parameters of different international environments and therefore applicable to multinationals or to national firms which export.

The free cash flow of a firm that is debt-financed solely by its shareholders belongs solely to them. Free cash flow to equity (FCFE) is:

FCFE = Operating Cash Flow MINUS Cash needed for meeting growth targets

Where

Operating Cash Flow = Net Income (NI) PLUS Depreciation and Amortization

Cash needed for meeting growth targets = Capital Expenditures + Change in Working Capital

Working Capital = Total Current Assets – Total Current Liabilities

Change in Working Capital = One Year’s Working Capital MINUS Previous Year’s Working Capital

The complete formula is:

FCFE = Net Income PLUS

Depreciation and Amortization MINUS

Capital Expenditures PLUS

Change in Working Capital.

A leveraged firm that borrowed money from other sources (could also be preferred stockholders) has a different free cash flow to equity. Its CFCE must be adjusted to reflect the preferred dividends and principal repayments of debt (MINUS sign) and the proceeds from new debt and preferred stocks (PLUS sign). If its borrowings are sufficient to pay the dividends to the holders of preference shares and to service its debt – its debt to capital ratio is sound.

The FCFE of a leveraged firm is:

FCFE = Net Income PLUS

Depreciation and Amortization MINUS

Principal Repayment of Debt MINUS

Preferred Dividends PLUS

Proceeds from New Debt and Preferred MINUS

Capital Expenditures MINUS

Changes in Working Capital.

A sound debt ratio means:

FCFE = Net Income MINUS

(1 – Debt Ratio)*(Capital Expenditures MINUS

Depreciation and Amortization PLUS

Change in Working Capital).

About The Author

Sam Vaknin is the author of “Malignant Self Love – Narcissism Revisited” and “After the Rain – How the West Lost the East”. He is a columnist in “Central Europe Review”, United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.

His web site: http://samvak.tripod.com

A beginner usually feels very attracted to the stock market while for example discovering a stock that’s being reported in CNBC or the news program and watching it rise fast and make new highs from $10 to $35 in just 2 months.

While learning about this successful news story he’s saying to himself “Oh boy if I was one of those lucky guys who bought that stock back when it was priced at $10 I easily would have tripled my money by now… That means my 20 grand would transformed in to a whooping 70 K! hassle free … I would have been able to grab one of those big HUMMERs on the spot and probably pick up a nice Rolex by the way!”

The stock market news constantly reports of hot stocks that are breaking out and making tremendous gains on the same day or doubling in price in just a few hours. Back in the bull market of the late 90′s you could easily see a good number of hot stocks sprouting out every week.

Those years surely made it look like every body could easily take LONG SHOTS and make a shiny pile of gold every day in the stock market. But today’s market is a different story. A totally different animal.

Some say that the stock market has gotten more realistic. Fantasy land is over and GAMBLING YOUR WAY TO RICHES is not an option anymore. You might get lucky a few times, but your
constant loses can wipe you out sooner or later.

The fact that the bull market period has ended for now doesn’t mean that you can’t make a great deal of money in today’s market. A lot folks from many walks of life keep making excellent profits on a daily basis, pocketing hundreds & thousands of dollars by trading stocks online.

Success in day trading starts by applying a wiser and REALISTIC methodology for choosing hot stocks as well as for getting in and out of them with profits in mind.

You need to look at the stock market more realistically. You got to learn that you can benefit when stocks go up and also when they FALL down. You got to WORK SMARTER and get more selective about the hot stock trading opportunities that you choose. You need to embrace the nature of day trading and be fully prepared to take advantage of stocks that are poised for a BIG RISE on the same day.

The bottom line is you have to PREPARE YOUR SELF to be successful, just like you would do it in other areas of your life in order to achieve success

Momentum Stock Trading helps new day traders and investors trade in the stock market every day in a practical way at http://www.MomentumStockTrading.com

According to Investopedia Inc. the penny stock market has seen phenomenal growth this past decade. From ’94 to ’03, the Over-the-Counter Bulletin Board trading volume increased an astounding 8900%, equaling a total of 63% of the NASDAQ and 78& of the NYSE share volumes. Many an investor has succumbed to their siren song.

It isn’t hard to see why. Penny stocks are usually traded in lots of 1,000 and, as the name suggests, are bought (and sold) at incredibly low prices. There is no official price cut-off, and differences of opinion range from shares trading under $1.00 all the way up to $5.00. Others distinguish according to the market that they are traded on (the OTCBB, OTC or “Pink Sheets” for example). Yet others designate stocks as penny stocks based upon their market capitalization, or the value of each stock multiplied by the total number of outstanding shares. Regardless of the specifics, a general rule applies to all penny stocks – they are a very high risk investment. Inversely, there’s also the potential for staggering rewards.

But for every pot of gold at the end of the rainbow, there are thousands of cliffs and pitfalls along the way. The risks and dangers of penny stocks are many. In the stock exchange, there is a “best price” priority given to orders of a higher price than yours if you’re buying or a lower price if you’re selling. Combining this priority with what is very often low volume trading means there will be times when you find that your orders cannot be filled. In addition, there will be instances where you will have to settle for partial order fulfillment. And these are just dangers faced when your stock is performing well.

Penny stocks come from companies that are often less than credible, and unlike some of their more expensive cousins, can find themselves swayed by the power of rumors. Press releases, news stories, widespread whispers and even online forums and chat-rooms can be responsible for dramatically influencing their performance. This volatility creates two considerable challenges: 1) a high potential for schemes and scam artists; and 2) the inability to use traditional stock charting methods with any real effectiveness. It goes without saying that this isn’t a market for the faint of heart.

Jennifer Gibbs is a successful freelance writer who lives in South Georgia with her husband and son. Be sure to check out her website for more great content, or to request a bid for your writing needs. http://www.JenniferGibbs.com

You go long and the market immediately goes down – you go short and the market immediately goes up. That’s 2 consecutive losses, and you are getting a little ‘anxious’ so you don’t take the ‘next’ trade. Of course, this trade is a winner. Now to make the situation worse, you then ‘chase’ the move, and as soon as you enter the trade it immediately reverses, thus giving you another loss – this is now 3 in a row. Ok one more ‘try’ – this can’t happen on every trade can it?

This time though, you will be real clever. You have noticed that the market is in a range, and it’s the bounce from the low/retrace from the high that is causing all the problems. So this time, the next trade you take will be a range extreme fade AND the hell with your trading method. The market is at the range low, and per your new ‘on the fly’ trading plan, you go long. Instead of bouncing again, the range immediately breaks out to the downside. Not only does this give you consecutive loser 4, but the loss occurred from trading against one of your ‘best’ method trade setups, and becomes a trade which is giving enough profit to pay for the previous 3 losers, and make you net ahead.

Now what are you supposed to do – QUIT? AND to be sure that there is no more temptation – your throw your computer out the window, and dive out right behind it. You are in a trading psychology spiral.

WHAT is a Trading Psychology Spiral?

I think of a trading psychology spiral as the transition from trading losses that you have accepted both as a part of your trading method, and as something that is inevitable in trading, into a surge of emotions that continually builds to a point where you can no longer accept anything. As this eventually ‘spirals’ out of control – trading method becomes completely ignored, and is then replaced by emotional responses and decisions for everything that is done. Even if quitting was really the only viable thing to do at the time, the trading psychology spiral can cause an emotional response where this isn’t even considered, until the situation becomes so desperate, that the trader can’t take it any longer AND does have to quit.

This isn’t a discussion about emotions and trading, and the various fears and issues that keeps a trader from trading to begin with; as we know, emotions are an inherent part of trading – you learn to control them OR you can’t trade. This is a discussion about emotions that are typically controlled well enough so that you ‘can’ trade, but then something happens where the trader loses that control, and their emotions spiral. A series of consecutive losing trades, especially those caused by deviating from the trading plan, are a root cause for this happening.

This also isn’t about something that happens only to inexperienced and unprofitable traders. There are going to be those times where nothing a trader does will work, and that result is going to be a series of consecutive losers. So the situation is the same, it’s the reaction that may be different. For instance, traderA may go into a panic causing them to spiral out of control, losing all self-confidence and self-trust, and ultimately more money than was intended. On the other hand, traderB may go into a period of revenge trading, coupled with an increase of their trading size, as they are ‘sure’ that each next trade is going to bring them back to even. Also, a spiral out of control, and the losses continue – AND also a loss of more money than was intended. WHAT does traderC do?

Controlling The Trading Psychology Spiral

Consider: each time a tpsych spiral occurs AND you go out of control – the quicker the next spiral is going to occur, and the faster you will go out of control when it happens. This is going to continue, until trading becomes too painful, and you will not be willing to trade any longer.

Consider: it is better to work through the emotions instead of quitting. Quitting is too easy, and this provides no solution or aid in preventing this from coming back and intensifying each time you have a rough period. As well, you have lost the ability to ‘count’ on yourself when you need to do so the most. To control a tpsych spiral, before you go out of control, is a tremendous win in and of itself. Do this, and get your trading back on track, and you will have made gains the value of which you can’t imagine, as you will know that you may have losing periods BUT you can trust yourself to remain in control, and not magnify the damage.

In light of this, take what you believe to be your key trading issues, write them on an index card, and stick them on to your monitor. The objective is realization and awareness, thus making these issues available to your conscious as a reminder, instead of only available to your subconscious as a problem. As you make your notes BE SURE that you are writing short non-judgmental notes – DON’T let the ‘solution’ make the ‘problem’ worse.

For instance, consider the combination of a build of emotions coming from consecutive losses which are also occurring during congestion – write notes similar to these on your card:

a build in emotions may come from a series of quick consecutive losses
quick consecutive losses often come from trading inside of congestion
are your losses ‘base’ congestion method trades OR are you overtrading
there is nothing wrong with ‘base’ method trade loses
your trading results are fine when you ‘base’ method trade

Now consider the same situation BUT different notes:

don’t be a stupid idiot and overtrade congestion like you always do
you are going to lose your ass and end up with another losing day like usual
you do this same crap every day and the same thing happens
you have no reason to even trade if this is all that you are going to do

Remain Neutral

Remain neutral – another note for your index cards.

Another approach may be to write notes that include the things you can remember yourself doing or feeling as you transition from acceptable emotion to tpsych spiraling, for instance: shortness of breath – sweating – squirming in your chair – unable to sit down. AND as the spiraling becomes more intense: cussing – screaming – throwing things – breaking things. UNTIL the spiraling is out of control: panic – desperation. Clearly, there is a whole list of physical responses to uncomfortable emotional situations; realizing them as they occur may be a step in controlling them before they ‘take-over’ and lead to spiraling.

Be Aware

I want to know the potential for the spiraling situation. It is VERY important to acknowledge that you have emotions, and not try to ignore them or hide from them as a solution to the problem OR because you perceive them to be a sign of weakness. This actually will just make the situation worse. You are human – humans have emotions – emotions become more intense in more difficult situations. So, I don’t need to know how I am going to have responded as I go out of control. I do need to know, and have something to remember, and/or think about, that can keep this from happening – that can keep me as neutral as possible, in what would be the more difficult trading periods – something that will ‘push’ me back to tmethod AND ‘away’ from tpsych.

WHAT does traderC do?

traderC is the trader who remains the most neutral in winning and losing; the most neutral in all situations. It’s this neutrality that becomes essential in keeping the emotions from becoming a trading psychology spiral, as the trader can ‘accurately’ evaluate their losses in terms of method. This trader will only trade their most ‘base’ method setups after any difficult period AND IF these lose, so be it, that possibility has already been accepted. Go on to the next method trade – it probably will be a winner.

Barry Lutz has been trading, as well as teaching others to trade since 1997, through his firm Tactical Trading, LLC., http://www.tactrade.com. He also writes a daily trading teaching lesson called the Trade Journal, which can be found, along with other resources on trading psychology and trading method at The Tactical Trader, http://www.tactrading.com

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Have you ever thought of investing? Do you have a family that you would like take care of? Does the idea of making money with stocks, bonds, mutual funds and real estate interest you?

Investing is essential to making money. Whether it be stock investing, investing online, real estate investing, finance investing, investing in bonds, investing in mutual funds. All are essential in helping secure your finances, and financial stability for you and your family. If you are interested in investing, continue reading about ways to make money. We will briefly discuss the concepts of investing with stocks and mutual funds, investing with real estate and investing online.

Stock & Mutual Fund Investing

The stock market is a great place to make money. If you intend on investing with stocks and mutual funds, we highly suggest that you first do research on the companies you wish to invest in. Although the stock market is a great place to make money, there is also a degree of risk involved.

Real Estate Investing

Investing in real estate is safer than the stock market. A lot of people purchase homes that need are in need of remodeling, and can make a lot of money by fixing them up and selling them. Be advised that it isn’t as simple as buying a house, painting it, and then selling it. There are a lot of factors that you should consider before you attempt to invest in real estate.

Online Investing

Another fast growing way to invest is through trading online. Traders have the capability of doing research, buying and selling and making money with their investments all with the simplicity of sitting in front of a computer. It’s amazing at how easily you can work your finances online, and make money without even leaving the house!

If you plan on investing, make sure you educate yourself in the market or means in which you wish to proceed. Whether it be investing with stocks, investing with mutual funds, investing with real estate or investing online, do your research and make some money! If you are looking for a resource to help you with investing, you can visit our website and you will find ample information about investments, and how to make money.

Brian M. Gardner is the Founder of Financial-Articles.com – An Online Money Making Resource. Learn how to make money and acquire wealth by investing in stocks and mutual funds, as well as how to be successful in sales, marketing and advertising.

Visit Brian’s website at http://www.financial-articles.com

If you are in the stages of learning to trade, you will become a compilation of all those you learned from. You will become your own unique breed of trader. We all come to the table with certain expectations and beliefs. We all come with some emotional baggage. We all learn from reading, studying websites, and other traders. Some informally, some by paying for education in the form of trading rooms, seminars and mentors. Every time you learn something, it adds to your experience as a trader. Eventually you become the sum of all you have learned. Even if you have a mentor you have tried to emulate, you will never be like your mentor. You will be unique.

However, while no two traders are identical, most successful traders do share some common characteristics. Most have learned the value of a trading plan. Most have learned the need for stops. It takes many a long time to understand the subject of this article. The need to be right.

The topic is a simple one. Yet it eludes many traders. It seems only obvious that if we want to be successful, we need to be right in our underlying assumptions. If we want to trade stocks, we should focus on being ‘right’ about the direction stocks are going. Correct? Well, not really.

Most traders focus too much on their need to be right. This can be detrimental and needs to be addressed. The truth of it is, we are dealing in the stock market. There is not a system, method or pattern that can produce accurate results all the time. If there were, it would be known to all. All would be using it. Ironically, if this was the case, when all started using the system, it could no longer work. A ‘catch 22′ of sorts, but just goes to show that it is obvious that there will never be a perfect system or indicator.

The best we can do is to study each situation, collect the evidence, and make a high probability decision at the proper moment. What is of primary importance is how the situation is handled when the trader is right, how the situation is handled when the trader is wrong. What is the most common reason traders fail? The answer is not following stops. What is another top reason traders fail? The answer is not letting winners run.

Not following a stop is an example of handling the situation improperly when a trader is wrong about the trade. Not letting a trade hit a target is an example of handling the situation improperly when a trader is right about the trade. What good is being ‘right’ if you don’t get paid for it? Good traders assume from the beginning that the trade may go bust. They know how much money they have risked. They know when they will get out, and they will analyze other options, such as profiting from the stock, which is now moving ‘against the odds’.

Good traders also know how to balance being ‘right’ and being timely. I know of an advisory service that was taking credit for predicting the fall of the Dow. The only problem is that they began that prediction when the Dow hit 6000. Quite a hollow victory. Waiting for too much information may make you ‘right’ more often, but to what avail? It is like the trader that finally decides the NASDAQ is going higher intra-day, because it broke the high of the day. The only problem is that the NASDAQ rallied 30 points to come back to break the high of the day, it is so extended, there is no room left for profit. The trader may be ‘right’, but his late decision awards him no money.

Yes, we need to be ‘right’ a fair amount when we trade. However, if your average winner is three times your average loser, you only need to be right 25% of the time to be breaking even gross. Accept that this is not an exact science, and never will be. We are reading peoples emotions. Accept that you will be wrong a certain amount of the time and accept that graciously. Focus on how you handle your winner and loser. Make timely, high probability decisions when you have sufficient evidence, and do so consistently and objectively.

The Stocks2Watch® newsletter has been published since 1998.

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Futures Trading Defined

What exactly is Futures Trading? Futures Trading involves a trading style based upon the potential “Future” performance of certain commodities and agricultural products; like coffee, sugar, gas, oil, gold. etc.

Trading in futures means that you are willing to make an agreement to purchase a certain amount of the commodity at a certain price on a future date. This investment can be to your advantage if the price of that commodity goes up significantly before that date, but at the same rate can cause you a loss should the price fall before then.

Investing in Futures

Great care should be taken when investing in futures. Futures Trading, while it is a good opportunity for making money, haphazard trading in futures can result in the loss of quite a bit of your hard-earned cash. Before deciding to place that first trade, one should take the time to research the commodity that you’re considering trading and educate oneself in the trends of that particular commodity.

You should also keep in mind that various factors can influence commodities, especially those dealing with livestock and agriculture. For example: droughts, floods, and even strikes or labor disputes can cause prices to fluctuate widely.
You should pay close attention to all of these factors. Also you may want to obtain the advice of respected financial and investment sites or other Futures Trading sites.

There is a great opportunity for making money in futures, but there can also be considerable risk.

If you would like to really propel yourself into the Futures Trading arena, do yourself a favor and get started on the right foot with a great beginner’s course entitled “The 60 Minute Futures Trader”. It is great for newbies as well as an enhancement for seasoned professionals. I highly recommend this course as it proves how one can make 80% or more of their trades profitable.

Article by: Bryan Zutavern. Author, Publisher, Daytrader, and Businessman in a wide variety of areas. If you would like to learn how to be successful in Futures Trading, please visit http://futures–trading.blogspot.com

An investor can find and research the best stock on the market, one with huge potential but if the general market indices are negative, it will most likely be the wrong time to buy. A stock with tremendous accelerating earnings, rising sales, an up-trending chart pattern and a strong industry group may sound excellent to buy but will mean absolutely nothing if the market is positioned to move in the opposite direction of your expectations. As soon as a stock is purchased, the time comes for an investor to make a decision to hold or to sell. If the position shows a profit, hold as your judgment is correct. If the position shows a loss, cut it quickly and don’t rationalize the situation before it doubles in size. Timing will play an important role in determining if you are right or wrong.

Losers must be cut quickly, long before they materialize into enormous financial disasters. They company and stock may not be a loser but rather your timing may be premature to a strong movement, forcing you to sell on a pullback. After a stock is cut from your portfolio, the transaction must be forgotten about and eliminated from your subconscious mind and/or emotional bank. The trade must be studied to capture the true essence of your mistake but the specific security involved must be blocked from any sentimental attachments, allowing you to consider reinstating the position at a higher level. This repurchase may take place immediately or well into the future but the important fact is that you were wrong with the timing on the initial position. The timing, also known as the ‘M’ in CANSLIM by William O’Neil, may have been wrong even though all fundamental and technical criteria related to the individual stock seemed to be perfect.

A quote from the great Gerald Loeb:
“Cutting losses is the one and only rule of the markets that can be taught with the assurance that it is always the correct thing to do.”

The wisdom shared by Loeb is easier said than done. Humans like to take profits and hate taking losses or admitting that they were wrong. Pride and ego distorts the clear thinking process that every investor must posses when following clear cut rules that provides insurance to their cash stake. Even tougher, humans refuse to repurchase anything at a higher price that they sold it previously. As Loeb states, only logic, reason, information and experience can be listened to if failure is to be avoided.

It is advisable to make a “test buy” in a shaky or unstable market which allows the investor to assess the general conditions with minimal risk but still maintain an emotional attachment. If the position goes bad, a small loss will be realize but the damages will be limited and the investor’s pride and ego can be repaired rather quickly. In a sense, the investor was half right by only initiating a partial position also known as a “test buy”. If the market was trending up, a “test buy” would not have to be established as the market direction would have been clear from the beginning.

When it comes to timing, an uneducated investor may realize better gains during a solid bull market based on pure luck than a seasoned investor will return in a sideways or unstable market. Following the trend will be the most successful route to consistent profits over the long haul. By watching the general market indicators, such as price, volume and daily new highs, an investor should know exactly what type of environment they are trading. The most important factor weighing on the stock market is the presence of public psychology, even more so than any fundamentals that the most intelligent academic analyst can compute. Technical analysis along with confirmation of the market trend allows us to see the combined thought process of the general public and tells us if the timing is right to buy or short a specific stock, regardless of the fundamentals.

In conclusion, we must understand that certain situations are only applicable during specific times. Buying leading stocks during a down trend is a sure way to multiple losses that are cut quickly. Shorting stocks during a raging bull is another sure way to financial disaster and margin calls. Don’t get discouraged if you take a few small losses consecutively as this is your rules telling you to stay out of the market at this time. The timing may be off even though the stock and research is favorable. Why would you swim upstream to reach your destination if you could jump in a boat and row downstream with the current another day? Before you ever start to immerse yourself into researching a stock to purchase, make sure you know the exact environment of the market and determine if it coincides with your objective. If it doesn’t, get ready to get slaughtered, especially if you don’t follow strict rules to cut all losses quickly.

Chris Perruna – http://www.marketstockwatch.com

Chris is the founder and president of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don’t stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.

04/28/2005

NASDAQ dropped -12.5% year to date in 2005. S&P500 index
suffered -5.7% this year. US stock market has been terrible
over past few months.

Not only general market is down, oil stocks recently had a
significant correction as well. It is easy to be nervous
because of the short term setback. However, to succeed
with long term oriented value investing, we can not be distracted
by the volatile short term market movement. It is time to
step back and look at the big picture of the current stock
market and review investment strategy to profit in this kind
of tough environment.

Stocks in General and Oil Stocks

Below chart is past 1 year performance chart between Energy
Index ETF (ticker: XLE) and S&P500 index (ticker: SPY). By
looking at the chart, even a fool will know that oil market
is booming while US stock market in general is struggling.

Simply put, the current US stock market is not in bull
market. The heydays of 1980′s and 1990′s when anyone can
simply put some money in S&P500 index fund or a decent US
mutual fund to earn 10% to 20% plus annual performance is
long gone. I expect for the next 8 to 10 years, the US stock
market in general will be stagnant.

If you have believed that 20 years of stock market
performance between 1980 and 2000 is stock market average
performance, then you will be shocked to know that just
before that period in 1960′s and in 1970′s, US stock market
went nowhere. Dow hit 995.15 in 1966 and Dow was back to 800
in 1982. If you were the long term investor who invested in
Dow index fund between 1966 and 1982, you got a negative -20%
return overall for your 16 years of loyalty, how would you
feel about that ?

Still remember the NASDAQ peak of 5000? In my opinion,
NASDAQ is screwed up index with full of expensive stocks
even today. I predict that we may have to wait another
decade to revisit NASDAQ 5000.

Current Stock Market Average Valuation is Not Cheap

Currently SP&500 index trades at about 17x average PE today.
Although this valuation is not terribly expensive, it is not
that cheap either.

Over past 100 years of US stock market history, market
usually bottomed at average PE of 10. That happened in 1974
or 1929 or 1980. We are not there yet, not even close over
past 5 years even though the technology stock bubble bursted
in 2000. In a major stock market bottom, we should see
plenty of big cap stable companies trading at PE of low
teens. Now look at this: Coca-Cola (KO) PE 20, Walt Disney
(DIS) PE 24. Even worse, a no-growth stock like Sun
Microsystems (SUNW) is still trading at premium PE of 19.

What is the Overall Earning Outlook of US Stock Market?

Even though the current stock market valuation is not that
cheap, if earning is good, market should do fine.

Are we going to get excellent overall earning outlook in the
next few years for the US stock market in general?
Unfortunately, my answer is no. My take is that US stock
market earning overall is decent, but not good enough to
trigger a bull market. This market is still digesting the
past bubble over-valuation coupled with poor earning
outlook.

Here is one reason of my not-so-enthusiastic earning
outlook: the rising oil and commodity prices.

The Booming Commodity price

Commodity and oil market has been booming since 1999 and the
high commodity price is taking toll on overall stock market
earnings. Companies need to pay more for the things needed
in business: steel, copper, oil, natural gas etc.
Historically, when commodity market was shining, stock market
did not do very well, and vice versa. In 1960′s and 1970′s,
oil and commodity had bull market run for nearly 20 years
while Dow Jone index had horrible performance for nearly 20 years. From
1980 to 2000, the stock market soared while oil hit as low
as $15.

The Bull Oil and Commodity Cycle Could be Very Long

Jimmy Rogers is famous investor who co-founded Quantum Fund
together with George Soros. In his recent book titled “Hot
Commodities”, he is predicting that the current commodity
bull market can last until 2013 strictly due to supply and
demand.

In one chapter of the book titled “Goodbye, Cheap Oil”, he
clearly lays out the reasons why oil and natural gas bull
market can last until next decade. This is as simple as
supply and demand: rising demand coupled with declining
supply.

The supply of oil and natural gas was diminished partly due
to extremely low oil and gas price in 1990′s. Over past 35
years, there was no major oil discovery in the world while
the old oil fields deplete. Oil and natural gas production
level of a well does not stay flat over the life of a well
reserve. The production level of a well actually declines
gradually due to geophysics of oil well until the reserve is
fully depleted. Even there is new oil field discovered, it
will take a decade after the discovery to actually produce
oil! Increasing supply to meet demand is a very difficult
and slow process.

Coupled with declining supply, the demand of energy from
China doubled since 1990 consuming 8 percent of world’s oil
in 2004. US economy is growing with increasing oil demand
year over year while US oil production has seen sharp
decline over past 50 years.

Still the oil price is not that high on historical basis.
Even with today’s oil price of $50 a barrel, the oil price
is still significantly lower than the inflation adjusted
peak price of $90 a barrel in 1970′s.

Value Investors Do Not Need a Bull Market to Make Money

As scary as the potential trouble in stock market, this kind
of tough environment is great money-making time for value
investors to pick up cheap shares.

Warren Buffet is the greatest value investor in the world.
He averaged 20% annual investment performance over past 50
years. However, Mr. Buffet’s performance in bear market of
1960′s and 1970′s was actually 30% per year return, much
higher than his average performance.

Focus on Dirt Cheap Stocks and Booming Commodities Market

Stocks do not go straight up or go straight down. There will
be huge run up or sharp sell off in short term. While market
is not in good shape, this is and will be wonderful time for
long term oriented value investors.

Commodity price is volatile. Just like stock market,
commodity price does not go straight up or straight down.
Although oil price weakened recently, I firmly believe that
oil price is not going back to cheap oil price below $40 a
barrel. As long as oil and natural gas prices stay high, oil
stocks will do fine in its business. As painful as the
recent sharp sell off in energy stocks, energy stocks in
general are still very cheap and my investment strategy is
to continue to stay long term oriented in them.

In the short term, it is very hard to know when a stock will
go up or go down. But I do know that valuation and earning
matters and investing in cheap stocks trading significantly
below market average will be rewarding in the long run.

Article by Henry Lu of BlastInvest LLC, a premium
investment newsletter publisher in Connecticut. Visit
http://www.BlastInvest.com for FREE “how-to” investing
assistance, web services and more.

Many people are looking at getting into day trading, and start with studying the Stock Market, and the different stock exchanges. What many don’t realize is that there are different markets and financial instruments that one can profit from. One market that has recently become available to the public to trade is the Foreign Currency Exchange, the FOREX.

The foreign exchange market is the largest financial market in the world. It trades upwards of 2.5 trillion dollars per day, which is approximately 1000 times the volume of the New York Stock Exchange. Quite easily, the foreign exchange market dwarfs the stock market of any country.

So, where is the foreign currency market? Well, unlike the stock exchanges of the world. The foreign currency market is a virtual market that is connected by the internet, phones, and fax.

The advantage of having a worldwide currency market is that it is open 24 hours a day, 5 days a week. Living in the USA, one could trade 24 hours per day Sunday 5pm to Friday 4pm EST. One can only trade stocks during normal market hours, so for those that have jobs during the day, the FOREX market is much more accessible as trading can be done at night or early in the morning before going to work.

Other benefits of the foreign currency exchange include:

1. High Leverage: Currency brokers usually give their traders 100:1 leverage, meaning that if there is $1000.00 in ones account, they will let one control $100,000.00, which allows currency traders to reap large gains from relatively small price movements in the market.

2. High Liquidity: Because the currency market is the largest market in the world with huge daily volumes, one is always able to get in and out of trades as liquidity is never an issue.

3. Stops are always honored: Except in extremely volatile markets, which is rare, limits and stops are always honored. Because of the market’s liquidity and 24 hour continuous trading periods, dangerous trading gaps are eliminated altogether. Orders are executed very quickly, without slippage. In the stock market, it is much more frequent that stops get skipped over as stock prices plummet, but in the FOREX, one can be much more confident that the stops are honored.

4. Entry orders are instant: There is no lag time in placing an order. Orders are processed instantly at the current market price, or the price at which you set the order to enter the market in the future.

5. No Commissions: There are no commissions in currency trading, the broker just takes a small difference between the bid price and the ask price as its fee for the transaction.

As currency markets are some of the most volatile markets, many fundamental variables such as weather, and war affect the price of the currency, however, since there is no one apparent reason much of the time for price movement, the fundamentals get discounted and one can use an almost purely technical approach to trading. This is why the FOREX is considered one of the most predictable trending markets that follows technical analysis methods more than any other market.

As one can see, there are many great benefits to using the FOREX as a highly profitable financial instrument. One can trade from home in their spare time, but first it is important to get a solid education in learning specific FX trading methods. Before trading in a live account, it is important to first get educated using books, or online courses. There are many courses online selling for upwards of $3000.00, but it is not necessary to spend that kind of money to get a good education. Usually the expensive courses come with DVD’s and other expensive items that raise the price. Much of the time one can find a course for under $500 that teaches the exact same content for much less money.

Wishing You Success in Trading!

David Molina

If you are interested in furthering your FOREX education and want to get a free e-book “Forex Freedom”, please visit: http://www.fxtradingmentor.com

Thousands of people every day trade on the worlds stock markets, with the majority now using software to aid them, but does it help them make more money?

This software is known as a ‘bot’, short for robot, but it is only ever as good as the user. If the user does not know how to trade successfully on his own in the first place then he is unlikely to get instant profit from a bot. New users have to understand that it will take weeks to learn how to use a bot correctly.

I use the ‘new’ bots on the block on a daily basis. Any professional trader should at least be aware of the existence of betting exchanges, and the fact they can turn over $Millions per horse race within a few minutes, and with the betting exchange allowing you to back (buy), and lay (sell) a horses odds, many new traders are springing up to take advantage of this with the use of betting bots. And the best thing is, you do not need any knowledge of the sport you are trading in. You can also trade on the majority of the worlds financial markets, such as the FTSE, NASDQ, etc, as well as currencies.

So are these new bots a license to print money? Depending on which one you use, as some are useless, and will see you lose money faster than if you were using a pin, but others stand out, and are put together by professional stock market traders. It is these bots that have the potential to make you money, and if handled correctly, plenty of it.

Most of the bots on sale focus on one aspect, whether it is trading, arbing, hedging or dutching, but there are a small number that focus on them all, and compared to the single function bots, are much better value for money. These multi-function bots allow you to find your niche in a competitive market, without emptying your bank balance.

It is also a misconception that you will start making a lot of money instantly. Even if the bot produced profits on a daily basis (which by the way, will never happen), you still have to limit trades to a fixed percentage of your betting bank, otherwise you will find yourself having no control over trading stakes. It is always best to start small, get the mistakes out of the way while it is cheap to do so, and when your stakes increase, you will have learnt enough from your mistakes to save money.

Some people click with trading straight away, others it can take weeks of staring at the graphs on the screen until the penny drops. Those that stick with it though, usually succeed, and a bot makes life so much easier.

So if you have the capabilities to profit from trading, then a betting bot may be for you, if you are looking for a quick buck, forget it.

Keith Driscoll is the Managing Director of Win2Win Limited, and has been a professional gambler since 1998. You can read more about trading bots at http://www.exchangebots.com