Penny Stock

What Does Penny Stock Mean?
A stock that trades at a relatively low price and market capitalization, usually outside of the major market exchanges. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB and pink sheets.

Investopedia explains Penny Stock??

The term itself is a misnomer because there is no generally accepted definition of a penny stock. Some consider it to be any stock that trades for pennies or those that trade for under $5, while others consider any stock trading off of the major market exchanges as a penny stock. However, confusion can occur as there are some very large companies, based on market capitalization, that trade below $5 per share, while there are many very small companies that trade for $5 or more.

The typical penny stock is a very small company with highly illiquid and speculative shares. The company will also generally be subject to limited listing requirements along with fewer filing and regulatory standards.

Penny stock????

Penny Stocks are any stock that trades below $5 per share. Most financial advisors and long-term investors tend to avoid them completely because of the extremely high risk that comes with owning them. They generally tend to fluctuate wildly in price, and although some report spectacular gains in a matter of a few days [or even hours], those who invest in them are generally surprised when they disappear altogether.

Generally, if a stock is trading that low, it is danger of losing its listing with an exchange. When this happens, a company is normally either in very bad financial shape, or on the brink of bankruptcy. Smart investors opt to avoid these.

New to investor

As a stock market investor or trader you should always remember that not every trade that you do will give you profit. There will be losses as well as profit. No one can make profit from every investment that they make at the stock market. The key for success at the stock market therefore is to make more profit than the losses that you suffer at the stock market. To make that happen you as a stock market investor have to follow some simple but effective tips. Some very basic things that will reduce your loss and increase the chance of making profitable stock market investment. So here we are telling about three most important things that you should always remember as a stock trader.

Have a strategy for investment – Well before you enter the stock market and invest in the stocks, you should frame a strategy for investment. Your strategy for stock market investment should be based on your objective and your fund and your ability to take risk at the stock market. By objective, we mean to say that you should have a clear idea of what you exactly want from your stock investments as that will primarily decide what is the most suitable way of trading for you? And what are the types of stocks that you should look for while making stock market investments. If you are looking for a regular income from the stock market and have the capacity to take some risks then day trading should be your preference and you should target stocks that show regular movement within a range. On the other hand if you are thinking of increasing your bottom line of your investment and ready to wait for a long time, then you should target large cap and blue chip stocks and delivery based long term trading should be ideal for you. Whatever is your preference, you should frame a strategy based on that and most importantly stock to that strategy when you are investing in the stock market and that is first step you have to take to increase your profit.

Choose the right stocks for investment – Choosing the right stocks for investing is the next big thing for your success at stock market. For selecting the stocks, fundamental analysis of the companies is the best possible solution you have got. Study the annual and quarterly reports of the companies that you are targeting for investment and then choose one that has got the maximum potential for appreciating in the future. Always choose a company that has got history of making consistent profit, has got low debt at the market, have a steady management and have a high asset value.

Choose the right time for making the investment – But choosing the best stocks for investment is not the last thing that will ensure your profit at the stock market. Even a very good stock is not worthy of investment if the best time for investment have gone past. So you have to be careful about determining the right time for investing in the selected stocks as well. It is this point where technical analysis comes into play. Technical analysis of the stocks are done on the basis of the price of the stocks and the volume of trading and some other aspects that will give you fair idea of the movement of the stock. Hence it will help you predict the future price movement and determine profitable price range for investing in that particular stock.

These steps might sound to your very simple, but it needs thorough knowledge of the stock market and the in depth understanding of stocks market trading and stock analysis to effectively follow these rules. So stop blindly following the tips and that you might get from various resources and try to learn the basic principles of stock trading and stock market analysis. That will be of great help for you for selecting the stocks and making profitable investments at the stock market. Apart from the knowledge you need to follow the stock market movement everyday and have a method to analyze the happenings. That will help you to predict the future of the stocks which is the most important aspect of stock trading. Lastly, you should never pay attention to the rumors and panic, rather you should stay patient and have faith in your analytical abilities as that will give you great profit in the long run.

Billion dollar investing tips from Warren Buffett

Widely considered the most successful investor of all time, Warren Buffett is a luminous example of the school of value investing. Starting with an initial fund of $105,000 in 1956, Buffet grew it to $45 billion over the next 50 years, making him the second richest man in the world. Though he is widely recognized as being an investor, the bulk of Buffet's wealth was built through intelligent use of leverage offered by his insurance companies. Since most individual investors do not have access to the type of capital that Buffet does, it is not easy to replicate his astounding wealth-building feat. However, by understanding and applying the basic guidelines of Buffett's investment approach to their own investing decisions, most long term investors can comfortably beat the returns of all but the best mutual fund managers.

So, how did Buffet accumulate the huge fortune that he eventually gave away to the charitable foundation run by his best friend, Bill Gates One of the greatest attractions of Buffett for investors is that his investment methodology is easy to understand. However, it is far more difficult to apply because it calls for large amounts of patience and calm when your stocks move against you. It is also difficult to apply because it requires an orientation towards research and the ability to understand the complexities of accounting and finance. But for those willing to invest time and effort into mastering this approach, superlative investment performance over the long term is guaranteed.

Invest in Businesses, Not in Stocks

"Whenever we buy common stocks for Berkshire's insurance companies (leaving aside arbitrage purchases), we approach the transaction as if we were buying into a private business. We look at the economic prospects of the business, the people in charge of running it, and the price we must pay." -- Warren Buffett

This is the cornerstone of Buffett's investment style. Whenever he evaluates an investment opportunity he analyses it as a business and not as a stock. This makes him look closely at the company's fundamentals, earnings prospects, financial health and management. Conversely, this style of evaluating a business prevents him from buying a stock just because it is going up even though it has dubious prospects. A lot of investors tend to buy stocks based on tips from friends, acquaintances or brokers. By adopting Buffett's approach, you can save yourself a lot of grief later on.

Only Buy Businesses that You Understand

"Did we foresee thirty years ago what would transpire in the television manufacturing or computer industries? Of course not. Why, then, should Charlie and I now think we can predict the future of other rapidly evolving business? We'll stick instead with the easy cases. Why search for a needle buried in a haystack when one is sitting in plain sight?" -- Warren Buffett

Buffett has a track record of generating 21 per cent annually compounded returns over a 50-year time frame, a feat matched by very few investment managers. Though technology companies delivered some of the best returns during this period, Buffet has never owned one for the simple reason that he could not understand the long term prospects of these companies and evaluate them thoroughly. So the next time you get a tip to buy a "hot" company that you do not understand, you should ask yourself: "If the greatest investor in the world will not invest in something he doesn't understand, should I?"

Buy Companies with Defensible 'Franchise'

"As Peter Lynch says, stocks of companies selling commodity-like products should come with a warning label: 'Competition may prove hazardous to human wealth'." -- Warren Buffett

Most of Buffett's portfolio companies, such as Coca Cola, Gillette (now Procter and Gamble), American Express and Washington Post, are businesses which have a significant hold over their market. This is because they have inherent competitive advantages, whether it be a highly recognizable brand, or near-monopoly status in a geographic area. Such companies can typically raise their prices without fear that customers will walk away. This in turn produces fantastic earnings growth and, consequently, great investment performance. So, before you make an investment in future, try to understand whether the company you are investing in has a strong and defensible market position and whether it can raise prices if it needs to.

Hold for the Long Term

"We are willing to hold a stock indefinitely so long as we expect the business to increase in intrinsic value at a satisfactory rate . . . we do not sell our holdings just because they have appreciated or because we have held them for a long time." – Warren Buffett

Buffett's companies have generated enormous returns for him. For example, his investment of $10 million in 1973 in the Washington Post Company had grown to more than $1 billion by 2003. While a lot of us may be able to do this occasionally, Buffett has generated such returns with startling regularity. One of the reasons he is able to do so is because he holds for the long term and is not quick to enter or exit businesses. In fact, he stuck with WPC for two years even though its price fell below his purchase price because he understood the fundamentals of the business and believed that it was undervalued. Even once it became profitable, he was not quick to exit because he believed that it had greater potential. He held it through several bull and bear markets and no greater proof is needed than the return he achieved to show that he was right in holding it for so long.

Ignore Short-Term Fluctuations in Price

"Charlie and I let our marketable equities tell us by their operating results—not by their daily, or even yearly, price quotations—whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it." – Warren Buffett

The stock market has a tendency to overreact on both the upside and downside. Often the market ignores the fundamentals of a business and reacts sharply to news flow. Sometimes entire sectors become either unduly depressed or overpriced. One of the key pillars of Buffett's approach is to ignore short-term fluctuations in price. He does not sell a stock because the market suddenly decides to drop. Neither does he buy one because it is going up. Once Buffett has calmly evaluated the fundamentals, he will buy the stock if its price is right. If the stock dips after he has purchased it, he does not worry so long as its fundamentals are good. Had he gotten jittery due to short-term price fluctuations, he would have been a lot less richer than he his currently.

Buy Good Businesses When Prices are Down

"If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they feel elated when stock prices rise and depressed when they fall. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices." – Warren Buffett

On 19 October 1987, all global stock markets crashed. The Dow Jones Industrial Average actually suffered a decline of 22 per cent, the greatest single-day drop in its history. Every stock on the market fell. Most people sold their holdings in panic that day. Buffett, however, was buying! He made the single largest stock purchase of his life that day. While all others around him hit the panic button, Buffet bought 10 per cent of Coca Cola for $1 billion. Not only was it his largest single stock purchase, he also became the single largest shareholder in the company. In his analysis, Coca Cola had a great business, great long-term prospects and the ability to expand because of globalisation. If the market was willing to sell it at an unreasonably cheap price, he wanted to scoop it up with both hands. And scoop it up he did! Coca Cola became one of the most successful investments in Berkshire's portfolio. By 2006, Buffett had made over $11 billion on Coke since he bought it.

Don't Be an Active Trader

"Indeed, we believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic." – Warren Buffett

Buffett is an atypical investor not only because he is highly successful, but also because he does not even look at stock tickers. He believes that trading too much is a tax-inefficient and costly approach to investing. Consequently, he has a very low turnover portfolio, very low brokerage charges and has not paid very much in the nature of capital gains taxes.

Do Not Over-Diversify

"If you are a know-something investor, able to understand business economics and to find five to ten sensibly priced companies that possess important long-term competitive advantage, conventional diversification makes no sense for you." -- Warren Buffett

A striking aspect of Buffett's portfolio at Berkshire is the small number of stocks in it. This number has rarely exceeded 10 stocks. Buffett believes that there are very few outstanding investment opportunities at any given point of time and that one should invest enough in each of those to make a substantial difference. In contrast, most people fill up their portfolios with more than fifty stocks. As a result, even if a stock appreciates 100 per cent, the impact on their net worth will only be 2 per cent. Investors who want to generate truly outstanding returns should identify a small number of great businesses at the right prices and invest a significant amount of their money in each of them.

Invest Only When There is a Margin of Safety

"Margin of safety" is a slightly difficult concept to understand. It can be loosely defined as the difference between value and price. If the value of what you buy is higher than the price you pay for it, you have a high margin of safety. If the price you pay is greater than value, you have a low margin of safety. When the margin of safety is high, the investor need not worry about short-term fluctuations in price and can buy more if he or she has the resources to do so. Also, if you are investing in a situation with a significant margin of safety, you are likely to make a higher return because you are buying at a relatively low price.

However, how does one quantify this margin of safety? It is admittedly a grey area. There are seemingly scientific approaches, such as the discounted cash flow, which are taught in most corporate finance textbooks. In practice, though, it is both very subjective and very difficult for an individual investor to apply. However, there are other short cuts which are more approachable. Since the discounted cash flow ultimately crystallizes into the price / earnings (P/E) ratio, one way of estimating the margin of safety is to look at the P/E ratio. A low P/E means there is a margin of safety. But even this approach has its pitfalls. Slow growing, lousy companies often tend to have low P/E ratios. And, sometimes, very promising companies have high P/E multiples.

One way around this problem is to divide the P/E ratio by the growth rate of the company's profits to arrive at its price-earnings to growth ratio. Thus, if a company's P/E is 20 and the growth rate of its profits is 20 per cent, its PEG is 1. Oftentimes, a PEG of less than 1 implies that there is a significant margin of safety. A PEG of greater than one means that the margin of safety is not very high.

That said, PEG is not the holy grail of valuation and there are several ways to value a company -- and all these approaches have their flaws. You can consider your time well invested if you spend some time researching valuation by reading a corporate finance textbook.

Thus, Warren Buffet's investment approach is easy to understand, but calls for significant effort on your part to understand businesses, evaluate them and invest successfully but then, nobody said that becoming a billionaire was easy!

Mutual Funds

Mutual funds are diverse stock holdings which are managed on behalf of the investors who buy into the fund. Mutual funds allow investors to take advantage of a diversified portfolio without the need of investing a large sum of money.

A diversified portfolio carries the advantage of offering protection against the rapid market losses of any particular stock. If stocks lose their value, the effect will be less if they belong to a portfolio that is spread across twenty stocks than if they belong to a portfolio that is consist of a single stock.

Diversification is always a good idea in making investments. The problem for small investors is that usually don’t have enough funds to buy a variety of stocks. Despite their limited funds, small investors benefit from diversification through mutual funds.

Mutual funds, aside from stocks, can be consisted of a variety of holdings that include bonds and money market instruments. Mutual funds are actually the companies and the investors are really the company share buyers. The shares in a mutual fund are either directly bought from the fund itself or indirectly bought from the brokers who represent the fund. Selling them back to the fund is a way of redeeming shares.

There are some funds which are managed by investment professionals who decide on which securities to include in the fund. Non-managed funds are also available. Indexes, such as the Dow Jones Industrial Average, usually serve as the bases for the funds. The funds, which simply duplicate the holdings of the index where they are based on, rise by a percentage that is the same as that of the chosen index. Non-managed funds often perform well and they sometimes perform even better than managed funds.

Mutual funds also carry some downsides. Aside from paying some fees no matter what the performance of the funds is, individual investors also have no say in which securities have to be included in the funds or not. In addition to this, the actual value of a mutual fund share is not as precise as that of the stocks on the stock market.

For small investors, a mutual fund is still considered to be a better choice than either stocks or bonds because they offer the diversity that provides cushion against unpredictable stock market movements. They also provide a greater return than bonds. Mutual funds can also lose value especially in the short term. Short-term investors are better off with bonds that offer a set rate of return.

The three main types of mutual funds are money market funds, bond funds, and stock funds. The type that offers the lowest risk, money market funds consist solely of high quality investments like those which are issued by the US government and blue chip corporations. Although they rarely lose money, money market funds also pay a low rate of return.

The aim of bond funds to produce higher yields than money market funds caused them to carry a correspondingly higher risk. The risks that are associated with bonds, such as company bankruptcy and falling interest rates, are also applicable to bond funds.

The types of funds that carry both the greatest potential for profitable investment and the greatest risk for losses are stock funds. The risk in stock funds is mostly for short-term mutual fund holders because stocks have traditionally outperformed other investment instruments in the long run.

There are different types of stock funds including ‘growth funds’ that attempt to maximize capital gain and ‘income funds’ that concentrate on stocks that pay regular dividends.

Those with limited funds or investment experiences are recommended to invest on mutual funds. When choosing the right fund, investors have to consider how much risk they are willing to take against their expected investment returns.

Invest & perish

This is exactly opposite to what most 'experts' are saying. They play safe by asking you to invest on a long term horizon. You can't question their wisdom/knowledge/judgment if their recommended stocks fall. They will claim it is still not long term enough.

Pure bakwas! How many people can afford to wait that long term unless they have ample money to take them through the years and years till that 'long term' finally arrives?

Intraday trading is safer

Technology makes intraday trading more predictable and accurate than investing in stocks for future appreciation in an unpredictable world. Holding stocks is a greater risk and is purely speculative. In today's economic realities, political uncertainties and instabilities, applying the same age old investment theories of 60s and 70s is asking for disaster.

Your trading capital become many times more than actual

Brokers offer 4 to 7/8 times leverage on your margin money. This enables you to trade more quantities and make more profits. However, this can misfire and lead to higher losses too. In case of trading Futures, the Stock Exchange decides on how much margin is required for a particular stock future.

First 4-year long bull run in 132 years of history

Indian stock market has mostly been one year of bull run followed by 3-4 years of bearishness. Yet, 'experts' say holding stocks is better. Statistically yes. But practically? Of course not! Now that we have entered a bearish period, nobody is venturing any guess on how long it might last.

'Experts' have no clue on intraday

The 'experts' always advise 'long to medium term' investment so that you can never question them when your holding becomes worthless. They will claim it was not long enough and you ought to wait more!

Intraday trading can be a career option

Ill informed and illiterate (in stock market context) speculators and gamblers have given intraday trading a bad name. Media is equally clueless. Yes, intraday trading can support a career, provided you approach it not as a gambler but as a professional trader. All you require are 1. Right tools of the trade such as online trading terminal software as well as live analysis software such as used in PRISM Intraday Trading system 2. Knowledge/Training on identifying BUY/SELL signals and 3. Adequate capital - you can begin with Rs 20,000 even.

Ideal for beginners as it is up to 98% accurate

PRISM Intraday Trading system helps you earn every day with 98% accurate BUY instructions. The accuracy has been tested and proven over more than 5 years of intraday trading running into millions of rupees.

Earn daily if you need to earn now

Intraday trading is the best option for people who want to have an income from stock market TODAY - not 3/5/7/10 years later. Not everybody can be like Warren Buffet - who waited 25 years before NOT selling Coca Cola shares!

Account types

Stock brokers handle most of the buying and selling activities on the stock market. An average investor will hire the services of a broker to handle his trades. A broad range of brokerage services is available nowadays. Full-service brokers can give advice about which stocks to buy or which stocks to sell. They often have full research facilities that they use to analyze market trends and to predict market movements.

The services provided by full-service brokers do not come in cheap since they charge the highest commission rates in the industry. Hiring a full-service broker is optional and it depends on the number of trades level of confidence, and the knowledge of stock markets of the investors.

Some investors, with the hopes of saving on commission fees, hire discount brokers instead. Although these types of brokers ask for much lower commissions, they don’t offer advice or analysis like full-service brokers. Discount brokers are ideal for those investors who like to make their own trading decisions. Some investors use both types of brokers for strategic purposes.

Some brokers offer better rates by operating exclusively online. There are even some full-service and discount brokers who offer discounts for orders which are placed online. Online brokerage is considered to be the least expensive way of trading stocks.

Investors need to open an account. Every broker sets his own requirements for the maintenance of an account balance. This is usually between $500 to $1000. Before choosing a broker, investors have to look at the fine print first in order to know more about he involved fees because some brokers charge annual maintenance fees. There are even some brokers who charge fees every time the account balance falls below the minimum.

There are two basic types of brokerage accounts: a cash account and a margin account. In a cash account, an investor has to pay the full amount of the stock price that he wants to buy. In a margin account, however, an investor is given the chance to buy the stock “on margin” which means that the brokerage will carry some of the cost of the stock. The amount of the margin, which varies from broker to broker, has to be protected by the value of the client’s portfolio. Adding more funds or selling some stocks are the only two options of the investor in case his portfolio falls below the specified amount. The investors, through the margin accounts, are allowed to buy more stocks with less cash thereby realizing greater gains and losses. Inexperienced traders are not recommended to opt for margin accounts since they are a lot riskier than cash accounts.

Choosing a particular broker has to be based on the specific needs of the investor. If an investor wishes to receive advice about which stocks to buy or to sell and yet he is uncomfortable with making trades on the Internet, then he is suggested to hire a full-service broker. On the other hand, technology savvy investors with enough confidence and knowledge to make their own trading decisions are better off with discount brokers.

After deciding on which type of broker to hire, investors are advised to compare a few competitors in order to find out the significant differences in the costs. When choosing a broker, investors also have to consider the number of trades to be made, the amount of cash to be deposited, the type of margin accounts to be used, or the kind of services to be rendered.

Indian Blue chip companies

One of the success stories in the recent times and that has had the best growth rates after China has been India. Most of the times you will hear only about IT sector and the BPO sector with all the US Fortune 500 companies sending their jobs overseas. The fact of the matter is that India is more than that.

If you have not invested in the Indian companies then you are losing out on the good growth stories and making huge returns on your capital.

Here is the list of the Indian blue chip companies which comprise the 30 stocks that are there in the BSE -30 and I am also giving out the symbols of the ADR’s if at all that are listed in the NYSE.

Tip: If you can invest in a mutual fund then invest in the Franklin India Blue chip fund which has been giving stellar returns as it just invests in the blue chip Indian growth companies.

ACC

Bharti Airtel

BHEL

DLF

Grasim

HDFC

HDFC Bank(HDB)

Hero Honda

Hindalco

HUL

ICICI Bank(IBN)

Infosys(INFY)

ITC

Jaiprakash Asso

Larsen

Mah and Mah

Maruti Suzuki

NTPC

ONGC

Reliance

Reliance Comm

Reliance Infra

SBI

Sterlite Ind(SLT)

Sun Pharma

Tata Motors(TTM)

Tata Power

Tata Steel

TCS

Wipro(WIT)

Tip: DO not blindly invest in all blue chip companies. Take a stock of the situation and consider only those which have some potential and can be provide better returns than in the US market else you can always invest in the stocks which are listed locally.

Better still you can also invest in the country specific ETF if you do not want the hassle of investing in the India Stock market directly.

Also note that you need to know what is the blue chip stock before you start your building your portfolio.

How Stocks Are Priced???????

Many people are still confused about the pricing of stocks and the movements of prices when they read through the list of stock prices in the newspapers. There is a wide variety of stock prices and there are many people who kept on wondering why some well-known companies are being traded for relatively low prices while some lesser known companies are being traded for excessively high prices.

Stock prices, to a certain extent, are determined by the confidence of an investor that is based on either a real or a perceived performance. The financial status of companies are reported on a quarterly basis when their cash flow, sales, and earnings are disclosed. The worth of a company is based on its financial status but it can be overrode or undermined by the speculation of the investors.

Rumors spreading in the stock market usually affects the fate of the stocks. For example, an ongoing rumor stating that a particular company is planning to make a strategic move will cause investors to come flocking just to buy stocks from that company. The principle of supply and demand applies in the stock market. A sudden upsurge in the interest of investors will cause the stock prices to rise while a fear among investors will cause the prices to plummet. The worth and the performance of a company are still considered to be the biggest factors in the determination of stock prices.

Stock prices can be found in the daily market summaries of newspapers or online sources. They provide information about the current prices and market movements around the clock. Stock brokers also provide quotes which can be accessed either via the Internet or via a telephone.

A stock quote table, which can be found in a newspaper or an Internet website, contains useful information that can help investors to make their decisions regarding the buying or selling of stocks. Reading a stock table requires a necessary skill for anyone who is interested in the activities of the stock market.
Latest Change 52 Weeks
symbol price net % time high low volume high low
BCE 31.150 -0.480 -1.52 16:57 31.750 31.110 3,643,000 33.000 27.150
BGM 17.060 -0.280 -1.61 15:54 17.300 17.040 207,400 26.850 17.110
IBM 79.820 -0.290 -0.36 16:01 80.680 79.560 4,999,200 99.100 71.850
MSFT 24.670 -0.310 -1.24 16:00 25.050 24.670 73,696,700 27.940 23.820

The first column of the stock quote table contains a 3 or 4-character long ticker symbol that indicates the name of the company. For example, BCE stands for Bell Canada Enterprises while MSFT stands for Microsoft. The list of ticker symbols can be searched through the Internet.

The latest price indicates the current price at the time the table was published. The latest price in the tables found in newspapers describe the closing price for the day. The prices in the Internet, however, are updated every few minutes.

Change is the difference between the previous day closing price and the current stock quote. High indicates the highest price while Low indicates the lowest price of the stocks sold as of the last trading day. Volume describes the number of shares that have been traded for the day. The 52-week High and Low shows the highest and lowest prices in the previous year.

Some tables contain additional columns to make room for other information such as the Bid Price, which is the price a buyer is willing to pay; the Ask Price, which is the price a seller is willing to sell; the Price/Earnings Ratio, which is the stock price divided by the earnings per share; the Market Cap, which is the outstanding shares multiplied by the current market price; and the Dividends Per Share, which is the current annual dividend that the company pays.

Getting Started

Stocks can be bought and sold by anybody who has money. Knowing the basics will help people understand how stock trading works despite the process’s own specialized vocabulary. People who have knowledge about stock trading are the ones who are most likely to be successful in the investment industry.

Most stock trading activities are done through an intermediary called a broker. Brokers, who take and execute orders from the investors, can also offer investment advices and analyses to their clients. Such brokers are called full-service brokers and they charge a relatively high commission. The types of brokers that do not offer investment advices to their clients are called discount brokers. Investors who wish to save more money usually hire discount brokers because they charge less commission.

Online trading and broker-assisted trading are two of the most commonly offered services by brokers. There are some brokers who use an Interactive Voice Response System for placing orders via telephones and a Wireless Trading System for making orders via web-enabled cellular phones or other handheld devices.

There are some brokers who use their own proprietary software for placing online orders while some give their website passwords for accessing order departments. Brokers allow their clients to track the stock market movements by offering a variety of charting options. The analysis software provided by brokers may be included in their services either for free or for an extra fee.
Types of Orders

The orders made when buying or selling stocks can be classified into different types. An instruction to buy or sell a stock at the current market price is called a “market order.” This order is usually executed near the quoted price at the time of the order was made. There may be a difference between the actual transaction and the quote if there is some inactive trading of stocks or rapid fluctuation of prices.

An expectation of stock price movements that leads to the interest of buying or selling stocks at a certain price above or below the current price initiates the placing of either a “stop order” or a “limit order.” A stop order instructs the broker to trade at a certain stock price, while a limit order instructs the broker to trade at a specified stock price or something better.

Stop orders, which help in limiting losses and protecting profits, become effective when the market hits the stop price. Because the stocks are traded at market price after they become active, brokers who are given stop orders are allowed to trade above or below the stop price. Limit orders, on the other hand, may not be placed at all even if the market reaches the limit price. The fast movement of the market may not provide enough time to execute the order before the price falls out of the limit price range.

For example, an investor buys a share of Bell Canada Enterprises (BCE) at $50 and put in a stop order of $45. If the BCE stock price falls to $45, the stop order will become effective and the stock will become available at market price. Conversely, if an investor buys BCE for $60 and put in a limit sell, then his stocks will be sold at a profit only when the price rises to that level. The investor can also buy BCE with a limit buy order for $45 to allow him to possibly buy the stock at a price that is less than the current market price. If the price doesn’t fall to the limit buy price, however, the investor cannot buy that stock.

All orders can be placed as either “good ‘til canceled” (GTC) or “day order.” A GTC order will remain in effect until it is canceled but a day order will remain in effect only until the end of the current trading day. Stocks are commonly traded in multiples of 100 that are called “round lots.” Trading other amounts of stocks, which is called an “odd lot,” is also possible. Trading software can handle either type of orders but odd lot orders are considered to be more difficult to fill than round lot orders.

Basicsss

Stock Market Basics: Buying & Selling Stocks

Buying and selling stocks can be a very confusing task because there are many things to learn about the stock market basics.

First, one must understand the basics and the foundation of stocks. Stocks are nothing more than parts of ownership in a company. Basically, a company offers stocks to the public to finance their company. Buying stock makes you a shareholder, and in essence, you own part of the company even if you are buying penny stocks.

There are different types of stock that one could buy. First is common stock. Common stock is exactly as it is stated, common, and holds no preferences. When the company offers a dividend, you are entitled to it. The next step up is preferred stock, which means you get a higher priority when it comes to dividends, meaning you get paid first.

Voting / participating stock is also available, where you can vote on issues of the corporation. Stocks of large publicly traded companies are traded on the open market, at such places such as the New York Stock Exchange, NASDAQ, etc. At the New York Stock Exchange, deals are done face to face in person. Prices are determined by an auction format in essence, meaning whoever pays the most, gets the stock. While this is going on, people can sell stocks at that price, and you are actually “trading” stocks. You may never meet the person you are trading with, but in essence that is what happens in two separate transactions.

Stocks can change constantly, due to many different things. It works on supply and demand, meaning if more people want a stock, the stock prices go up, and conversely, less interest equals a lower price. The most common way to purchase a stock are through brokers.

There are in person brokerage companies, such as Merrill Lynch, or you can go online and trade online yourself or through a broker. Online sites such as Scottrade, Etrade, etc let you trade stocks on a real time basis, and only cost a few dollars per trade. Many people may be enticed to buy penny stocks, but those are almost a sure bet to make you lose money.

Overall, there are some basics that were outlined that are important to trading stocks, but to really be successful, there is a bunch more to learn.

Bull:::Bear markets

A Comparison between Bull Markets and Bear Markets

There are two ways to describe the general conditions of the stock market: it can be a bull market or a bear market. A bear market indicates the continuous downward movement of the stock market. Conversely, a bull market indicates the constant upward movement of the stock market. A particular stock that seems to be increasing in value is described to be bullish while a stock that seems to be decreasing in value is described to be bearish.

The bull and bear terms do not refer to the short term fluctuations in the stock market. A bear market is the stock market wherein the prices of the key stocks have fallen by 20% or more over a period of at least two months. Prices, even during a bear market, may temporarily increase. Bull markets, being the opposite of bear markets, indicate a rise in the prices of the key stocks over a certain period of time.

The economical state of a country is usually reflected through the stock market conditions. The stock market of an economy with reasonable interest rates and low unemployment rates is considered to be bullish since it is doing just well. Bear markets, on the other hand, usually occur during a slowdown in an economy. The investors tend to lose their confidence and the companies begin to lay off their workers. An exaggerated bear market will eventually lead to a crash that is brought on by panic selling while an exaggerated bull market will actually result to a market bubble that is brought on by investor over-enthusiasm.

Even if most money can be made during bull markets, bear markets also present a lot of financial opportunities. Investors use their knowledge of the characteristics of each type of market as an investment strategy. It is expected that a bullish market will generate a huge number of investors who wish to buy some stocks. Because a bullish market could also mean that the economy is doing well, there will be a lot of people interested in buying stocks since they have the extra money to spend. This kind of situation will cause an increase in the prices of the stocks because there will be a shortage in the supply of stocks. During bear markets, it is expected that a lot of investors will have the desire to unload their stocks and put their money in fixed-return instruments like bonds due to the continuous decrease in the prices of the stocks. Supply tends to exceed demand as money is withdrawn from the stock market. This causes the prices of the stocks to lower even further.

It is easier to make money during bull markets. In a bull market, all dips are temporary and they are going to be corrected any time soon. Since the upward rising of the prices cannot go on forever, the investors need to sell their stocks when the market reaches its peak.

Bear markets are considered to be opportunities of picking up stocks at bargain prices. Approaching the end of a bear market will offer the greatest chance to generate some profit. Since the prices will most likely fall before they recover, the investors have to be prepared for some short-term loss. One investment strategy used during bear markets is short selling. It involves the selling of the stocks that they do not own in the anticipation of further decrease in prices. This strategy gives the investors a chance to buy the stocks for a price that is lower than their previous selling price.

During bear markets, fixed-return investments such as CAs and bonds can also be used to generate income. Defensive stocks, which include government-owned utilities that provide necessities despite the current economic state, are also safe to buy even during bear markets.