October 14th, 2008 by admin
Imagine your friends laughing when you say you made a lot of money as the stock market dropped. Then imagine their faces when you show them your incredible gains. They won’t laugh any more. They’ll beg for help.
Everybody loves it when the stock market goes up. Many people panic when it falls. But they don’t need to. An American market exists that allows traders to make money regardless of whether stocks are going up or down.
Professional investors know how to hedge their bet. They take precautions because they know the economy will move through various cycles. What goes up will eventually come down.
The common man and woman are different. They assume investing is difficult so they don’t take time to learn simple methods that might benefit their lifelong effort to get ahead. They throw their money into mutual funds or a 401-K account and hope for the best. This may work when things are going well in the financial markets. In a crisis, this method will be the cause of many a sleepless night.
Every family could use some extra money each month. And it’s not a pipe dream, if you are capable of taking simple direction and absorbing new information.
Here’s how you to make money when the stock market falls: hedge your bet by trading the mini-sized Dow Jones futures market. I know what you’re thinking. Futures?! Isn’t that a great way to lose money? My answer: Have you ever lost money in the stock market?
Today’s economic conditions should be a reminder that our money is always at risk. Yesterday’s victories may be tomorrow’s defeats. All the more reason to hedge - always - your most important investments.
The mini-sized Dow Jones electronic market is global and stays open for business throughout the night and into the next day. It closes briefly at the end of each business day, all day Saturday, then opens again late Sunday afternoon. Plenty of time to access and manage your online account.
One significant reason for learning this market is its simplicity. You can learn to trade the market up and down - and it’s all legal. For people who have only traded stocks, it is sometimes difficult to understand how a futures trader can make money when a market drops. But it’s true, it can be done, without breaking any laws.
This is not true of some “short selling” that takes place in the stock market. Some rogue brokerages break Securities and Exchange Commission rules and in the process rob good, honest investors. That is not what I’m suggesting. But that illegal practice is precisely why you would be wise to learn how to hedge your stock portfolio with the mini-sized Dow Jones futures market.
There are many tutorials to help you understand how to trade this market. Google “mini-sized Dow Jones” or “the mini-Dow” and you’ll have plenty to choose from.
But don’t fall for offers that ask you to pay big bucks for software and platforms you won’t need. I’m not suggesting you day trade - not at first anyway. So choose a guidebook that is modestly priced and then learn as much as you can from it before buying your next book.
The Chicago Board of Trade and the CME Group Exchange websites offer good, free information to help you understand the basics of trading futures. Take full advantage.
Finally, be a specialist. Master the one market that can do you the most good. The mini-sized Dow Jones stock index will be enormously beneficial if you have long-term or short-term stock investments. You’ll soon realize that by concentrating on one market you don’t have to be Warren Buffet to make smart moves.
Copyright 2008
Douglas Glenn Clark is the author of The Mini-Dow Jones Picture Book: How to trade futures and hedge stocks. Free trading strategies are posted each week at http://www.afterthenoise.com
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I will never forget my very first lesson in the stock market. It was a mess. Within just two weeks I lost everything I invested. I did not even know that my broker invested in stock options and not in the shares itself. Maybe he told me but I did not know the difference anyway.
Today, almost twenty years later, I can only laugh about my foolishness. How could I be so naive believing it would be so easy to make money with stocks? I was fooled by the fact that it was too easy to open an account and to give an order to buy shares. I could just do it without doing any research. It was so easy to get into the market. How could something that is so easy be dangerous?
No one really cared about me but just themselves. So did I. I wanted to make money fast. I did not care which stock would bring me the profits. I would just buy anything that looks promising.
Maybe that sounds familiar to you. We are all impatient and want what we want quickly and easily. Unfortunately (or luckily), on the stock market there is no mercy. Whether you are a novice or an experienced pro, the rules are the same for everybody.
The best lesson I have for beginners is to be very careful in the beginning. Protecting your money is the first rule. The stock exchange is a battlefield, a black hole that sucks your money in without asking. If you approach the market with this attitude then you are ahead of ninety percent of the other stock traders out there already who do not survive the first weeks. Like I did.
Highly Recommended Reading:
Understanding The Stock Market
Online Stock Trading
David A. Sorenger is an expert author on stock market related topics. His articles about stock trading, online stock brokers, stock options and penny stocks have been published on numerous web sites, forums, blogs and e-zines all over the Internet.
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January 31st, 2008 by admin
To be highly accurate in any pursuit, you have to carefully observe and analyze the object at hand. The stock market is no different. The idea may seem simple enough, but even with their hard-earned money on the line, you’d be surprised at how often people argue with the facts that are right in front of them. Many investors are sometimes misled by the shouting of opinions and prognostications. Listening to opinions about the market is one of the riskiest things you can do as an individual investor. You want facts, not personal opinions. If there’s one lesson most learned from the 2000 three-year bear market, it’s that arguing with the facts and simply hoping for the best is the easiest way to lose your shirt. Let’s start by dissecting market activity and talk about what it’s trying to tell you.
The Interplay of Price and Volume
The stock market is governed by the same forces as individual stocks: supply and demand. Throughout history, the best way to determine the market’s health and direction has been to view the daily price and volume action of the three major indexes: the Dow, the S&P 500 and the Nasdaq. Volume bursts in these key indexes show where mutual funds and other institutional investors, the biggest driver of stock prices, are moving.
In an up-trending market, you normally want to see prices and trading volume rise somewhat in tandem. This shows a market under accumulation, with more positive volume than selling volume: a good sign. On down days, in the majority of cases, you want to see volume lessen. This shows a lack of any significant selling another good sign. But take note of days when the market shoots up in price to new highs on lighter volume. This shows a lack of institutional buying, which might be a warning sign.
Even in the best of all bull markets, there will be days on the way up when selling suddenly overtakes buying when an index closes down for the day on heavier volume than the day before. This shows distribution, and it is a potential red flag if that type of action continues to occur. One day of distribution is not enough to turn a rallying market downward, nor is it necessarily cause for alarm. Rather, take it as a signal to start watching the market more closely to see what happens next. Market cycles over the last 50 years indicate that it usually takes three to five distribution days over a period of up to four weeks to turn the market’s uptrend into a downtrend. Every major market top in the past 100 years has revealed this negative price-and-volume action prior to the market’s downtrend.
Many people think of the great crash of 1929 as being a sudden, inexplicable event. Not so. In late 1929, just before the Dow gave way to a selling avalanche, the index posted a flurry of down days, each on heavier volume than the previous session, all of them saying to investors: “Get out.” This activity pinpoints the mass exodus by institutional or professional investors the heart and soul of the market. You might be asking how a market event almost 80 years ago tells us anything about today’s market. The answer is that in the stock market, as in many things, history continually repeats itself because human nature doesn’t change.
The Nasdaq flashed similar warning signs in the spring of 2000, although almost everyone missed it because they were caught up in the predictions and hysteria of the moment. By March 30, the market had logged a series of heavy distribution days, a sign that a number of mutual funds, pensions or other big players were selling stock. Investor’s Business Daily’s market column “The Big Picture” warned people to get off margin, begin raising cash and only remain invested with extreme caution not because of what we thought the market was going to do, but because we were reading what the market was actually telling us day by day. It was telling investors: “Sell.”
An investor who remains inflexible during a confirmed market downturn and argues with the market facts will usually suffer the consequences. The name of the game is to preserve profits you have built up in a bull market instead of riding them back down through a bear market period.
Articles on stock market trading, finance, investing tips and many more stock trading related information. If you want to make money out of this visit http://www.2stocktrading.com
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January 28th, 2008 by admin
What a glorious week for stocks….that is, if you are short the market. It has been tough watching the value of our stocks shrink so rapidly in the New Year. This is also the kind of market pros, like Warren Buffett, love to see because they can find good value stocks cheap. Mr. Buffett also has plenty of time to sit on these value stocks to wait for them to climb back in favor, which some people don’t want to do. No one can tell you when the bottom has been reached and I certainly don’t know when that will be, but it is a great time to research stocks and look for bargains.
There are several ways to play a bear market, to stop the bleeding without selling every stock you have and in some cases, even make money. I will go over a few, but by no means is this a complete list or do all of these strategies work all the time.
- Inverse Stock Market Funds: You can buy mutual funds or electronic trading funds (ETF) that are inversely correlated to the stock market. They are usually tied to major indexes like the DOW, S&P500, Russell 2000, NASDAQ 100, etc… Basically when the index goes down, these funds go up. A few of the companies that provide these types of funds are ProFunds, ProShares and Rydex.
- Options: These can be risky and complicated, but they are a way to hedge your bet in stocks. Most of your brokers should have information on them if you are interested.
- Futures: Basically the same as Options, except with Futures you are obligated to fulfill the terms of a contract and with Options you have the right to buy or sell underlying assets at expiration. Again, these can be very risky and complicated to understand for the average investor.
- Government Bonds: Not really sexy, but safe none the less in a bear market.
- Defensive Industries And Companies With Cash: The non-cyclical companies will continue to have products purchased through thick and thin, so they are a safe bet in down markets. You will always be purchasing deodorant, toothpaste, shampoo and home cleaning products. It is also prudent to invest in stocks that have hordes of cash, which obviously helps in retreating markets.
Let’s face it, making money in a bear market isn′t easy, and our goal as long term investors is to weather the storm and take advantage of opportunities when we see them. It is not easy being the contrarian, but it can work to your advantage if you play your cards right. There is a reason why Warren loves markets like this and it is because he can build positions in cheap stocks for the long run.
Scott Kibby
Levott LLC - Control Your Success
http://www.Levott.net
Email: Scott@levott.net
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January 24th, 2008 by admin
The movement of the stock market, its trends, whether up or down, are referred to as the “emotion” of the market. There are specific terms that are used to indicate market movement. A bear market is characterized by the downward movement of the market over a period of time while a bull market is characterized by a consistent upward trend. Likewise, a stock that is doing well is considered bullish while a stock with declining value is referred to as bearish.
Bull and bear references as applied to the stock market in regards to its general conditions or “emotion” are not used to indicate short term fluctuations within the market. A bear market is generally a market where the prices of key stocks have fallen in price by 20% or more over a minimum period of two months. It should be noted, however, that a bear market may see a temporary increase in stock prices though they can not be sustained until the tide changes. On the flipside, a bull market is indicated by the consistent and long term rise of key stock prices.
Historically, the stock market has reflected the state of the nation’s economy. Bull markets have often thrived when the economy was doing well, unemployment was low and interest rates were reasonable. Bear markets, on the other hand have usually occurred during times of the economic downswing or slowdown. In such cases it is not uncommon for investors to lose confidence in the market and companies embark on layoffs an budget cuts. In extreme cases a bear market can escalate an already declining investor confidence due to lowered values of stocks which can lead to a panic driven stock market crash. Likewise, a bull market that is exaggerated can be driven by over enthusiastic investors and a market “bubble″ occurs. This “bubble″ will eventually burst and values will decline, often sharply.
While most gains are made during bull markets, opportunities for gains are present during bear markets. Having an understanding of the characteristics of each type of market will allow investors to incur gains and profit from the trends. Naturally, when the market is bullish investors are more inclined to buy up stocks. The environment is favorable with an economy that is doing well and people may have some extra money that they would like to use to “dabble″ in the stock market. Under these conditions, the supply is cut but the demand is high and this serves to drive prices higher.
A bear market, on the other hand, presents falling stock prices leading investors to seek to unload their stocks in an effort to salvage what they can from their losses. Often, investors in a bearish market will place their money in fixed return instruments such as bonds or mutual funds because they pose less of a risk. As money is withdrawn from the stock market due to stock sales, the supply exceeds the demand and the prices of the stocks are driven down.
Of course, the easiest time to make money in the stock market is when it is bullish. If you can get in at the onset of the upward trend, you can stand to benefit the most by incurring the greatest gains. The dips that occur during a bull market are temporary and are usually corrected rather quickly. However, it is important to understand that the rising prices will eventually begin to decline and the wise investor will learn how to “read” the trends and anticipate the market peaks, thus the optimal time to sell before the market turns bearish.
Bear markets do have some great benefits though because they offer investors the opportunity to buy into stocks at bargain prices. Unlike the bull market where the key to optimum gains is to enter at the beginning, the greatest chance for profit in a bearish market is at the end of the trend. Typically, the prices drop, often substantially, before recovering which presents the investor with a optimal buy in at a low price. However, investors should be prepared to take a short term loss as prices dip just before the upward turn.
Short selling is a popular investment strategy that occurs during a bear market. In short selling, you sell stock that you do not own in the anticipation of a further price drop. This is done so that when the time comes to deliver, you can buy the stock for less than you sold it. Fixed return investments such as CAs and bonds are also used to generate income during a bear market. These “defensive stocks” are safe to buy at any time, regardless of the stock market trends.
Think you know your stock market basics? Think you know all about penny stocks? Free trend analysis of your favorite stock.
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January 24th, 2008 by admin
What a glorious week for stocks….that is, if you are short the market. It has been tough watching the value of our stocks shrink so rapidly in the New Year. This is also the kind of market pros, like Warren Buffett, love to see because they can find good value stocks cheap. Mr. Buffett also has plenty of time to sit on these value stocks to wait for them to climb back in favor, which some people don’t want to do. No one can tell you when the bottom has been reached and I certainly don’t know when that will be, but it is a great time to research stocks and look for bargains.
There are several ways to play a bear market, to stop the bleeding without selling every stock you have and in some cases, even make money. I will go over a few, but by no means is this a complete list or do all of these strategies work all the time.
- Inverse Stock Market Funds: You can buy mutual funds or electronic trading funds (ETF) that are inversely correlated to the stock market. They are usually tied to major indexes like the DOW, S&P500, Russell 2000, NASDAQ 100, etc… Basically when the index goes down, these funds go up. A few of the companies that provide these types of funds are ProFunds, ProShares and Rydex.
- Options: These can be risky and complicated, but they are a way to hedge your bet in stocks. Most of your brokers should have information on them if you are interested.
- Futures: Basically the same as Options, except with Futures you are obligated to fulfill the terms of a contract and with Options you have the right to buy or sell underlying assets at expiration. Again, these can be very risky and complicated to understand for the average investor.
- Government Bonds: Not really sexy, but safe none the less in a bear market.
- Defensive Industries And Companies With Cash: The non-cyclical companies will continue to have products purchased through thick and thin, so they are a safe bet in down markets. You will always be purchasing deodorant, toothpaste, shampoo and home cleaning products. It is also prudent to invest in stocks that have hordes of cash, which obviously helps in retreating markets.
Let’s face it, making money in a bear market isn’t easy, and our goal as long term investors is to weather the storm and take advantage of opportunities when we see them. It is not easy being the contrarian, but it can work to your advantage if you play your cards right. There is a reason why Warren loves markets like this and it is because he can build positions in cheap stocks for the long run.
Scott Kibby
Levott LLC - Control Your Success
http://www.Levott.net
Email: Scott@levott.net
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