Stock Market-The expensive Stocks

By cfdidea

Today as the world's economies start to slow down, many people are searching for how to generate extra income to protect themselves for the upcoming tough times ahead. So what are you doing to help you generate extra income? Many smart traders are turning to the stock markets and forex markets to help them generate extra income.

The meaning of cheap stock, that is, stocks that they are trading under 60 cents or below, are always enticing - because you put down a small amount of money for a potentially lucrative return. It also looks good because with your investment you are getting a lot more shares, or contracts for you amount invested.

However, for many investors, this scenario is just a pipe dream to buy that stock at 10 cents and see it go to $10. Does happen but not very often and it can be very costly. Sometimes they are cheap for a great reason, they are NO GOOD

So what are the downfalls to cheap stocks?

How can you identify if they are cheap These cheaper stocks can also be categorized by their market capitalisation (that is, the total number of shares multiplied by the price per share). Which is the total value of the company If a company's market cap is less than $100 million, the company is considered a fairly small stock, or a "small cap stock".

So is bigger better, or are small Fish sweeter, Will they grow? Historically, small cap stocks have outperformed large cap stocks in terms of returns. However this is not always the case and you have to remember the saying risk versus return. This isn't because a lot of cheap, small companies are better investments than large companies, but because almost all big companies were small when they first sold stock. Everything normally starts out small. Microsoft started in a garage, and now they are one of the biggest company in the world. Most large companies are through growing or are just fighting for market share.

Money-hungry investors turn to small stocks to buy, because these stocks are cheap and it looks like the bigger companies have not much room to grow. Right? We all want to get rich from the stock market, otherwise we would not trade? True? Read the Fine Print- Be careful of 'the cheap stock'

Traders and investors will often flock to internet chat rooms and talk up a cheap stock, saying they are going to find large amount resource, or they are doing a big deal with a big company. Why does this happen because people buy it and then want someone else to continue to buy it.

This is called "pumping and dumping" and it happens all the time. So make sure you are careful. As if this was true what is being said in the chat rooms, it would be inside trading. Illegal so make sure you do you own homework.

A stock that maybe trades only 5,000 shares a day is a good example of this type of scam and highly illegal. So do not fall into the trap. Otherwise you will lose your money. By pumping up the stock it creates the price to move higher for no good reason. This stock will soon be a DUD Trade. This Stock used to trade at $5 now its 50 cents. So that's cheap? Wrong

Another thing to avoid is a stock that has dropped significantly in price. Just because a stock looks cheap doesn't meant it's going to return to glory and you'll make yourself a big profit. The reason they fall is because something fundamental may have changed, they could have lost most of their revenue by losing a contract, or could be sued there are a host of reasons for this stock to fall.

You have to ask yourself why the stock fell in the first place? Those odds aren't good that these stocks will rebound. The odds aren't in your favour. Following the trend, remember trend is your friend.

As we have discussed in the article the most important steps you can make as a trader is education. As you are responsible for creating your own wealth so to continue learning and for more free education lessons please visit the CFD FX REPORT they will be able to satisfy all your education requirements. Also they can help you find the Best Forex Broker and CFD Brokers in the market. Visit them today. Education is knowledge and knowledge helps create wealth. - 23222

About the Author:

The CFD FX REPORT is a real time trading tool that offers clients free trading reports, with trading ideas, stock market and forex market education as well helping them with. Also if you are looking for a Forex Broker, then feel free to visit our broker section as we recently reviewed all the forex brokers and have found the best on the market.

Avoid Misconceptions When Investing

By Rick Amorey

When thinking about stocks, there are many misconceptions one may have about investing in them. Usually, mistakes from misconceptions are easily corrected, but when money is involved in the mix, these mistakes can lead to big losses. This article is to help you ensure that you do not have these disastrous misconceptions.

The first and most glaring misconception about investing in stocks is the idea that you can have overnight success. When your financial portfolio is well-established, and you made good decisions, there will be instances when you could earn hundreds on a daily basis. But doing so requires a lot of market study and patience. And if you try to get a quick buck, then your capital will burn out right before your very eyes.

Now, on to my next point: When trying to earn big and fast, some people invest everything they have on the first good deal they come across. You don't have to put all your eggs in one basket! Even the best experts in stock will see the occasional loss of funds; it's a good idea to just see a small percent of your investment disappear. Wouldn't that be better than see them all vanish in one bad day? It can happen.

While the next one isn't really much of a misconception, it's still not advisable, anyway. There's the idea of being able to handle stocks on your own without a capable broker. While this is indeed possible, I wouldn't recommend it, especially to first-time investors. Trading is not to be taken lightly, and the experience of qualified investors will be priceless in helping you from making bad decisions at the start.

Finally, I would like to mention that the current economical instability does not mean that this is the worst time to invest in stocks. On the contrary, it may be a good idea to buy stocks while they're at their cheapest. It could be a good long term investment, but like all things must be considered carefully. - 23222

About the Author:

Do not fall for get-rich-quick schemes that are rampant on the Internet! With the help of Emini Trading, you will learn a sound, well-built plan to slowly but consistently earn more and more with trading. Be a part of the Emini Trading System now!

Global Macro Trading and the Benefits of Diversification

By George Druckenmiller

Anyone that has been trading for a long time has heard that diversification is the only free lunch our there, referring to the economics principle that nothing good is free. The problem has been that if you went to the typical financial planner you were deworsified and not diversified. Dont worry because diversification is still very useful if done properly and really does help to increase returns and lower risks.

The typical planner will have you put some of your money in domestic stocks, some in foreign stocks, and then place some money in bonds. If that is all you are doing you are not getting nearly the benefit you could be getting and in reality you are barely diversified at all.

Diversification done right will not only have you invested in several different asset classes but also in multiple strategies inside each asset class. Ask a global macro trader why they trade this way and they will tell you that being able to go into multiple asset classes is the only way to consistently generate positive returns regardless of what the stock market is doing.

The world of global macro trading will have you looking at several different asset classes such as domestic stocks, foreign stocks, Treasury bonds, investment grade corporate bonds, junk bonds, foreign government bonds, foreign corporate bonds, commodities, real estate, and currencies. In fact some traders will get even more diversified by investing in collectibles, private equity, venture capital, etc. Basically anything that has different economic drivers is worth looking at as for a potential investment as it diversifies your risk.

As traders and investors we should all be looking for the best risk to reward scenarios out there instead of just being involved. If you are doing that then it helps to look at multiple markets so that you can always be putting money at risk in an intelligent manner.

Luckily we can diversify not only across asset classes but also across different strategies in each one. For instance if you could allocate some money to a long term value investing strategy that looks at three to five years out investing in stocks and then also invest in a good short term trading fund. By doing this you can capture slightly different types of alpha or excess return. If you build a portfolio this way you will become extremely diversified and uncorrelated to regular investments.

If you do this properly and diversify into not only different assets but also into different strategies inside each asset class you will be able to capture returns that the classis stock bond mix would have missed. While this is no guarantee of positive returns every day, over time you will see a reduction in risk and an increase in reward. Diversification is really a free lunch.

If you are a relatively active investor you can achieve positive returns in multiple asset classes yourself by building market beating models in different markets. Yes, you can and indeed should use bottoms up research but in the spirit of being efficient with your time you should automate as much as possible so that you are able to be a more efficient global macro trader and miss fewer of the potential opportunities that occur in different markets. - 23222

About the Author:

The Macro Trader helps investors find great Global Macro Trading opportunities. Tactical Asset Allocation is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.

Stock Trading Terms

By Mara Hernandez-Capili

If you are new to stocks trading then it is imperative for you to read this article. This article is written to provide you with the usual terms used in stocks trading. To give you a fresh recap: stocks trading is the buying and selling of stocks. When you buy a company share or stocks you are considered as a part-owner of the company where you get to enjoy privileges like voting rights.

A capital gain is the term used to describe the increase that your capital received because of the increase in the companys profits. It is usually what investors are after that is why they invest through stocks. Stocks can have high capital gains depending on how many shares were purchased. The higher the shares, the greater the capital gains if the market increases value.

A buy and hold strategy is the term used when a stock is bought and held for a long period of time regardless of the fluctuations or positive rise in the market. This is in belief that in a matter of years, a stock may increase its value to more than 100% of its original capital gain. Some people exercise this strategy while some dont, for they would not want to wait long enough to access their capital gains.

A current market value is the term used to describe the current worth of portfolios, stocks or shares. This is not fixed in value because fluctuations in the market generally affect the price of shares. In order to have high capital gains, people wait until the stocks are priced at a minimum market value. If the company starts to gain its value in the market, shares dramatically shoots up leaving the investor happy with high capital gains.

The last term is the aggressive term. The term is used to describe the way an investor invests in high risk shares. The greater the number of shares you purchased, the higher the risks involved. This is mostly played by sophisticated investors. - 23222

About the Author:

Mara Hernandez-Capili is a writer and a researcher on Business and Finance. Learn more on how to increase your financial I.Q. by learning about emini trading today. Start earning extra income by making your money work for you through the emini trading system. "Start your journey to financial freedom not tomorrow, not next week, but today.

Forex Trading- Exit or Get Burnt

By cfdtrader

Today as the world's economies start to slow down, many people are searching for how to generate extra income to protect themselves for the upcoming tough times ahead. So what are you doing to help you generate extra income? Many smart traders are turning to the stock markets and forex markets to help them generate extra income.

The minute you place that trade you become emotionally attached to it, so when it becomes bad it can be difficult to cut that emotion. It is almost like love, if they loved you they wouldn't do bad or go bad.

So makes a successful trader or a trader that goes broke, the ability to exit. You see successful trader understands that they can't pick the forex market or stock market 100% of the time.

The successful traders go into the market looking at the worst case scenario and having a plan of exactly where to exit even if it goes against them.

Forex Traders and Stock market traders that go broke have no plan to exit, you most of the 'losers' have the view that they get the market right 100% of the time, so they are never wrong so they don't need an exit strategy. What can be worse than this is they will refuse to exit the trade, and then get caught in downward spiral. Make sure that your broker offers trialing stop losses, here is a great broker to consider or email support@cfdfxreport.com to get the name of this awesome broker.

You have to know when to fold them The exit decision is the most crucial decision of trading. When you explore the above statement it makes sense, you see it determines how much money you make or lose. A good strategy to implement when it is possible, that as soon as the stock moves up say 5% move the stop to break even, this will ensure you are a successful trader. If you are a forex trader, it can be around 20% (depending on leverage). If the stock moves up and then comes back it maybe that the momentum has shifted.

The two main forms of exiting are when you to cut your losses or when to take your profit of the table. The reason you must be able to take a loss, is that if you don't they may continue to spiral downwards and inflate the losses.

This all comes back to your rules and strategies. Letting the profits run can be an equally difficult decision, a strategy that can work effectively is the trailing stop loss, every time the position moves up a certain percentage you increase your stop loss. The benefit of this is that you are not trying to pick the top of the market. No Emotion. No Attachment. Its all in the mind I must reinforce this "The trading game is all about keeping your head and not letting emotion take over". This is why your trading plan is important, just as important that you have one that suits you and ensuring that you stick to the rules. Cutting loses is never easy, but a small loss is easier to take than a huge loss try and instill this into your mind and it should help. Don't every have the mentality that it is a small drop, it will come back then I will get out, it doesn't happen very often. The markets of late would have seen many of these traders be taken out of the market completely. There will always be another trading day.

As we have discussed in the article the most important steps you can make as a trader is education. As you are responsible for creating your own wealth so to continue learning and for more free education lessons please visit the CFD FX REPORT they will be able to satisfy all your education requirements. Also they can help you find the Best Forex Broker and CFD Brokers in the market. Visit them today. Education is knowledge and knowledge helps create wealth. - 23222

About the Author:

The CFD FX REPORT is a real time trading tool that offers clients free trading reports, with trading ideas, stock market and forex market education as well helping them with. Also if you are looking for a Forex Broker, then feel free to visit our broker section as we recently reviewed all the forex brokers and have found the best on the market.