How To Buy Good Stocks

Learn To Buy Good Stocks

Although it may seem obvious to most stock market swing traders there are a number of simple rules that you can follow which will ensure that you have more success when buying stocks:

In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These stock indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.

For example the DOW 30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).

Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to easily buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered very liquid it should trade at least 500,000 shares per day, ideally even more.

It is best to avoid stocks that are bellow as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between and . Avoid buying a stock below at anytime.

Another consideration is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option in order to protect your stock.

Be very cautious about buying a stock just before it’s earnings release, stocks often drop significantly if you come out with a poor report. Earnings are released 4 times a year with one of them being the annual report.

If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.

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3 Common Mistakes Made When Trading Options

#1 Trading options in only one direction and that’s usually up.

A common mistake options traders make is one of omission. They forget or fail to realize that options trading allows one to make money on falling prices as well as rising prices. By not trading in both directions they leave a lot of money on the table. When you stop trading when the market is in a downturn, you are potentially leaving half the available money on the table.

Additionally, security prices tend to fall faster than they rise, so some of the biggest, quickest gainers are executed via falling share prices. So if the intrepid options trader is not looking for short trades they are truly cheating themselves out of some of the best trades going.

#2 Not having money-management rules in place.

Another common mistake is to not strictly adhere to sound money-management rules. Critical metrics arise from guiding principles such as how much should you trade and how much should you risk? Where should you set your stops or in what manner should you hedge?

Solid money management rules control help you to control your trades. And most importantly, they help to prevent catastrophic losses so that you can trade another day.

#3 Letting your emotions dictate your trade entry and exit points.

Many times behavior that is illogical makes investors execute trades that lack the necessary fundamentals. Instead of letting sterile indicator guide their decision making, they operate on emotion or impulse. Fear of price reversal drives traders out of winning trades too soon and fear of loss makes them stay in losing trades for too long.

And because there is zero way to eliminate your emotions completely, you must learn to control them. The most realistic and effective way to do so is to develop a set of trading rules to constrict your trading activities and to conduct the majority of your research and trading decisions outside of open trading hours.

Stock Trading Golden Rules

To be successful in stock market, you need to prepare few guidelines. If you follow these guidelines consistently, you will make money with stocks. Obviously you will most likely lose your money if you break your own rules. So my suggestion is to follow these rules no matter what.  People might suggest you to go for Stock trading software as an easier route.  However sticking to your own share trading rules will certainly be worth during the long run, it is the discipline that will help you make big profits. So look at these rules  before you enter the stock trading.

Stock Trading Guideline No 1: Be an Expert at a trading style.
Different people will have different stock trading styles. Do not try to do them all. You keep improving and practicing at the one style of share trading that is most suitable for you. Do not hop from one trading style to another. You should master one trading style  rather than trying to make poor attempts at implementing numerous method.

Stock Trading Guideline No 2: Never risk over three percentage of your total portfolio on any single share.
Protecting your primary investment is vital if you want to be in stock trading for long time.  Keep in mind that you are not trying to acquire the firm, you are just trading their stocks to make profit.

Share Trading Guideline No 3: If market goes against you, cut your losses at maximum of 15%
A very important rule. Many traders commit the mistake of holding a losing trade while smart people will minimize their loses and move on. The most important rule here is to place stop losses and reduce your losses if your assumptions went incorrect. Stick to your stop loss point and analyze the performance of your stock.

Stock Trading Guideline No 4: Always set price targets.
Before share trading have price targets. Don’t be too greedy and try to get the most out of rising share price. A stock price can rise steeply too quickly and can also fall too drastically.

Stock Trading Rule No 5: Don’t break the rules.
Like I mentioned before you must stick to the rules to attain money in share market.

Similar guidelines are applicable in foreign exchange market as well. You have automatic forex trading robots like Forex Megdroid, though sticking the rules is the key to success.

Forex Pips Secrets

Learn Forex Pips Secrets

Here is an useful Forex Pips Guide from a cool forex website.

When you start looking for currency exchange articles, you will quickly observe references to the forex pip. Your gains and losses will be determined in pips. another thing that is measured in pips is the spread, the difference between the bid and ask prices which is the main cost of FX trading and how the forex brokers create their money. Hence it is obviously very  significant to know what is a pip.

The word is an acronym standing for percentage in point (otherwise, price interest point). It is the least increment of changes in values. It allows us to evaluate a climb or fall in currency rates in percentage terms as an alternative of dollars and cents.

What should we use Pips instead of dollars? The logic for this is clear. In the foreign exchange market there is no world currency in which to define prices. The United States Dollar may be the most generally traded currency but it is not drawn in in all trades. If you are trading cross rates, i.e. two extra currencies such as EUR/GBP or any other pairs that does not involve USD, it would not make any sense at all to state your profits and losses in terms of United States dollars. as an alternative, we require something that is a small percentage of the value of whatever currencies we are trading with.

This means that the monetary value of a pip varies according to the currency pair. Even if you are making use of the best forex trading software you need to have a very good knowledge about pips.

nearly all currencies are quoted to 4 decimal points. For illustration you might notice the bid price for EUR/USD quoted at 1.3641 and ask price 1.3645. The change (the spread) is 0.0004 or 4 pips. In this case a pip is 0.01% of a lot.

accordingly if the lot size was $100,000, one pip would be worth $10. For a lot size of $10,000, one pip would be US$1.

That is the worth of pips when the US dollar is the quote currency, i.e. XXX/USD. But when the quote currency is different, one pip is commonly ten units of that currency (e.g. 10 euros or 10 pounds). Or if your lot size is 10,000 units, one pip is 1 unit (1 euro or 1 pound).

The Japaense Yen is an exception which has a much lower unit value than most currencies (you get a lot of yen to the dollar). For this reason of this, the yen is only quoted to the second decimal point. You might see a price USD/JPY 110.12. In this case one pip is 0.01 or 1% but in yen, not dollars. So the pip value is JPY 1000 which at that price would be worth US $11.012.

These numbers can be confusing when you are a beginner at currency trading. So it is better for beginners to trade consistently with just one forex currency pair.

When you trade in one pair repeatedly every day you will soon get used to how much a pip means in terms of your actual gains and losses in your account. You will understand how much one pip is worth in dollars or in your own currency.

But when you are are doing forex trading quite a few different currency pairs, you have to deal with pips of diverse values. If you get baffled, you could be taking greater risks than you intended or closing trades with less gains than you thought. It is much easier to deal with just one pair initially until you have a sound understanding of trading practices and forex pip values.