Fortune Watch

Are you thinking of entering the fast-paced world of day trading? Arm yourselves with the information from this fact sheet on day trading.

What is day trading? Day trading is an investment tactic that does online daily stock trading with a relatively short investment. Those who do day trading usually buy and sell securities during the same market day and, as a general rule, do not hold stocks overnight. Many day traders make dozens of trades every market day hoping to capture profits that arise from small intraday price fluctuations.

How is day trading different from swing trading? Day trading relatively holds the stock for only the day. After the stock market closes, a day trader has no stock in his hands. Swing trading holds a stock for at least a few days, waiting out for the best price before dumping it back to the market. Day trading is much more stressful and requires guts and a keen business sense. Once you get good at day trading, you can earn up to $50,000 from your initial investment.

How much capital would you need for day trading? You need an investment equivalent to buy 1000 stocks. That is roughly around $20,000. Because the chances are small that you will find a marketable stock with a price of under $20, this is enough to get your day trading underway. However, you must remember that this is a 100% risk capital so do not worry too much if you lose this amount very early.

What are the general rules for day trading?
– Always trade with the trend.
– Cut losses short
– Never get emotionally involved in your trades.

What are the most suitable stocks to trade for day trading? It is advisable to trade high volume stocks. Go with the trend with the popular stocks available. It’ll be easier for you to sell those stocks at the end of the day trading.

How does a usual day trading transaction occur? For example, at 10:00 AM a day trader might buy 1000 shares of stock XYZ just as the price begins to rise on good news, then sell it at 10:04 AM when it’s up by 1/2 ($0.50). The day trader makes $500, minus commission. With today’s cheap commissions of $29.95 or less per trade, that’s a quick $440.10 or better, excluding taxes.

Most people who deal with day trading spend all of their time in front of the computer, watching the slightest change in the stock price. As the prices go up and down, the day trader must be alert as to when to sell his stock or wait for the moment to hold on it. This can be a very stressful lifestyle as a mere second could mean an increase of half the stock price and missing that moment for any person engaging in day trading could mean a loss on his investment.

Day trading is not a get rich scheme. It is serious business where you could lose everything within minutes because of wrong information. Before jumping into day trading, remember to do your homework first. Go to seminars on day trading, use simulations if possible and practice reading market indicators. To be a successful day trader, you don’t just need luck. Knowledge and experience counts. Welcome to the world of stock markets and investments!

Stock trading has numerous benefits as a viable part time occupation.

In contrast to a second job, there are no special qualifications to begin. The stock market doesn’t care about your level of success, education, ethnic origin or any personal characteristics. Additionally you have the freedom to trade from any location. If you follow a few simple rules you can run your business on your own terms.

The most important factor is to be clear about why you want to trade stocks. What do you hope to gain financially from learning to trade?

Are you looking to: Create an enhanced lifestyle with supplemental income? Replace a full time income with a passive income stream? Become independently wealthy by creating a financial base independent of other income sources?

What would being a successful trader mean you? Imagine yourself making successful trades and gaining financially. Think about what it would feel like to have extra money in your bank account and to achieve your targets. With a clear picture of what you want and how that would feel you will be able to remain focused and motivated.

Your first task is to put one primary goal for your trading plan in writing. Additional goals you set can then support your primary plan.

Know Yourself. As well as learning to trade stocks it is essential that you understand yow you react under stress. Being aware of your own behavior patterns and common causes of and reactions to stress when trading will help you to master stock trading.

The reason that many people lose money in the stock market is because they lack the proper knowledge base. Independent of trading styles there is one thing common to all successful traders; the use of a tested and proven system.

In learning to trade you must be willing to let go of pre-formulated ideas and start fresh, develop new successful habits, and the discipline necessary to trade successfully over time.

Are you willing to do this?

Successful stock market trading eludes many people because they don’t have contact with an experienced, successful trader or trading system that actually works. Going it alone can be potentially expensive when learning by trial and error. Investing in a solid education and taking advantage of the insights and experience of successful trader makes a lot of sense when learning to trade successfully.

One of the unique things about the state of mind of investors in stocks or mutual funds nowadays is that there is a huge diversity in their happiness levels. Of course, those who chase short term opportunities over days or weeks are always in some part of a manic-depressive cycle but nowadays, even long-term investors’ moods have an impressive diversity.

On the face of it, happy days are here again. Stocks have clearly shaken off the decline the suffered in the middle of last year. The markets are at or near all time highs and so are equity mutual funds. Currently, almost 95 per cent of equity mutual funds are either at an all time high or within five per cent of such a high.

In fact except for a handful of perpetual dullards (whom no one any longer invests in any way), there are no equity funds that haven’t recovered the losses that the markets suffered a year ago. In fact, many funds have done substantially better. In the period from June 14, 2006, which was the lowest point that the major indices touched in recent times, the markets have gained considerably. During this period many equity mutual funds gained more than the markets did.

Of course, a larger number, performed worse than the markets. Still, as I pointed out earlier, the fact remains that even these have earned substantial returns over this period and as I said earlier, there aren’t too many funds which aren’t at all time highs.

All in all, there are hardly any investors who are today sitting on losses, no matter when they’ve invested. So that’s that isn’t it? Happy times are here again and everyone should be smiling and congratulating each other?

Not quite. The fact remains that people invest in equity mutual funds to make money, not just to avoid losses. A great deal of money flowed into equity funds in the first half of 2006. Based on the heady atmosphere of those days, I think much of this money was not level-headed long-term investment. Instead, it flowed in expecting quick and substantial returns.

However I think this has been a good experience everyone. This is the way equity investment is. Stocks are volatile and need time to give returns. Most investors who come in at the peak of a bull run actually end up having to make losses in exchange for receiving this valuable educational experience. Those who have learnt it for free should actually consider themselves pretty lucky.

A huge debate arises when it comes to marriage and money about whether or not spouses should have a joint checking account or separate checking accounts. One popular thing that people do nowadays is they keep one joint account to pay the bills from and then they keep a separate account for each of them to spend money on “personal” things. This is a total cop-out when it comes to managing money with your spouse. A marriage is not a joint venture. You cannot pick and choose which things that you want to share as a couple and which things not to share. You must be handling money as a team.

My opinion is that there is only one way to handle your bank accounts. You keep one joint checking account and one joint savings account. You write a budget together, stick to that budget together, and talk to each about making purchases over $50 dollars, unless you are going to make 10 different $50 purchases in one day, then you talk it over with your spouse!

Common Arguments: “My spouse is worse at handling money than I am”. This is why you got married, to help each other, not avoid each others weaknesses. It is okay for one of you to be more financially savvy, but you both need to create a budget together, and not sharing your incomes will only bring more division. If your spouse had a problem with drinking, would you totally abandon them or try to help them? In the same way, why would you totally abandon your spouse if they had a problem with handling money?

“It is easier to keep track of the money”. No it’s not harder, it should be simpler because you are dealing with less bank accounts. What account do you use when you go out to dinner? I can hear it now “No, you pay this time; I have to pay for the dentist tomorrow”. If you are communicating about your purchases, and balancing your check book together each week, it should be easier to keep one joint account.

“I make more money than her, and I don’t want her spending all of it”. You make more money than her? Well, does she cook for you? Does she wash your dirty underwear? Yeah, exactly. You cannot put tabs on your salaries, or else resentment, jealousy, and division will destroy your marriage.

Handling money is extremely important in a marriage. And just like everything else important in a marriage, communication is key to keeping your money handling healthy. If one of you wants to spend all the time and the other wants to save all the time, come to an agreement. Set aside some “Blow” money to use for having fun and blowing it without any worries about what it gets spent on. Set aside money that will be saved for long term and short term. Also, remember to set aside money to pay off debts. Never settle for just paying the minimum payments on credit cards or paying off a car or house in 20 years.

Stocks not Best Investment for Quick Returns

Did you buy a stock to turn $20,000 into the $60,000 you need for Junior’s next year in college? If so, you’re not investing, you’re gambling, and, unless you are incredibly lucky, you will not meet your goal. The expectation of a high return in a short time frame is not realistic. Do stocks ever shoot up like rockets?

Yes, some do. However, you must understand that the market works on a rigid risk-reward basis. If there is little risk to the investor, there will be a lower potential reward. Investments that offer an extremely high potential reward invariably come with a high level of risk.

For the investor, this means if you are after the big returns, you must be prepared to suffer more losses than rewards. As an investment choice, stocks have historically returned 11 to 14 percent.

This does that mean that every stock should return in that range? Not at all – that is simply an average. You need to assess the risk of investing in a particular stock before deciding what an acceptable return is.

An investment in a young high tech company should have a higher potential payout than putting your money in a “blue chip” company that posts modest growth and pays a regular dividend.

What would be the risk factor for a stock that could potentially triple in price over a short period? The answer is very high – in fact, so high that the odds of it succeeding would be very slim. There is no safe (or legal) way to earn a very high return on your money over a short period.

Investing in stocks is best done as a long-term effort, which allows your money to grow and permits time for course corrections and adjustments.

In financial terms, leverage is reinvesting debt in an effort to earn greater return than the cost of interest. When a firm uses a considerable proportion of debt to finance its investments, it is considered highly leveraged. In this situation, both gains and losses are amplified. Margin is a form of debt or borrowed money that is used to invest in other financial instruments. It is often used as collateral to the holder of a position in securities, options or futures contracts to cover the credit risk of his or her counterparts. The concept of leverage and margin are interconnected because you can use a margin to create leverage.

Leverage allows a firm to invest in assets that have the potential to generate high returns. Unfortunately, a leveraged firm brings about additional risk because if the investment does not provide the returns expected, the firm still has to pay back the debt and interest. When a firm is leveraged it ultimately means that it depends somewhat on debt to finance its investments.

A leveraged firm does have its advantages, however. For example, it can increase shareholders’ return on investment by giving the company the ability to take on more high return yielding projects and there is also a tax advantage that is related with borrowing.

A margin is collateral such as cash or securities that are deposited into an account to cover credit risk that the other investor must take on when they have a position in a security, option or futures contract. The margin account is used to cushion any losses that may occur from fluctuations in prices.

It helps to decrease default risk because it constantly monitors and ensures that the investors are able to honor the contract. A margin is also considered borrowed money that is used to buy securities. This can be a practical way of obtaining funds in order to invest in a profitable investment.

A margin account allows you to borrow money from a broker for a fixed interest rate to purchase securities, options or futures contracts in the anticipation of receiving substantially high returns. Some stocks or securities are not permitted to be margined – this is usually due to their volatility and the desire of brokers to refrain from lending out money when there is a high potential for default. It is important when deciding to borrow money that a thorough investigation be done to make certain that the investment is reliable and not excessively risky. This is because an inability to pay back the principal and interest of a loan could result in bankruptcy.

Whenever you hear discussion of credit card debt, the various best ways to manage it and clear it etc., one thing is mostly ignored. Credit card debt can be extremely stressful and it can have a very negative impact on your life.

It’s always hanging over you, getting you down, making it difficult to live your life the way you would like to. This article takes a look at how to recognize debt stress, and what you can do about it.

The Symptoms of Debt Stress: There are numerous symptoms that can be caused by stress. Some of the most common ones are: feeling depressed and irritable headaches, not being able to sleep, forgetfulness, lack of concentration. If you have some of these symptoms but you’re unsure whether they are related to stress a visit to your Doctor may be in order.

Who Gets Debt Stress? Just about everybody that has debts gets stressed about them. Debt results in millions of days off work every year and it’s statistically one of the leading causes of suicide. When you read about someone who has committed suicide it’s very common to find their name is followed by “who owed in debts”.

Students and graduates are among the most vulnerable, as debt is growing here faster than in any other sector of society. It’s very easy for anybody to rely on their credit card, a little here and a little there and before you know it you owe thousands.

The average adult now owes many thousands in debts, tens of thousands even and as that’s the average, then it stands to reason that many people must owe much more. This being the case then always remember that you’re not alone, other people are suffering in the same way and there may well be many worse off than you.

How Do You Deal With It? The perception of stress caused by debt is often of embarrassment or shame. People with lots of debts don’t want to talk about it, even with their family or close friends, for fear of upsetting people or looking like a failure.

It’s essential that you talk about your problems, storing it up inside will result in even more stress. If you talk to no one else you should at least talk to your partner. They are in the best position to understand and possibly help you. When you’re ready to confront your debt stress probably the best route is to find two people outside of your partner, one who can advise you and one who can act as a counselor.

Finding someone outside your partner who can advise you and act as a counselor. That means a professional who knows what they’re doing in regard to financial matters and possibly a psychologist or psychiatrist or some other kind of counselor. Don’t let stigmas deter you, this is about your health which is much more important.

The next thing to do is to consider how you created the debt to begin with. Dig out your old credit card statements. What did you spend the money on? By far the best way to defeat your debt stress is to pay back your debts.

Even if it will take a while to clear the debt you know that your debt is gradually going down and as it does your debt stress will follow.

If you ask children to choose between eating one ice cream immediately or two ice creams a day later, they’ll invariably choose to have just one right away. But if you give the child a choice between one ice cream the next day or two ice creams the day after that, almost all children will choose to wait the extra day and get two ice creams instead of one. I think all parents know this. I too figured this out almost as soon as my daughter was old enough to ask for things. Of course, children are pretty clever and often manage to outmaneuver parents. But whether it works or not, parents know that the trick is to try and avoid situations where a choice has to make between immediate gratification and some future pleasure.

Unlike parents, economists took a long time to figure this out and when they finally did, it was thought to be a great discovery. But then, applied to economic behavior, it probably is. What is true about the way our children make ice cream decisions is also true about the way we make decisions about savings, investments, and expenditures and probably about many non-financial matters like health and work too. Most of us, children or adults, are not good at making decisions that involve comparing the seductive present (and the immediate short-term) with the distant future.

Of course, this is not equally true of everyone. Some people, especially at a young age, have a severe form of this problem of not being able to think past the immediate gratification. These are the people who supply much of the profits of credit card issuers. At the other extreme are the kind of people who spend their lives accused of being misers- the ones who are unable to live the present without obsessively planning for the future. For a long time, the difference between the two kinds was considered to be a sort of moral gap with the former being the thrifty and careless no-goods and the latter being sensible and prudent.

But perhaps this is not the right way of looking at things. Over the last three decades or so, there has been a lot of research that suggests that some of these behavior patterns are fundamental to the way the human brain has evolved. For most of the period during which human beings were evolving, the immediate present really was very important – much more so than the distant future.

The problem is that this instinctive preference produces financial behavior that is detrimental to our economic well being. Conventionally, the solution to this would be education and self-awareness. If more people learn about patterns of risky economic actions then they wouldn’t take those actions, right? Well, actually, it doesn’t look like it. Only a small proportion of people will have the self-awareness to modify their economic behavior and pay more attention to the long-term than the immediate short-term. The only way that people can change their behavior is if they somehow get committed into a good choice.

I’ve always said that it was important for investments to be liquid so that one could withdraw from them when the need arises. However, it is a fact that for a large mass of people, the main investments tend to be the ones like long term retirement funds where they are forced to make and stick to for a long period of time. Perhaps there’s a lesson there.

Don’t fall behind. Finance charges, interest payments, getting discouraged about your finances… all problems that can occur if you let yourself fall behind. Whether it’s bills, credit cards, or student loan payments, falling behind can be a very difficult problem to come back from. The more you have to pay out in charges, the less you will have to invest in your future.

Set goals. If you don’t know where you are headed, how do you get there? In order to accumulate wealth you need a plan. Write out your goals, a way to achieve them, and you’ll be on your way to an early retirement.

Invest early. The greatest thing you can do to build wealth is start early. Even if you can’t invest much, start with what you can and let your money grow over time. As Albert Einstein said, “compound interest is the greatest mathematical discovery of all time.”

Invest in what you know. Whether you are looking to invest in real estate, stocks, or anything else, make sure you know how the investment works. The great Warren Buffett was often criticized for not investing in technology during the dot-com boom. His answer was simple. If you don’t know the business model, what the company does on a day to day basis, or how it generates revenue now, and in the future, then stay away from it. This principle can be applied to all types of investing.

Don’t do what the crowd is doing. When everyone is starting to get into an investment, that is generally when the smart investors are getting out. If everybody knows a stock is hot, or that their real estate market is booming, it generally indicates a bubble and that it’s time to cash out. Investors make money buying low and selling high. If an investment is hot and lots of money is flowing into it, you can’t buy low.

Don’t try get rich quick schemes. Don’t get greedy. This is easier said then done, but don’t try to gain too much too fast. Building wealth takes time and hard work… there is no easy way to get rich.

Save more. This is another one that sounds pretty basic, but can be difficult to achieve. Often times people want the instant gratification and go out and treat themselves. If you have some money burning a hole in your pocket at the end of the month, save it. Think about how nice it will be when that money is working for you rather than heading out shopping.

One of my friends writes some interesting stuff that is being written nowadays about investing, is fond of using the word fool. But he doesn’t do it the normal way – the way, say, a school teacher does. For example, I remember him once saying that banks were the default suppliers of foolishness in the markets. This idea of foolishness in this special sense makes it easier to understand why markets behave the way they do. What exactly is this foolishness? I think it’s best defined as what is not.

We’ve all heard of the Efficient Market Hypothesis, which says that financial markets are ‘efficient’, meaning that the prices of stocks (or other securities) reflect all known information and therefore incorporate the collective beliefs of all investors about the future. For the hypothesis to be correct, people must have equal access to all information and have rational expectations.

I think the kind of foolishness we are talking about is everything that is the opposite of all those factors that make the market efficient. It’s a bit like heat and cold in physics. You could say that the flow of knowledge and rational expectations keep the markets efficient or you could say that it’s the flow of foolishness that keeps the markets inefficient. Isn’t that a problem? No, it isn’t, most certainly not. Inefficiency is what keeps the stock market interesting and profitable. If the markets were as efficient as the hypothesis says, then those who can identify and mark out foolishness would make less money.

Therefore, a steady and limitless supply of foolishness is the greatest of assets. Foolishness is the life blood of the stock market. Without foolishness, we would be nowhere. Instead of worrying about how well companies are doing and how much the economy is growing, smart stock investors should instead worry about whether an adequate supply of foolishness will be maintained. I’m happy to inform readers that if present trends continue, they have nothing to fear.

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