How to Choose A FOREX Broker ?

Monday, January 25, 2010

Most investors who trade Forex stocks use a broker. A broker is an individual or a company, who buys and sells stocks according to the investor's wishes. Brokers earn money by collecting commissions or fees for their services.

You should check that a broker is registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud or abusive trade practices. A Forex broker also needs to be associated with a financial institution, such as a bank in order to provide funds for margin trading. Picking the right Forex broker for you will take some work on your part. There are brokers who charge a flat fee and some that charge commission. It may be a good idea to talk with friends and business associates about their brokers. You may get some good leads, and you're certain to hear who to stay away from. There is nothing like word of mouth advertising.

If you are thinking of investing online, you could choose several online brokers and contact their help desks. Seeing how quickly they respond to your questions could be key in how they will respond to their customers’ needs. If you don't get a speedy reply and a satisfactory answer to your question you certainly wouldn't want to trust them with your business. Just be aware that as in other types of businesses, pre sales service might be better than after sales service.

Before you choose an online broker get a copy of their online demo account. What features are included? Is the software reliable? Does it offer automatic trading? Are there extra software features that cost more?

Before setting up an account with a Forex broker you will need to do further investigation. How quickly will these brokers execute your buy/sell orders? What is their policy on slippage? What are the transaction fees? What is the spread, fixed or variable? What are the margin requirements and how are they calculated? Does the margin change with currency traded? Is it the same for mini accounts and standard accounts?

Don't forget to ask about minimum account balances and interest payments on account balances. Make sure that your funds will be insured.


For instance, many of the world's wealthiest people gained their fortunes by becoming an owner of a sucessful company, be it one they've built themselves or a company that someone else has already built and maintained sucess with. Take for instance someone like Warren Buffett owner of Berkshire Hathaway. Warren Buffett has become one of the richest men in the world by buying successful companies and keeping them under the management of Berkshire Hathaway for the long term. If you had invested just 10,000 dollars in Warren Buffet's company when he was first starting out you'd be a millionaire many times over by now.

Owning your own business is a great way to increase your wealth, along with business ownership many other wealth magnates have increased their money through the investing in real estate and the stock market. Investing the way other big players invest is a smart move as long as you understand the risk involved. If you have an understanding already about how to invest then you should be taking the necessary steps to invest wisely and diversify your portfolio.

If you have long-term financial goals, like retiring at an early age then your investment portfolio needs to grow quickly. Things like putting all of your money in the bank would likely not help you achieve your long term goals as the interest which banks pay would likely not outweigh the effects of inflation on your money.

Investing is not for everyone and may not even be necessary for some individuals. If you are the type that doesn't mind working your whole life and are happy maintaining the standard of life you're currently living then perhaps you need not jump into the investment game. You could also look for safer investments such as government backed bonds or money market funds.

In the end if you would like to start investing then you should go to your local Barnes and Noble store and pick up some sort of beginner's guide to investing.

Buy Sell Hold in Share Market

The "Buy" decision has two important steps: Step one allocates the available investment assets, by purpose, between Equity and Income securities, based on the goals of the investment program. It is done best using The Working Capital Model. Step two establishes strict selection quality measures and diversifies properly within each security class. Investment Grade Value Stocks are the low-risk equity champions; long-term, non-gimmick, managed CEFs produce the best income/diversification mix available in readily tradeable form.

The "Sell" decision involves setting reasonable targets for profit taking for all securities in the portfolio. Loss taking decisions must not be undertaken out of fear, and must be avoided during severe market downturns. Understanding the forces causing market value shrinkage is important and a highly disciplined hand at the emotion control button is essential. There is no such thing as a good loss of capital.

The "Hold" decision is most common, and it regulates and moderates the process, keeping it less than frantic. Continue to hold onto fundamentally strong equities and income securities that are providing their normal cash flow. Hold weaker positions until the appropriate cycle (market, interest, economy) changes direction, and then consider whether to sell or to buy more.

Stock Market Movements

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I've been thinking about starting a stock market prediction business. Clearly, there is a huge market for timely and accurate information of this type, and just as clearly, predicting the future is much easier than dealing with the realities of whatever is actually happening at the moment. If investors could know what's going to happen next, they could develop a plan to deal with it in the present. Maybe Wall Street could help me get this new business up and running!

What's that? Wall Street institutions already spend billions predicting future price movements of the stock market, individual issues & indices, commodities, and hemlines. Really? Is that right also? Economists have been analyzing and charting world economies for decades, showing clearly the repetitive cyclical changes and their upward bias. Funny then, or strange would be more accurate, that the advice generated by the oracles of Wall Street seems to assume that the current environment, good or bad, will be everlasting. Isn't it this kind of thinking and advising that prolongs the downturns and "bubbles" the advances---in all markets?

If it were true that our favorite pinstriped product pushers can actually predict the future, why would investors do what they do in response to the predictions? Why would financial professionals of every shape and size holler: "sell" at lower prices, and "buy at any price" when market valuations surge upward? Shouldn't lower prices be the call to the mall? Most Wall Street soothsaying has a short-term focus that dwells upon today's market conditions; most Wall Street glossies emphasize the long-term nature of investment programs, and encourage investors to apply patience to the program they decide to use for goal achievement. Why is the advice so out of sinc?

The reason for the emphasis confusion is simple: it's easier to play to the emotion of the moment than it is to look beyond--- even though we all know that a directional change will be along eventually. Regardless of the direction, Wall Street advice will always fuel the operative emotion: greed or fear! Wall Street's retail representatives never go against the grain of the consensus opinion--- particularly the one projected to them by their superiors. You cannot obtain independent thinking from a Wall Street salesperson; it doesn't fill up the "Beemer".

Here's some global advice that you will not hear on the street of dreams: Sell into rallies. Buy on bad news. Buy slowly; sell quickly. Always sell too soon. Always buy too soon. And by the way, who do you think is buying and selling the securities you have been told to dump or to hoard?

No self respecting guru would ever refute the basic truths that the market indices, individual issue prices, the economy, and interest rates will continue to move in both directions, unpredictably, forever. Hmmm, this is where you need to focus your attention if you want to get through the investment process with your sanity. You need to expect and plan for directional changes and learn to use them to your advantage. Tranquilizers may be necessary to get you through the first few cycles, but if you have minimized your risk properly, you can actually thrive on the long-term predictability of the markets.

The risk of loss cannot be eliminated. A simple change in a security's market value is not a loss of principal just as certainly as a change in the market value of your home is not evidence of termite damage. Markets are complicated; emotions about one's assets are even more so. Cyclical changes in all markets are just as predictable conceptually as knowing approximately where you are within a cycle is knowable actually. The key is to understand what your securities are expected to do within the cyclical framework. Now there's a knowledge business with no Wall Street practitioners!

Predicting individual stock prices is a totally different ball game that requires a more powerful crystal ball and an array of semi legal and illegal relationships that are unavailable to most investors. There are just too many variables. Prediction is impossible, but probability assessment has enormous potential. Investing in individual issues has to be done differently, with rules, guidelines, and judgment. It has to be done unemotionally and rationally, monitored regularly, and analyzed with performance evaluation tools that are portfolio specific.

How To Start Investing

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When you're first getting into investing there are literally tens of thousands of investments to choose from. You can invest in stocks, bonds, mutual funds or some other type of investment.

For the newbie investor just knowing the name of the investment or company you're putting your money in is just the beginning. There are often a lot of minor but important details that you must learn about before you decide to invest. If you had the time and know how you could analyze financial statements, speak with company employees and the company suppliers and so on and so forth. However not many of us have the time necessary to put towards being a full time investor.

Just because you may not have the time to be a full time investor shouldn't scare you away from investing. You can still find quality companies to invest in and it doesn't have to take a lot of your time. The first thing you need to do is get quality information and then you can make purchases of quality investments, you can then leave the management of your investments to individuals who are qualified to manage them.

Having someone else manage your investments will allow you to do the things your good at and leave you with more free time to do the things you like to do. One of the most important parts of investing is knowing what you can do for yourself and knowing what you should hire an expert to do. For example, if you're considering investing in stock in the overseas market then it might make more sense to invest in a mutual fund. Overseas markets can be trickier to navigate than domestic markets, especially for a beginner, so a mutual fund manager would likely be the best place to turn. This would be easier than putting all of your time, energy and money into trying to pick foreign stocks on your own.

The best way to build your wealth would be to invest in businesses which make you an owner, be it a partial owner or a full owner. These types are investments are not always for the faint of heart due to the up and down nature these sorts of investments can have. Investments where you would become at least a part owner include stocks, some form of a small business or real estate vehicles.

PERFORMANCE OF INVESTMENT EXLPERTS

Thursday, January 21, 2010

All investment experts have one thing in common: they are all veritable storehouses of information and knowledge on the economy and the corporate world. However, not all of them have the required analytical abilities, foresight or wisdom to use this information to make the right investment decision at the right time. As a result, it would be difficult to find an investment expert who does not make at least a few major blunders every year. Even great thinker and visionaries have been known to lose their reputations in the stock markets. John Maynard Keynes, the towering economic genius whose ideas gave birth to the IMF , the World Bank and the concept of deficit financing, failed to anticipate or understand the greatest stock market crash in history. He mistook the collapse of the U.S. stock market in 1992 for a “bull point for world prosperity”. However, despite this spectacular and widely-publicised blunder, he had an enviable and consistently successful record as a stock market investor. He not only made himself a fortune of several million dollars, but also deployed the fund of his college in the stock market and multiplied them ten times over. If Keynes could make a blunder, then no investment analyst can possibly hope to be infallible.

Tips For Day Trading

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Day trading the stock market involves the rapid buying and selling of stocks on a day-to-day basis. This technique is used to secure quick profits from the constant changes in stock values, minute to minute, second to second. It is rare that a day trader will remain in a trade over the course of a night into the next day. These trades are entered and exited in a matter of minutes.

The main question that most people ask when it comes to day trading is simple: Is it necessary to sit at a computer watching the markets ALL day long in order to be a successful day trader?

The answer is no. It's not necessary to sit at a computer all day long. There are a number of factors to consider, but generally the rule of day trading is to trade when everyone else is trading. In other words, trade in the morning.

As with all financial investments, day trading is risky in fact, it's one of the riskiest forms of trading out there. The stock prices rise or fall according to the behavior of the market, which is entirely unpredictable. Day traders buy and sell shares rapidly in the hopes of gaining profits within the minutes and seconds they own those particular stocks. Simple to do in theory, harder to do in practice.

If you are constrained by a small amount of capital, you may not be able to buy large amounts of a stock, but buying only a small amount can add to the risk of a loss. And, obviously, it is impossible to predict with certainty which stocks will result in profits and which in losses. Even the best of traders must learn to accept both outcomes.

It's also important to know that in day trading, it is the number of shares rather than the value of shares that should be the focus. If you day trade, you WILL face losses, but even for the more expensive stocks, the loss should be marginal, because prices do not usually fluctuate to an extreme degree over the course of just one day.

The day trading industry deals in a large variety of stocks and shares. Here are just a few:

Growth-Buying Shares: shares made from profit, which continue to grow in value. Eventually, these shares will begin to decline in price, and an experienced trader can usually predict the future of this type of share.

Small Caps: shares of companies which are on the rise and show no signs of stopping. Although these shares are generally cheap, they are a very risky investment for day traders. You'll be safer to go with large caps and/or mid-caps, which are much more secure and stable thanks to a premium.

Unloved Stocks: company stock that has not performed well in the past. Traders buy these shares in the hopes of generating profits if and when the stock rises in value. As with small caps, unloved stocks can be a risky choice for day traders.

These examples are NOT your only options when it comes to day trading stocks. The best way to determine which type of stock is right for you is to invest some time for careful research, a knowledge of market patterns, a solid strategy, and a disciplined trading plan.
You need to learn to trade ONLY when the market gives the right signals, and ONLY when the volume of activity in the market supports a successful trading opportunity.

BULL MARKET TOPS

Friday, November 13, 2009

In the stock markets, the surest way of making the biggest gains is to buy when a bear market touches rock bottom, and to sell when a bull market scales a major peak. The only snag in this strategy is the fact that its successful application depends upon the timely identification of bear market bottoms and bull market tops. This is easier said than done because such tops and bottoms are always easier to spot through hindsight (often described as an exact science)than ahead of time. Time and again, it has been observed that the advance identification of such tops and bottoms often eludes even the most knowledgeable and seasoned of investors. However, this does not mean that spotting such major turning points in the bull-bear cycle is an impossible task. It may not always be possible to catch the exact tops and bottoms in every bull bear cycle, but there are some time -tested signals that can give sufficient advance indication that such tops and bottoms are close at hand. This knowledge is usually all that is required to ensure investment success.

Under normal circumstances there is no rational reason why any stock market index should appreciate by 100% in any particular year, over the peak of the precious year. Even under the most optimistic of economic conditions, an across-the-board jump in share prices of this magnitude would not be justified by corporate fundamentals. The reasons for such a steep appreciation in share prices must then logically be ascribed to uncontrolled euphoria and the emotional excesses of and over-enthused market to sell, even if your selling decision happens to be premature and dose not exactly coincide with the highest bull market peak.

A bull market invariably scales a major top only when hundreds of thousands of small investors, motivated by dreams of instant wealth, make a frenzied bid to grab whatever shares they can before it is too late. At such times, excitement runs high, emotions replace reason, greed replaces caution and market sentiment is feverishly bullish. Since an individual investor has limited capital at his disposal, he tends to get attracted towards shares that appear to be cheap and affordable. As a result. he usually ends up purchasing shares which quote at around, or below, their par values. These low-priced shares give him the feeling that he is acting prudently and with caution. He also persuades himself into believing that these below-par purchases are genuine bargains which will give him the twin benefits of limiting potential losses and unlimited potential gain. This is the main reason why at a major bull market top it often becomes difficult to find shares which quote at below-par prices.

As a rule-of-thumb, the selling signals flash red when the number of shares quoting at below-par prices falls to around 0.5% of the actively traded shares on any stock exchange. At such times, it pays to sell _and to sell heavily_without giving a second thought to whether one has made the right decision or not. When the market is close to a major top, the shares of closed-end mutual funds tends to quote at high premiums to their net asset values .

WHY FOREIGN INSTITUTIONAL INVESTORS WANT TO INVEST IN INDIA ?

Affluent countries have an abundance of surplus capital, a natural consequence of prosperity. As countries get more and more prosperous, their markets get saturated and the demand for capital diminishes. As a result, supply of capital exceeds demand and capital therefore tends to fetch very low returns.

In under-developed and developing countries there is a dearth of capital. As a result, the supply of available capital falls far short of the demand and capital thus fetches a very high return. developing countries have a huge potential for growth and a large pent-up demand for goods and services. When inter-country barriers and restrictions on the movement of capital are removed, or eased, then capital tends to flow from the affluent to developing countries so that it can earn higher returns. These capital flows can be in the form of loans, direct physical investments or portfolio investments.

Under normal circumstances, a major chunk of surplus capital of USA, Western Europe and Japan would have flowed to China and Russia. But these countries doesn't have have developed stock markets and therefore cannot absorb large foreign portfolio investments. These regions will no doubt, attract heavy capital inflows in the form of loans and direct physical investments, but the major chunk of foreign funds earmarked for overseas portfolio investments will eventually find its way to the Indian stock market. The Indian stock market offers really viable and practical option for portfolio investments to foreign fund managers. the major stock market boom in India will,in all likelihoo, be fuelled by foreign institutional investors.

Emotions Of a Investor

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Emotions are strong feelings and play a important role in the formulation of investment decisions. Most investment decisions are motivated by greed,fear and hope.
In a bull market, greed is the main motivating force fuelling investment decisions. Investors throw caution to the winds, borrow money at high rates of interest, stretch their financial resources , and take other unwarranted risks. In the bear market, on the other hand, fear is the dominating emotion. Fear leads to panic selling and unloading of otherwise sound scripts at unbelievably low prices.

Frequently, investment decisions are based on hope. An investor may want to buy a particular share because he thinks it will go up, but because he hopes that it will. Hope also sometimes makes an investor cling on to a share whose price is falling rapidly in the hope that it will eventually rebound to its original price. Wishful thinking is another word for hope.
Emotions distort the decision-making process. They frequently override reason, logic and some times even facts this happens especially when emotions come disguised as reason. They prevent investors from seeing reality as it really is , and not what they would want it to be. Emotions also prevent investors from changing their minds when proved wrong, or when there is need to change and adopt a different line of thinking.

Excessive fear, on the other hand, is a dangerous emotion because it can lead to panic selling and prevent the investor from picking up bargains in an atmosphere of doom and gloom..... the ideal time to do so.

TEN TIPS FOR A INVESTOR

1. Do not visit your stock broker every day. The more frequently you go to your broker's office, and listen to the rumors that circulate there, the greater the chances of your being influenced by the crowd opinion of the moment.

2. When you go through the stock market quotations in your daily news paper or through internet, do not focus your interest exclusively on the shares that interests you, the shares that you own, or the shares that you want to buy. Try to also read and remember the quotations of other shares. It will help you to acquire a wider and more balanced perspective.

3. Avoid talking freely and loudly about your investments in social gatherings. In fact, try to steer the conversation to subjects other than the stock market. This is particularly important during periods of extreme optimism and extreme pessimism. People who are habitually prone to be vocal about their investments are normally the first to get drawn into vertex of crowd emotions.

4. Do not take large loans for the purchase of shares. The very fact that you have taken such loans means that your thinking is already being strongly influenced by greed. There is also another disadvantage. In a falling market, heavy loans and the need to pay interest on them periodically, will make you particularly vulnerable to fear and panic. People who are not burdened by heavy loans are seldom pushed by greed and fear into taking foolish decisions.

5. Do not speculate, that is don't buy on margins or try to make money through short-term fluctuations in share prices. Speculators or invariably motivated by greed. They are also normally the first to panic whenever share prices begin to fall.

6. Adopt a long-term investment strategy. A long-term vision and perspective or seldom influenced by current market sentiments.

7. Diversify your portfolio. A concentrated portfolio will make you more vulnerable to fear and anxiety.

8. Invest only what you can afford to loose. Don't depend upon stock market games for running your kitchen, providing the school fees of your kids, meeting medical expenses or paying your apartment rent. In any case, even if you happen to be extremely rich, it would not be prudent to invest more than 50% of your assets in the stock market.

9. Investing your working capital of your business in the stock market is a risky job. That is a sure sign of uncontrolled greed.

10. Do not invest in shares offered through private placements from the promoter's quotes of new and upstart companies.