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****Select A Good Stock Market Strategy For Good Returns

Select A Good Stock Market Strategy For Good Returns

Sunday, February 28th, 2010

Stock market can be a good money maker if you know how to play the stock market correctly. A lot of people get into the stock market thinking they can make big money but then lose money by making some rash decisions.

These decisions most often are based on gut feel and not on solid research. Stock market research is the key to making money in the stock market. There are two types of stock market research that can be done in the stock market. Each of the types of research can lead to good amount of money if proper investing discipline is followed.

The two types of research that can be done is

• the fundamental research and 
• the technical analysis research. 

 Both of these styles are very different and require different kind of discipline and methodology while buying the stocks.
In fundamental research you research a stock which has a long term potential and then keep on accumulating this stock for future gains.

• The time horizon for this type of investment strategy can be really long like say two years to four five years. 
• This type of style requires the art of stock picking to be perfected in terms of their fundamental strengths. 
• Also the attributes of this kind of a stock trader are that they are patient and have immense amount of perseverance. 
• They know the art of stock picking and can wait for some time to pick a good stock.

In the Technical research the main emphasis is on trending and the traders thrive on the volatility of the market.

• Based on the trending they buy and sell stocks. 
• Stock quality is important but not to the extent as in fundamental research. 
• Also the main aim here is to make money on a short term basis and do not hold the stock for long. 
• They exploit the inefficiencies in the system as a tool for buying and then selling or offloading the stock once they reach a threshold profit percentage or the stock reaches a particular trend. 
• These traders can also make money in a bearish market.

So if you are investing in the market you will need to enough discipline to follow any approach. There is no middle path and the middle path will not make you enough of profits. So make sure that you follow one strategy and make money from it. Remember patience is a virtue in any business.

New stock market for beginners need to learn about trading strategies. The author recommends stock market for beginners strategies for getting to know how to select a good stock.

Price and the Valuation of Shares

Price and the Valuation of Shares

When you participate in the market you are one of three things: a trader, an investor or a loser.

Everyone can find out the price of shares by looking at the live ticker on your stock trading charts. But the price of shares aren’t set in stone. Stock prices are always in a state of flux, moving up and down at the mercy of the constant pull and push of supply and demand between buyers and sellers.  

How about the valuation of shares?
The value of shares depends on who is looking at the stock. It’s all about perspective: where there is a buyer, there is always a seller and a trade is made when an agreement in price is completed.

• The seller may have other reasons, but let’s assume they see the stock has exhausted its upward trend, and they are selling to realise their profit:
• while the buyer sees potential value in an increasing stock price.

What method do you use to assess the value of shares?
The market doesn’t employ a valuation method at all – it moves at the whim of the market. Does the share price fluctuations ever make sense to you?

• How can the share price of Commonwealth Bank more than halve from $62 to $24 then jump 140 percent from $24 to $58 in January? 
• Did the real company value fall and then jump that much in a month? How can that happen?

When you participate in the market you are one of three things: a trader, an investor or a loser

There is always going to be a mismatch between the price and the valuation of the shares. And when you participate in the market you are one of three things: a trader, an investor or a loser.

• A share trader jumps into the trade (either long or short) to take advantage of this mismatch of price and the value of the company on the stockmarket (or they could be executing their trading system based on other factors). 
• A stockmarket investor buys into a position, optimally when the company is valued cheaply, and waits in the long term for the value to surface. 
• A loser simply doesn’t know who they are and are probably jumping into the markets because of a hot tip.

So understand that as there will always be a mismatch in the share price and the valuation of shares.  The important part to remember is to know

• if you are in the markets as a trader (where a skill set of trading with discipline complete with trading rules is required) or
• if you are participating in the market as a share investor who must keep track of the share valuation.

http://www.mysharetrading.com/2010/02/22/price-and-valuation-shares.htm

Invest wisely or get flattened by elephants

Invest wisely or get flattened by elephants

Anybody can buy or sell shares and if that's the case it is not the most accurate method of assessing value that matters but the most popular.
And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.


MARCUS PADLEY
February 6, 2010

Archie had his birthday this week. Seven. He is a wonderful kid having inherited all the best bits of his Mum and Dad with his everlasting smile, impartial consideration for others, dazzling good looks, the ability to talk the hind leg off a donkey, and his obsession with money - only one of which he got from me.

He is also a dedicated inquisitor, incessantly bombarding us with questions such as "Dad, what goes faster, a big jet or a small jet", "Dad, if you ditch the ants, are there more animals or humans in the world", "Dad, what would you prefer, to be sat on by an elephant, or poked in the eye by a baboon", "Dad, how many people are fishing in the world right now" and "Dad, how much money do you have in the bank".

We used to argue the relevance of the questions or the connection between the alternatives he presented but after four years of barrage we have now just learnt to answer "Animals","Big jets", "Sat on by an elephant" or "64,675,432", which unfortunately is not the amount of money I have in the bank.

So you can imagine the attack when Archie saw his first share price chart.

• "What's a chart",
• "What's a share price",
• "Why does it go up and down",
• "Why don't you know what the price is?",
• "If it was a scooter it would always be $99.95".

Ah, the clarity of youth.

• And why indeed don't we know what the share price is?
• That would be nice, if someone could simply tell us.

As rumour would have it, the most popular method of telling you what a share price should be is some form of Buffettology. Its reach is universal. There is hardly a man on the street who would not profess some ability and intention to invest on the sensible and highly publicised principles of value assessment and patience that "the Warren Buffett Way" supports. But allow me to let you in on a sharemarket secret.

• Anybody can buy or sell shares and if that's the case it is not the most accurate method of assessing value that matters but the most popular.
• And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.

Scary, but that's how shares prices move most of the time, without anyone doing any assessment of value.

• How else could the share price of the Commonwealth Bank more than halve from $62 to $24 in the global financial crisis and then more than double to $58 last month if the biggest driver of the share price was the rational assessment of the company's value.
• There is no way the bank's value fell 60 per cent and then rose 140 per cent, and it didn't, but the value of the shares did and this mismatch reveals the plain truth about shares.

There are two very different things going on in the market and every time you put on an order you have to choose to exploit one or the other with nothing in the middle.

• Either you are trading in shares and hoping the price will go up, or
• you are investing in companies and waiting for the value to surface.

Both are OK, both have intellectual pull, neither has the moral high ground (although many think they have) and you can do both at the same time. But as a buyer and seller of shares you do need to ask yourself every time an order goes on the screen "Just what am I doing?" because perhaps one of the most prevalent and enduring mistakes among clients and advisors alike is the use of the language of rational value investment as the pretence for disorderly trade. It is everywhere.

So what are you going to do?
Because I can guarantee that until you stop kidding yourself that

• you are investing in companies
• when you are in fact trading share prices

and until you choose to

• either devote yourself to a value approach
• or learn to trade with discipline

it will not matter what fantasy you have concocted for yourself,

• things will not improve and
• you will continue to be sat on by elephants and poked in the eye by baboons.

Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today.


http://www.smh.com.au/business/invest-wisely-or-get-flattened-by-elephants-20100205-nilc.html

Also read:
Paying the price of a new Mercedes to buy a new Proton! Beware of manipulators in the market place

More than 70% of traders will lose nearly all their money!

According to the National American Securities Administrators Association, more than 70% of traders will lose nearly all their money! This is solid proof that the majority of traders and investors are dumb money.

What is the Dumb Money Doing Wrong?

First and foremost, the dumb money act as a herd or mob. This group exhibits very little individual decision making. This is exemplified by how the herd follows the financial news so religiously. The financial news is a severe lagging indicator. This is because reporters only report after the fact. It is so silly that people actually think they will gain knowledge that will allow them to have “the edge” in the markets. This isn’t possible because millions of other competing investors are watching the same news! The news is notoriously bullish right before a bear market and bearish right before the market starts soaring.

http://www.stock-market-crash.net/zero-sum.htm

http://myinvestingnotes.blogspot.com/2009/12/does-everyone-lose-in-crash.html