The Whitney Theater (Hamden, CT) marquee advertised movies for children ("Gidget"..."The High and the Mighty"). Every kids matinee, the manager would pick a ticket out of a large popcorn box. He would give the winner candy, free soda and popcorn, or a toy connected to the movie.
One afternoon he read the numbers on my ticket stub. The prize was an air-pumped rocket. My friend Elly and I went to an open field, pumped it as hard as we could, and let it go. It went straight up, stalled, lost momentum, nose-dived and hit the sidewalk.
Stock Markets soar and crash too. Stock Market traders sometimes become kids with a toy. Every day the market pumps itself up. Indices spiral upward making many giddy with kiddish delight; nobody wants this rocket to fall from its lofty heights. With little notice, the market stalls, momentum is lost, and markets crash.
Simple laws of gravity inform us that upward moves of any force require energy and momentum. The stock market is ruled by the same laws. Markets cannot, will not, and have not moved in one direction without correcting. This means that bull markets are not forever, and bear markets are bearable.
"What happened?" My toy rocket did not give me any warning when falling to reality. Stock markets project warning signs when upward momentum stalls. You never want markets to go up forever. It is best when markets move up, pause, contract, and build a base before making their next move.
A base-line provides support for a market index like the Dow or the S&P. Long support lines give investors solace because it takes a lot of sellers to break through it. A support line or base (see image) is a trading pattern of stock buying and selling with little price change.
No support means the market index has potential to keep falling until it finds a support line/base or bottom. Markets stall when reaching a high price on average daily stock trading volume. Bulls (buyers) will strain to push the markets upward, but Bears (sellers) thwart the momentum. An excessive number of sellers (many more than the average) can force an index/stock to new lows.
"Make it go higher!" My toy rocket did not reach heights too fast. Elly and I were ten or eleven years old; we wanted that rocket to disappear in the clouds. Many investors act the same way; they want the markets to go up and up because it means more money. When markets hit successive days of positive returns, investors get starry-eyed. We like it when Neil Cavuto (among others) reports new highs for the Dow (read " The Dow Jones Industrial Average: Failing the Average Investor" by Steven Selengut).
Dizzying heights cause most investors to miss subtle market moves. Stocks/indices must move higher on strong buying volume. When markets reach a bench-marked high level, getting past it will take three times the average number of daily buyers.If the price stalls at the bench-marked high and the buying volume is less than the daily average, index prices decline.
"Don't worry." Elly never worried; I always worried. When that rocket went off, I feared it would break a window or hurt someone. Elly said, "Just pump it Ray and let it go!" Some stock investors never worry. Wise Wall Streeters know that "The market needs to climb a wall of worry." War, high oil prices, poor consumer sentiment, and Federal Reserve rate increases are walls of worry. Euphoric investors topple markets.
Something to Fear The Vix Index is the "fear index" When the Vix spikes, worry increases; when the Vix is down, optimism is excessive. Today, May 22, 2006), the Vix spiked.
The VIX "is a good indicator of the level of fear or greed in U.S. and global capital markets. When investors are fearful, the VIX level is significantly higher than normal." (Antognelli, Ferreira, McArdle, and Traub. "Fear and Greed in Global Asset Allocation." The Journal of Investing. (Spring 2000), pp. 27 - 32). Every rocket must return to earth for refueling. I learned this with my friend Elly and my toy rocket.
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Tuesday, September 15, 2009
Investing in stockmarket
The term Stockmarket is a concept for the mechanism that enables the buying and selling (trading) of the shares and stocks of publicly held companies, other securities and derivatives. The stocks and shares of these companies are listed on the stock exchanges, which are entities (either mutual organizations or corporations) specialized in the business of bringing buyers and sellers of stocks and securities together.
Most modern day trading, as opposed to the open-and-cry system of the past is now done via electronic exchanges where the buying and selling occurs through on-line real-time matching of orders placed by buyers and sellers.
There are many different ways for investing in the Stockmarket, including income or capital growth, technical analysis or charting. Better still there are strategies that do not require complicated charts. All you need is a ruler and pencil, and the right publication to select high-performing companies. Something a seven year-old can be taught to do. If you look well enough, you are sure to find a method that suits your personal needs and goals.
You can go for a hands-on or a hands-off approach that can take anything from an hour per week, through an hour per day to an hour per year. You can go for a highly risky strategy to a medium to low risk strategy. Consider investing for the long term instead of short term.
A lot of people are afraid to put their money in the Stockmarket because they are highly concerned about risk. What they forget is: Risk is a factor of life, and risk can be managed and highly reduced.
Most people tend to seek the advice of financial advisors without realising that financial advisors mostly earn commissions on recommending and selling specific investments. It goes without saying that they will be more interested in selling investments that will ultimately make them more money.
Hence, it is not the smartest move to let someone else invest your hard-earned money for you, especially when you realise that learning about investments is not exactly rocket science. Ask yourself this question: Who is most likely going to look after your money better, you or someone else?
Further more, most of these advisors are not wealthy individuals themselves neither are they successful investors. So it is very much the case of ‘the blind leading the blind’. In many cases, the only difference between you and the financial advisor is just a licence to advise on investments, sadly without the need to be investors themselves. As useful as the licence might be to financial advisors, you will be unlikely to find a millionaire investor with a licence, or a financially independent financial advisor.
What you want is to learn about investing from people who have a success record of investments themselves. People who can teach you from their personal real life experiences! People who can teach YOU to fish, and not fish for you. Theory is great, but what will make you rich is real-life application.
Most modern day trading, as opposed to the open-and-cry system of the past is now done via electronic exchanges where the buying and selling occurs through on-line real-time matching of orders placed by buyers and sellers.
There are many different ways for investing in the Stockmarket, including income or capital growth, technical analysis or charting. Better still there are strategies that do not require complicated charts. All you need is a ruler and pencil, and the right publication to select high-performing companies. Something a seven year-old can be taught to do. If you look well enough, you are sure to find a method that suits your personal needs and goals.
You can go for a hands-on or a hands-off approach that can take anything from an hour per week, through an hour per day to an hour per year. You can go for a highly risky strategy to a medium to low risk strategy. Consider investing for the long term instead of short term.
A lot of people are afraid to put their money in the Stockmarket because they are highly concerned about risk. What they forget is: Risk is a factor of life, and risk can be managed and highly reduced.
Most people tend to seek the advice of financial advisors without realising that financial advisors mostly earn commissions on recommending and selling specific investments. It goes without saying that they will be more interested in selling investments that will ultimately make them more money.
Hence, it is not the smartest move to let someone else invest your hard-earned money for you, especially when you realise that learning about investments is not exactly rocket science. Ask yourself this question: Who is most likely going to look after your money better, you or someone else?
Further more, most of these advisors are not wealthy individuals themselves neither are they successful investors. So it is very much the case of ‘the blind leading the blind’. In many cases, the only difference between you and the financial advisor is just a licence to advise on investments, sadly without the need to be investors themselves. As useful as the licence might be to financial advisors, you will be unlikely to find a millionaire investor with a licence, or a financially independent financial advisor.
What you want is to learn about investing from people who have a success record of investments themselves. People who can teach you from their personal real life experiences! People who can teach YOU to fish, and not fish for you. Theory is great, but what will make you rich is real-life application.
Investing In The Stockmarket For Beginners
Many folk will have toyed with the idea of dabbling on the stock market, some will have taken the plunge and made a profit. Unfortunately many, many more will have made substantial losses. Having been burnt in the past by just watching my profits rapidly disappear, coupled with a few disastrous decisions, I decided to pick myself up by the boot strings, study and find my way back into the market. This time with greater expertise, more caution and most important of all, SUCCESS.
There are several stark facts that need to be taken into account before entering the stock market.
1. You should not invest any money in the market unless it is money you can afford to lose.2. ‘Investing’ is the polite word for a venture, which is essentially gambling.3. Do your homework beforehand. Never trust a recommendation from a friend, or any other source, until you have thoroughly researched the information. In addition you will need to learn:
1. How to choose a stockbroker. 2. Where to find the best free information. 3. How to choose, set up and operate a good software system. 4. How to choose a share.5. How to set and operate a stop/loss system.6. How to cut and run.7. When to take your PROFIT.
Some of the best free sources of information are the media, newspapers etc. As you are investing your money, some of this will need to be spent on a good software system. There are free Internet sites such as www.moneyworld.co.uk which allow you to set up a portfolio and watch the market, and is a good place for the beginner to learn.
As with every good business venture, there is no real, safe shortcut. You will need to be prepared to study, and in fact, keep studying all the time you are involved in the market. This is a venture that will need your almost constant attention if you are to succeed. Don’t rush in and buy a stake in the market because you are convinced in your own mind that you are right. First of all, you will need to sit on the sidelines, watching, making some fictional trades. See how they fare. Learn by your mistakes etc. Get as much free information as you can. Softly, softly catchee monkey!
There are several stark facts that need to be taken into account before entering the stock market.
1. You should not invest any money in the market unless it is money you can afford to lose.2. ‘Investing’ is the polite word for a venture, which is essentially gambling.3. Do your homework beforehand. Never trust a recommendation from a friend, or any other source, until you have thoroughly researched the information. In addition you will need to learn:
1. How to choose a stockbroker. 2. Where to find the best free information. 3. How to choose, set up and operate a good software system. 4. How to choose a share.5. How to set and operate a stop/loss system.6. How to cut and run.7. When to take your PROFIT.
Some of the best free sources of information are the media, newspapers etc. As you are investing your money, some of this will need to be spent on a good software system. There are free Internet sites such as www.moneyworld.co.uk which allow you to set up a portfolio and watch the market, and is a good place for the beginner to learn.
As with every good business venture, there is no real, safe shortcut. You will need to be prepared to study, and in fact, keep studying all the time you are involved in the market. This is a venture that will need your almost constant attention if you are to succeed. Don’t rush in and buy a stake in the market because you are convinced in your own mind that you are right. First of all, you will need to sit on the sidelines, watching, making some fictional trades. See how they fare. Learn by your mistakes etc. Get as much free information as you can. Softly, softly catchee monkey!
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