An Insight Into Value Investing

By James Anderson

Do you know the secret to long-term growth? Why, it?s value investing! Picking it up effectively will make you more skilled at handling the instability of the financial market, compared to others. At its most basic level, value investing involves buying securities, whose shares seem under-priced by fundamental analysis. In fact, the fundamental nature of value investing is purchasing stocks at a value that is less than their intrinsic value.

David Dodd and Benjamin Graham ?both distinguished professors at Columbia Business School, established the concept of value investing. They were responsible for instructing many well-known investors. Today, it?s clear that when it comes to investment, value investing is a brainy strategy. Buying low PE ratio stocks, low price-to-cash flow ratio stocks, or low price-to-cook ratio stocks all come under value investing. Renowned people in the industry of value investing include William J. Ruana, Irving Kahn, Charles Brandes, and of course, Warren Buffet, who is probably the most famous among them.

When it comes to value investing, there are four certain basic tips that one can follow. The first is to look at the price or value of the entire company, and not just the current share price. Market capitalization is the cost of buying the whole company, and the market capitalization test will tell you if you are paying extra for a stock. One can also estimate the cost of a stock through the price to earnings ratio ? as this gives a decent standard for comparison for other value investing opportunities.

The second tip is to consider whether the company is buying back shares. Aim for a management that tries to reduce the number of outstanding shares, if the other uses of capital are not value for money ? this will make each investor?s stake in the company bigger. Third, in value investing, think of your reasons for investing in the company. Ask yourself what interests you about that company. Think about the company?s current price, profits, management, staff, etc. It?s important to keep your emotions at bay ? treat this purely as a business transaction. If the stock seems undervalued, you?ll need to keep away from it.

Fourthly, and lastly, take a moment to think about whether you?d like to own the stock for the next decade or so. Are you willing to buy the shares and keep them for that long a time? If not, then this value investing is not your cup of tea. Here?s a valuable tip ? select a good company, when it comes to the initial stake, pay as little as permitted, ensure a reinvestment of dividends ? remember that effort and time are required.

The fundamental principle of value investing is based on the conjecture that there will always be some kind of fluctuation or disturbance in the market. Therefore, since the values of equities are constantly in flux, and changing in different directions, their fundamental values will differ ? and thus, some are likely to give better returns than others. So go for shares whose values have fallen (for no apparent reason), if you want to be great at value investing, and wait for the situation to correct itself. - 23208

About the Author:

James Anderson the owner of the website http://www.thecontrariantrader.com uses several key indicators to pinpoint huge shifts in the crowds before they happen. Know more by visiting the website http://www.thecontrariantrader.com.

Economic Factors That Move the Forex Markets in the Short Term

By Hass67

Fundamental traders depend on fundamental analysis in trading forex. Technical traders depend on technical analysis in trading forex. But the importance of economic data cannot be underestimated in shaping trading strategies.

Over 90 percent of currency transactions are done against USD. USD is either the base currency or the counter currency in most of the currency trades.

Choosing the right currency pair to trade is very important for you. USD is the most important currency and most probably you will be also trading USD most of the time. You should know that the release of certain economic data has significant and lasting impact on USD.

With time, you will learn that forex markets reaction to the release of different economic data also changes with time. US GDP figures used to be important for USD but they dont impact much.

EUR/USD is the most liquid pair in the forex market and is heavily traded. The release of Nonfarm Payrolls (NFP) data on the first Friday of each month has become important in recent years. These figures makes EUR/USD and other pairs involving US Dollar highly volatile for some time until the markets digest the importance of these figures.

Similarly, the release of US housing sales number every month has become very significant for USD in the recent years. Previously, forex markets used to give more importance to US Trade Balance.

If you are a range trader who likes to scalp for a few pips every trade, you should avoid trading on the day NFP data is released. Release of NFP figures makes the markets jittery and highly volatile.

However, as a breakout trader, understanding of which economic data is expected to be released can help you in your trading. You should plan your trades in accordance with the importance of the economic data to be released.

In brief, knowledge that certain economic indicators make the forex markets move most is important for you as a trader. It is also important for you to know that particular economic data, the market considers most important at any point in time.

You should also understand which economic data causes knee jerk reaction in the currency markets and which pieces of economic data will have lasting reaction in the currency markets. - 23208

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading; stocks and forex. Read about Trend Forex System. Best Forex Signal Service. Learn Forex Trading.

Choosing A Profitable Forex Trading System

By Mark Thomas

In this business world, one will eventually find his way to success if he is able to depend on himself and not on other people. A businessman who does not rely on other people will be able to generate big profits. If you are a trader, you should learn how to create your own profitable forex trading system. Even if you are a novice, there are easy ways on how to build one all on your own.

A forex system will be very efficient if you are able to make the system simple. Do not go for those that are complex with lots of rules. This is because you are the only one who will need to keep up with the rules by yourself. Instead of utilizing such system, go for the ones that are truly simple because these have been confirmed that they are very effective and there is lesser chance that you will come across those times when you will fail.

A good system should be able to help you produce greater amount of profits as well as help you cut the losses. Obviously, if you are involved in a business, your main goal is to make lots of money and be able to keep them. A profitable forex trading system should be in a longer term, which means that it will not only be in a matter of days but for years. This way, you will be able to determine the big trends that can help you make the most of your cash flow and then reduce the shortfall in your profits. In a long term system, every trader should not settle for small profits for instance a day trading. It is important for a business to stay strong and be able to compete with the other companies and businessmen.

You need a robust and healthy management system and you should be able to spot the opportunities whenever they appear in front of you. What you should do here is to look for the weekly trends and once you have done so, proceed with the daily charts and lastly to the time entries. For most successful traders, the best way for them when trading currencies is through the breakout method, which occurs in all the forex markets worldwide. You also need forex tools so that it can help you time your entry and eventually take profits. There are a lot of programs that are available for download today and some of them have filter indicators.

If you have decided that you want to follow the breakout method, only two things can happen. The first one is that everything is in your favor while the other one is reversed or even false. If the latter occurs, you should be able to manage your money through exiting the market and then employ the day session monetary stop.Every trader wants a profitable forex trading system. It is recommended that you do not trade at all times so that you can quickly liquidate the losses. - 23208

About the Author:

Mark Thomas, a Professional Software Developer have been in Trading for several years and have developed a Forex Trading Software Tool which helps the Traders to keep track of all their Trades in a Disciplined Manner. Get complete details about Trade from Mark Thomas . Visit his website http://www.tradeontrack.com

Learn More About Day Trading Strategies

By Suzanne

The term Day Trader refers to a person who buys and sells stocks (or any market) in the same day, investing huge amounts of money to cash in on small fluctuations in the prices of stocks and indexes that are highly liquid and volatile. Certain stocks are suitable for Day Traders, liquidity and volatility are the two most essential aspects that are looked at by Day Traders.

The essential elements of successful Day Traders are, Excellent trading psychology and mental state management, Proven money management systems, Proper tools and training, Profitable trading system. There is a certain amount of risk involved in every trade. The risk increases for those without sufficient knowledge and training.

Day Trading used to be practiced generally by financial firms, investment bankers and speculators. However, with new leaps in technology and the introduction of electronic trading and margin trading, it has become more popular with casual at home traders.

There are many styles within Day Trading. Many focus on short term trading, as in they close all their transactions before the close of the day to avoid all unmanageable risks. Others focus on price momentum. While yet some others lay emphasis on technical patterns. Day Traders often borrow certain amounts of money to trade. This is called Margin Trading.

Some of the strategies followed in Day Trading are discussed here:

* Trend Following - This basically follows the principle that prices of stocks once rising will always be rising, and vice versa.

* Contrarian Investing - This follows the principle that prices that have been soaring will reverse and prices that have been falling will go up.

* Range Trading - This is based on keeping record of stocks and seeing the range in which they fluctuate. Thus stocks are brought when they are at a low and sold off when they reach their peak.

* Scalping - This is a trading style where traders buy stocks that are on the rise and sell them off in minutes or seconds to get the profit instantly. This basically exploits the market when the market is volatile.

* Rebate Trading - This technique involves trading low priced stocks in huge amounts which helps them trade more shares and have more liquidity. This uses ECN as the primary source of profit.

* News Playing - This is the most important aspect which Day Traders exploit. Often there are rumors in the market of stocks going up or falling and these have to be understood by the Day Traders and stocks are bought or sold off in accordance to maximize their profit.

It is estimated that around 90% of Day Traders fail or lose their capital and it is a hard discipline. However, with the advent of newer technologies and statistics it has become somewhat stable. For a good Day Trader the most important aspects are good training, a proven system, and managing emotions. - 23208

About the Author:

If you wish to know more about day trading stock tips and free day trading resources then you are invited to visit http://www.UMTTrading.com. UMTTrading.com is a universal place to get information on different kinds of trading strategies. This site provides detailed information on swing trading, day trading systems, forex systems and much more. . .

Option Trading: How To Achieve Superior Returns As A Trader

By Dr. Asoka Selvarajah

What is option trading?

Option trading is a way of entering a market with a relatively small upfront investment, but with the possibility of netting you a much bigger return on investment than if you had traded in the underlying instrument. What you are doing in option trading is purchasing the right to buy or sell the underlying security within a specified time period.

During that time you are free to complete the purchase or sale at the price decided initially. If you do not honor the contract the premium that you pay can be lost. Time period in option trading contracts are generally about a month and are settled at dates that are fixed by the stock exchanges that could be the third Saturday of the month. Once this period is over, as an option trader you have lost all rights to make the trade and your premium remains forfeit.

Concepts

You would have to be deeply involved in stock market trade to understand the difference between stock trading and option trading. If you as a newcomer still want to be involved in option trading you must make an effort to understand terminology used and the ideas behind the concept. The terms by used by traders in option trading are quite specific and have their own meanings. When you go in for option trading you would have to decide a price for the stock you want to trade in , the number of shares, and the time period in which you would make such a trade.

The option trader who buys options has no obligation to act whatsoever, and is only obligated to pay the premium to buy the option in the first place. He retains the right to exercise his options in the future, should the opportunity arise and should he wish to do so. The option "exercise price" locks in the specified price at which the underlying stock can be bought or sold for the lifetime of the option. If you are the owner of a call option, giving you the right to buy stock at the exercise price, and the stock price rises above the exercise price during the lifetime of your call option, you can exercise your option to acquire the stock at that exercise price instead of the prevailing price in the market, which may be far higher. In other words, you are buying stock cheaper than the market value.

The stock price may drop or just remain lower the exercise price, the buyer of call option cannot use at all, but can also sell the option and in that way exit the position at a loss or breakeven. Alternatively, he can hold onto it with the expectation that the market value of the option will rise, dependent upon factors such as the underlying stock price, volatility, time to expiry and more.

When you know what you are doing, there are also far more trading opportunities with relatively lower risk compared to merely buying or selling the underlying. Usually, the options of leverage can control a bulk amount of the original stock for relatively small capital expenditure compared with buying or selling the underlying tool. This makes options more attractive because there exists higher profits on investment than just trading the original instrument.

What do the words mean?

Option trading for stocks is generally in blocks of 100 shares

The option giving the right to buy the underlying instrument at the strike price is called the "call" option.

The option giving the right to sell the underlying instrument at the strike price is called the "put" option.

The price set in the option trading contract at which the underlying may be bought or sold is called the "strike price".

In the money: When the strike price is below the existing price of the stock and you exercise a call option, and when the strike price is above the existing price of the stock and you exercise a put option.

You are considered to be "out of the money" if your strike price is more than the existing price at the time of the option and you put in a call option, or you put in a put option and the strike price is lower than the existing price. - 23208

About the Author:

Discover FREE expert Trading videos, podcasts and articles packed with secret strategies to super-charge your Trading and rocket your profits. Dr. Asoka Selvarajah also offers you his critical FREE report, The 7 Deadly Mistakes Of Online Trading. Visit His Online Trading Site OnlineTradingRebel.Com Right Now!