One of the best roads to wealth is investing in the stock market. I’ve invested in stocks for over twenty years. During that time I’ve made a lot of money and I’ve also lost money as well, but I have learned many valuable lessons along the way.

Many people don’t invest in stocks because they consider them too risky. Achieving success of any kind involves risk. Starting your own business or investing in real estate is risky if you don’t know what you’re doing.

Most people today take the safe and secure road of putting their money into savings accounts or bonds. If that sounds like you, you’re missing a golden opportunity to have more money tomorrow than you have today.

There are no pat rules or formulas to guide you when choosing stocks. Bells won’t ring when you pick the right stock, and you will never be certain that a well-researched pick will pay off. You will have to work hard to find opportunities missed by the masses of people.

Still, there is a lot you can do to increase your chances of making a good pick. Before you invest in any stock, you should invest in what you understand, do your homework, and take advantage of the knowledge you have about particular companies or industries. Most of all you need to be patient.

It’s important to research the companies you believe have potential. Research is often best done in person. For example, if you’re interested in Walgreen Company, a nationwide drugstore chain, you would want to visit several stores. Look around at the products they carry and the service they provide.

The same would hold true if you were interested in buying stock in Dave & Busters, a nationwide restaurant chain. Visit one in your area and have dinner. Then go to another city and visit another Dave & Busters and have dinner as well. Take notice of everything, not just the how the meal is, but also how the service is and how it operates.

This sort of in-person, fundamental research is easy for anyone to do, you don’t need special credentials to see how fast a store is ringing up sales or whether it’s offering something new in the way of products or services. When you visit, ask an important question, “Which of your competitors do you respect the most?” Often the endorsement of a rival will lead you to purchase their stock which could turn out to be a top performer.

You don’t have to meet with company heads to get the inside scoop on an industry. If you’re in the industry already, you have a catbird’s seat. That includes producers, suppliers, wholesalers, retailers, and anyone else connected.

For example, those in the oil industry, like oil refiners, tanker salesmen, gas station owners, or equipment suppliers, can see changes coming and take advantage of them. They also know what moves the industry and what factors are the most important to watch.

Likewise, you may be in a position to take advantage of changes (like a shift in demand or a new technology) that no one else knows about, especially an investment broker.

Once you’ve chosen stocks you think are worthy of buying or keeping, it’ll be all you can do to stick with them if there’s bad news all around you. One of the basic rules of success for investing in stocks is: Never get scared out of owning them. Never sell stocks because so-called experts in the media say that the sky is falling. You should only sell if the company’s fundamentals are deteriorating.

Whenever you begin to worry about your investments in the stock market because of “big picture” concerns such as wars or deficits, it pays to consider the Even Bigger Picture. The Even Bigger Picture shows that over the last eighty years, stocks have provided their owners with an average return of 11 percent a year. Despite the wars, the recessions, the bear markets, the crashes, and anything else that might predict the end of the world, owning stocks has been twice as rewarding as savings accounts and owning bonds.

If you’re serious about making money in the stock market, you must expect drops in the market. When you favorite stocks go down with all the others that is the time to buy more shares, and look for bargains.

How many stocks should you buy? The best answer to this question is to buy a manageable number of stocks that you can get involved with. Over time you’ll learn something about the industry and your company’s place in it. For example, you learn what happens to your stocks in a recession and what factors affect its earnings. When the market retreats, you will find bargains and you can add some great socks to your portfolio.

Once you have knowledge and experience you can comfortably follow eight to twelve stocks, but it’s perfectly reasonable and profitable to have as few as five in your portfolio. Besides, not all of your stocks have to have to be great performers. If just one of your stocks performs at a high level and the others go nowhere, you will have tripled your money.

Here are some important points that will help become a better investor:

• The market, over the past few decades has been dominated by the masses. This makes it easier for you, the individual. You can make the best investments by ignoring the masses.

• In the short term, there may be no correlation between the success of a company and the price of its stock. In the long term however, there is a 100 percent correlation between the success of the company and the success of its stock. It pays to be patient, because the disparity is the key to making money.

• Don’t invest in long shots because they rarely perform well.

• Never invest in a company without first understanding its finances. Companies with weak financial statements drop the most in price.

• Never invest in hot stocks in hot industries.

• No one can predict interest rates or where the market or economy is headed. You should study and concentrate on what’s happening to the companies you own shares in.

Picking stocks is both an art and a science, but you should never rely on either one too heavily. For example a person who relies solely on looking at financial statements before making an investment will not be very successful and same goes for the person who relies solely on hunches. Many people play hunches and make investment decisions by their gut alone but to be a successful investor, you must do the research to make sure your hunch is valid.

Legwork is equally important to your investing success. It takes time to find good companies to invest in. You have to be prepared to visit the companies, observe how they operate, sample their products and services, and talk the employees who work there. You may have to look at hundred different companies before you find a good investment, but all it takes are a few big winners to make your efforts worthwhile.

Becoming a successful investor and making money in the stock market comes down to you. Always be careful whose advice you follow. It’s not smart to blindly accept the recommendation of someone even if he or she is a professional without first knowing something about the person’s background.

Some people listen to what the masses are pushing, some don’t do their homework, and some who have been successful in the past become lazy. The truly successful investor, the person who makes the most money in the stock market is the person who researches companies constantly to get ideas.

Copyright©2006 by Joe Love and JLM & Associates, Inc. All rights reserved worldwide.

Joe Love draws on his 25 years of experience helping both individuals and companies build their businesses, increase profits, and achieve total success. He is the founder and CEO of JLM & Associates, a consulting and training organization, specializing in personal and business development. Through his seminars and lectures, Joe Love addresses thousands of men and women each year, including the executives and staffs of many businesses around the world, on the subjects of leadership, achievement, goals, strategic business planning, and marketing.

Reach Joe at: joe@jlmandassociates.com

Read more articles and newsletters at: http://www.jlmandassociates.com

Intermediate-term technical indicators suggest SPX will be much lower within six weeks. The chart below is an SPX daily chart, with indicators, since the end of the rally in Nov. The chart shows the NYSE Oscillator’s (i.e. NYMO) 50-day MA peaked two months ago slightly above 25 and closed at 2.12 Fri. Normally, when the Oscillator’s 50-day MA rises to 25, it will fall to negative 25. Also, the second half of the downtrend tends to be steeper than the first half.

Moreover, the chart shows, the VIX 200-day MA fell last week to 12.38. VIX closed at 11.85 Fri and has been below the 200-day MA over most of the past month. Consequently, the VIX 200-day MA may fall to the historically low 12.29 level reached in mid-Feb ‘94, when SPX pulled-back 9.7% in 60 calendar days from early-Feb to late-Mar ‘94. So, there may be little SPX upside, and at least a moderate pullback may take place over the next few weeks.

Last week, the technical short-term oversold condition of the market was neutralized. The Oscillator and Stochastics reached low levels early last week and then rose with the market late in the week. However, SPX may continue to rise to just below the Parabolic SAR (i.e. purple dots), similar to the rise in late Jan, before pulling back sharply, although the 10-day MA was resistance Fri. SPX generally traded around its Mar Max Pain point at 1,275 most of last week.

There are many important economic reports next week: Mon–None, Tue–Retail Sales, Current Account, Business Inventories, Wed–Import & Export Prices, Empire State Index, Oil Inventories, Fed’s Beige Book, Thu–CPI, Building Permits, Housing Starts, Unemployment Claims, and Fri–Industrial Production, Capacity Utilization, Michigan Consumer Sentiment. Also, next week is an end-of-the-quarter options expiration week. Consequently, it may be a volatile week.

SPX has been in a slow and volatile uptrend, over the past 3 1/2 months, after the rally ended in Nov, which is a bearish pattern, e.g. a rising wedge (within another two year rising wedge) or a double top (or potential triple top). Uncertainty about monetary policy may heighten, although the FOMC is expected to raise the Fed Funds Rate 25 basis points Mar 28th, because of stagflation concerns, i.e. slowing growth with rising inflation.

Charts available at PeakTrader.com Forum Index Market Forecast section.

Arthur Albert Eckart is the founder and owner of www.PeakTrader.com Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

A few London Stock Exchange brokers and traders are wondering what benefits, if any, would be realized from merging with Nasdaq? The answer to that question is that no one is entirely sure.

CEO of the London exchange, Clara Furse, declined Nasdaq’s $4.1 billion offer almost fourteen days ago, as she has previously declined multiple similar proposals since taking charge of the exchange five years prior.

However many investors in London are extremely optimistic that a winning bid is coming from the US that they have hedged the stock prices of the London exchange by a hearty twenty percent above the offer, even as the market continues to loose its footing and slip from its high point on Monday. During the Day Thursday, values edged up 1.5 pence, to finish at £11.395.

In spite of the frenzy of many London exchange investors looking to liquidate their shares in the near future, a few market players are less than hopeful about merging the markets. The cynics also include a former Nasdaq executive.

"I’m not sure those advantages are so great," stated Lynton Jones, former chief executive of Nasdaq International "If you are able to create one company with one set of technology, one rule book and one set of regulations, then you begin to see cost reductions."

It appears unlikely in any combination of the London exchange and a United States market, Mr. Jones said. A recent visit by Nasdaq executives and investors who possess long standing and well established positions in the London exchange did not help in efforts to clear up the predicament, individuals who have been briefed on the talks say.

"It’s still sort of a chess match," said Richard H. Repetto, an analyst with Sandler O’Neill & Partners. Nasdaq and London market officials have not conferred face to face or floated an offer since its initial disclosure on March 10th of this year.

Possible complexities of any integration are intimidating to a large extent. Both the Nasdaq and the London Stock Exchange are in the process of buying new and different trading technologies. Nasdaq acquired the electronic brokerage and trading platform Instinet last year and is switching to the Inet system. The London exchange just invested millions of pounds into a new digital platform known in the industry as Sets that will go online next year.

Another issue that is currently muddying the waters is also one of the items that makes London so attractive to the Nasdaq and others; the differences in regulation. Immediately after Nasdaq’s initial proposal, the Securities and Exchange Commission of the USA and the Financial Services Authority (F.S.A.) of Britain made a formal agreement promising to substantially increase their mutual cooperation. The chairman of the S.E.C., Christopher Cox, said he could not foresee future regulatory obstacles to consolidation, and also stated regulators would be wise not to "suffocate transactions."

Nasdaq’s offer comes along with London’s strength is beginning to compete with New York, as it attracts international investors and emerging capital. British officials are promising heavy support for this merger. A new international business council continues to be one of the top locations for international company’s most valued activities.

David C Skul provides global market solutions to clients from all over the world. Please visit, read our articles, review our blog, and engage in global market discussions at http://www.relativitycorp.com

Here is how economies really work in a nutshell. This is an extremely obvious economic fact that most people completely forget. If people work together in harmony value is created. If people fight among one another value is destroyed.

Nothing in the world we perceive is in itself of value at all. Only those things that at least two people agree are of value become worth something. Ponder this forcefully for a moment. Is gold really of value at all? It is just an inert metal. There are tribal societies who do not perceive any value whatsoever in gold. You can’t eat it, drink it, or smoke it so it definitely does not directly change the way you feel. The only reason it is value is because people in general say so!

I was listening to a lecturer who is extremely competent at changing people’s belief systems. I was amazed to hear him talk about the creation of fiat currency, money that is not backed by a physical commodity, as a bad thing. This to me was impressive. Here was a very intelligent person implying that an inert metal was somehow valuable in itself completely oblivious to the fact that the gold standard caused as many problems as it solved for country economies!

The gold standard did impose a common standard of value for all national currencies that gave some stability to international trade and investment, dampened interest rate fluctuations, and stimulated the expansion of commerce and investment abroad. In addition the gold standard imposed economic discipline on a country but these advantages were offset by a number of limitations such as the necessary maintenance of free trade, restriction of a country’s money supply by its gold stock making a nation unable to respond to problems of lagging economic growth or rising unemployment.

Now I want you to ponder the stock market. If gold has no inherent value then of what value is a stock? Again, a share of a stock is only of valuable if at least two people consider it valuable. Stock market pundits push things like earnings and healthy financial statements both of which are subject to creative reporting within legal yet wide accounting standards.

Inside corporate executive have been caught red handed in the last few years cooking the books making estimates of any fundamental share value highly circumspect. Again, it all goes back to whether there are more people buying or selling a company’s stock and executive corporate insiders with their gifted stock options are the biggest beneficiaries of the corrupt Wall Street machine.

Corporate America owns the American media. Executive insiders control corporate America. Don’t let Wall Street fool you into thinking that the path to stock market investing riches is through laborious financial analysis because it is a fool’s journey. Learn to read how the public’s emotions in the stock market are being manipulated by unseen corporate forces and you will have the best shot at coming out way ahead!

Dr. Scott Brown, Ph.D. a.k.a. “The Wallet Doctor” can teach you how saving the daily price of a cup of coffee at Starbucks can make you a millionaire in the stock market through long term stock investing. Dr. Brown’s website is: http://www.walletdoctor.com/

Many years ago stock trading was reserved for the very wealthy or for those individuals that had the right connections. However, with the explosion of the Internet and the ability to easily trade stocks online it has become more common for anyone with money and a desire to trade to buy and sell stocks of almost any company. Perhaps the only stigmatism that still exists is the necessary knowledge needed to understand the terminology associated with how the stock market truly works. The fact is knowledge is power and the more information you possess on how to trade stocks the better your odds become at actually making money in the long run.

Even with the use of the Internet most stock trades are down by a middle party known as a broker or brokerage service. This entity is responsible for taking your stock buying and selling orders and executing them. Some brokerage companies offer stock-picking advice related to the current conditions of the stock market. There are two primary brokerage firms. The first are usually referred to as full service brokers. They offer the most stock picking advice but they also charge a fee or commission for their service. The second type of brokerage firm is the discount broker. They are extremely popular amongst consumers that don’t really need any type of financial advice and are merely looking to purchase and sell their stocks at a discount.

The Internet age truly is marvelous and it clearly shows with the technological advances that allow online trading, interactive systems that take stock orders placed over the phone and the relatively new method of buying and selling stocks through web enabled phones and high end electronic handheld devices.

Many brokerage firms offer software that allows you to effectively track your most recent buy and sell transactions. They also usually offer some form of software that analyzes stocks allowing you to make a more informed decision when it comes to buying or selling your favored stock pick.

Some terms that you should definitely become familiar with include the following: Market Order – This refers to the action of buying or selling a stock at the current market price. Even with the most advanced technology your order won’t exactly happen at the price you want. There is a slight delay that occurs which allows your action of buying or selling the stock to occur as close to your preferred price as possible.

A more complicated order is called the stop order. This order is normally executed by more advanced stock pickers who are looking to purchase a stock at a certain price (identified through analysis) above or below the current quoted market price. This form of purchasing a stock is sometimes used as a hedge in order to limit any possible losses that may occur from your stock action or to protect any profits that you may have already made.

As you can see stock picking can be easily down by anyone with an Internet connection and a little bit of knowledge. However, no matter how easy it has become to buy or sell stocks it’s still a good idea to familiarize with the many stock-trading terms. After all the informed investor often becomes the richer investor.

Timothy Gorman is a successful Webmaster and publisher of Online Stock Trading Secrets. He provides more stock advice, information and ways to make money with stocks that you can research in your pajamas on his website.

Stocks that are breaking out are usually very good profit-makers. That’s why you’ll often see us report that “XYZ could break out.”

A breakout occurs when a stock penetrates a previously formed resistance level and shoots ahead with no overhead resistance in the way. These moves can go for many points in a few days.

But you must understand resistance levels.

Suppose that you are watching XYZ every day and notice that it is moving ahead a little by the end of every session. By the end of the week it is up four points and you decide to buy if it is up at the beginning of the next day’s session.

Sure enough, XYZ is up the next morning and you buy at 50. Murphy’s Law then takes effect, and the stock falls five points the next day. Naturally, you aren’t happy and, more important, so are the 10,000 other people who bought the stock on the same day you did. Most of you are thinking the same thing: “If this thing gets anywhere near the price I paid for it, I’m out!”

So after a few days of consolidation XYZ starts to head back up. What do you suppose most of the owners of XYZ who bought it at 50 are going to do the second it gets to 49-1/2? Sell! And XYZ falls like a rock back to 45. The 50 price has become resistance.

Two things have happened. Another wave of people bought XYZ at 49.50, and they can’t wait for it to get up there again so they can get their money back. Also, traders noticed what took place. This is a dream come true for them because they highlight stocks that have formed a buy-sell "range" and start to trade it. They buy XYZ at, say, 45.00 and let it run to 49 and then short it so they can make money on the way back down to 45. This pattern–running up, whacking head at 50, falling back, regrouping, running up, whacking head–can be repeated many times.

But what happens when the XYZ finally releases some great earnings news, or its sector heats up so much that the stock finally punches through that 50 resistance line? Well, for one thing, a "short squeeze" is created. That just means all the traders that shorted XYZ figuring it was going to fall back to 45 now have to actually buy those shares as soon as possible to cover their short.

All that rapid buying along with the "new" money that is coming into XYZ because of the news release creates a fantastic supply-demand situation. All buyers and no sellers means that the stock price must go up to get people to sell it to the people that want it. When it finally does break out, it can go for a bunch real quick.

If you find a chart of a company that has rolled up to a resistance level and then fallen back three or more times, watch it closely every time it gets near that high again. If it finally breaks through its resistance and holds, chances are good that it will really fly from there. The key word is “holds.” You have to be patient and make sure it doesn’t pull back again. In general, if it holds above that resistance level for a full day, it is moving higher.

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The three charts below may indicate SPX direction over the next one to three months. The first chart is a 2 1/2 year chart of SPX with its 20-day MA (black and blue lines), VIX 20-day MA (red line), and CPC 20-day MA (green line). There’s generally negative correlations between SPX and VIX and SPX and CPC. Also, when the 20-day MAs of VIX and CPC are at bottoms, SPX is often near a top, and when the 20-day MAs of VIX and CPC are at tops, SPX is often near a bottom. Currently, the VIX and CPC 20-day MAs are low compared to SPX, which may indicate SPX is near a top.

The second chart is analogous to the first chart, except 50-day MAs are used. The negative correlations are similar, and the 50-day MAs of VIX and CPC are also low compared to SPX. One notable difference is the VIX 20-day MA has been falling, while the VIX 50-day MA has been flat after rising. The second chart also shows the SPX 50-day MA tends to rise, fall, rise, etc. Currently, the SPX 50-day MA is rising at a decreasing rate after rising for five months. So, the SPX 50-day MA may be close to flattening and then falling (the SPX 20-day MA has somewhat similar movements).

The third chart is a three-year SPX monthly chart with Bollinger Bands. At the beginning of the cyclical bull market, SPX rallied into the upper half of the monthly Bollinger Bands and then generally traded between the middle and upper bands. In October 2005, SPX fell to the middle band, rallied to the upper band, and then traded just below the upper band, which has been resistance. Also, the ZigZag line shows each time SPX rose to the upper band, it pulled-back towards the middle band. The previous two times SPX rallied to the upper band, it pulled-back over 7% and over 6% within three months.

The three charts suggest SPX will more likely fall, within the next three months, than rise. However, if SPX continues to rise, it may be constrained by the monthly upper Bollinger Band, currently about 1,308. Also, the monthly middle Bollinger Band, currently at 1,204, has been support over the recent bull market. A 6% fall from 1,310 is 1,231 and a 7% decline is 1,218, which would continue to hold the monthly middle Bollinger Band. If SPX falls or closes below the monthly middle Bollinger Band, that may signal the end of the cyclical bull market.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

Charts available at http://www.peaktrader.com/ Forum Index Market Forecast section.

People usually fear what they do not know. You cannot judge or label something until you get to know it.

First impressions are a perfect example. One person may have preconceived notions about somebody who they don’t know much about. Once they get to know that person, they realize that their first impressions were invariably false.

The same thing applies with penny stocks. Penny stocks get a bad first impression. They are quickly written off. The purpose of this article is to get past that first impression, to really dig deep and see if these bad impressions are warranted or not.

Below are some of the myths that always seem to shadow penny stocks.

Myth #1
“You’ll lose all your money if you trade penny stocks.”

This stems from the belief that trading penny stocks is risky. Actually, any form of investing in stocks will always invariably involve risk. The only way you will lose all your money trading penny stocks is if you don’t bother trying to minimize the risk. The key is to look to minimize that risk! It’s as simple as that.

For example, starting your own business incurs high risk. Does that stop people from doing it? No. And you know what? The people who succeed in starting their own business are the ones who minimize the risk. They do that by researching on how to successfully start their own business by reading, talking with people and taking action. The same thing applies to penny stocks.

You will not lose all your money by trading penny stocks provided that you minimize your risk by researching, learning, and practicing trading before starting.

Myth #2
“There’s not enough liquidity in penny stocks.”

What do people mean by liquidity? Liquidity simply means having enough volume to easily buy and sell your shares. For example, if a penny stock only has two trades, its liquidity is said to be low. There are not enough traders to buy and sell.

However, if a stock is experiencing huge amounts of trades, thereby indicating the presence of a large number of traders, its liquidity is said to be high because you can easily buy and sell shares.

Looking at an after market report recap of penny stocks will reflect that there is more than enough liquidity in penny stocks.

Myth #3
“It’s easy to make money in penny stocks.”

When it comes to penny stocks, the math looks very appealing. Buy shares at a penny and sell them for two cents. There, you just doubled your money. If it were that easy, people would be millionaires.

The fact of the matter is that trading penny stocks can be very rewarding. However, that reward goes to those who educate themselves and paper trade (practice trading with fake money to gain experience), in other words, goes to those who are willing to pay the price to learn.

That’s precisely the reason why some people are very negative toward penny stocks. They have been attracted to the potential of making money, only to rush in without any sort of training or education and become disillusioned and embittered.

Despite all the stereotypes that seem to follow penny stocks, there’s one aspect that everyone agrees on. Penny stocks involve high risk and high reward. There’s no doubt about that. The key to getting that high reward is to learn how to minimize the high risk. It’s as simple as that. It’s as simple as that.

Jason Brook is the author of The Ultimate Step-by-Step Guide to Day Trading Penny Stocks. His website can be found at http://www.daytradepennystocks.com.

An options strategy called Covered Call Writing is a conservative strategy designed to reduce risk and increase income when investing in stocks. Briefly stated, stock options are contracts in which you buy or sell the right to buy or sell. Although there are eight types of options contracts, we’re interested here in low-risk "Covered Call Writing."

Here’s how it works: Say it’s August and you buy 300 shares of XYZ stock at the price of $48 per share. XYZ pays a quarterly dividend of 50 cents per share. Therefore, if the price never moves, you’ll earn 4.2% per year.

At the same time, you would participate in Covered Call Writing. To do so, you, you would "write three January 50 Calls." This means you are selling ("writing") the right for someone else to buy the stock from you (they "call" it away) between now and the third Friday of January at the specified price of $50. (All contracts expire the third Friday of the month.)

Each contract represents 100 shares, hence three contracts. The buyers pay you a fee (called a "premium") of $3.5 per share, or $1,050. (The premium is based on the amount of time until expiration and the spread between the current price and the "strike price," in this case $50. Therefore, the premium changes constantly.)

Assuming you don’t cancel, only two things can happen next: The contract will get exercised or it will expire worthless in January. Either way, you keep the $1,050. Clearly, this strategy can yield big rewards. Among the advantages are:

1. You are establishing a profitable sell price the day you buy the stock. If exercised, you are guaranteed a profit;

2. You reduce risk because premium in effect reduces the price you paid for the stock;

3. Your annual yield is boosted far above that of the dividend alone.

However, there are other considerations. For one, you are limiting your potential profits. No matter how high the stock rises, you won’t sell for more than $50. You can solve this problem by buying your option back, in effect canceling it out. You would do this if you later think the stock will dramatically rise and you don’t want to miss the gains to be made.

Also, you have not reduced the risk that your stock may drop in price. The only certainty is, should XYZ drop $25, your option will not be exercised - a small consolation. To protect yourself, you may "buy a January 45 put" giving you the right to sell your stock for $45. This is the opposite of what we’ve reviewed here, and is designed to minimize losses, rather than protect gains.

Because of the potential for price drops, you should choose a high quality, blue-chip stock that fits your budget, an which offers a stable trading range, solid fundamental, high dividends, and good growth potential.

Covered Call Writing is not a reason to own stocks, but the strategy might be of help if you already own them. Prior to opening an account, you must receive and urged to read "Characteristics and Risk of Standardized Options," which is published by the Options Clearing Corporation in cooperation with NASD and all major U.S. stock exchanges. The booklet is available from any broker or financial advisor.

About the author: Tony Reed is the author of " How to boost your stock returns while lowering your risk", please visit his website Mutual Funds & Stock Trading for more information.

This article is free for republishing as long as you leave the article title, author name, body and resource box intact (means NO changes) with the links made active.

Decide and Have a Strategy

The strategies will depend on if you are a day trader or an investor. The strategies for day traders will not work for an investor and the other way round. Therefore you have to decide if you are going to be a day trader or the investor. Remember that day trading is a full time job and you get married to the trade. Investing is not a full time job but you can make similar money as a day trader makes.

Strategies for Day Traders

The day trader is there to make money for him/her. The strategy for each one is to maximize the income. In this the day trader has two tools Wiz technical analysis and arbitrage. Speed of working and attention to details are the stock in trade for the trader. Since not everyone can become a day trader, we will leave the strategies for each one to be developed separately and will not go further than this.

Strategies for Investors

There can be a number of strategies for investors. Before you go ahead and adopt a strategy or a combination of strategies, it is necessary to follow a strict code of working. The code may not be written but, but it is based on common sense and it is in your interest if you are an investor.

1. Study the market before investing: It is your own hard earned money. You should not be reckless with your investment. Therefore study the market before you investment. Find out if the market trend is up or down.

2. Study the market segment: It is necessary to study market in which your company operates before you purchase the shares of a company. Find out everything you can about the company.

3. Timing of purchase: The share of good company expecting increase in quarterly half yearly or annual results, go up before the actual announcement of results. If you are not sure about the purchasing, avoid purchasing the shares at this time.

4. Rumors about the company: You should avoid buying on the basis of rumors about company. You should also avoid buying on the basis of unconfirmed company reports and tips.

Having done your basics, now you can go for determining the strategy of purchase of company shares.

1. Buy low and sell high: This is the best strategy and everyone will tell you to adopt it. In practice however, a newcomer will find difficult to adopt this in practice. Over a period of time you will be able to fine tune your skills and adopt this strategy.

2. Buy and Hold: This works for nearly all the new entrants in the stock markets. When choosing a company to invest, choose carefully and after a thorough study of the company and the market in which this company operates. However the exit strategies also have to be fixed in advance to ensure that you are not left holding the baby after every one has the profit from company shares. Some options can be

• Exit after your returns from this share are fulfilled in a certain period. The money you have received can be invested in another company promising a higher rate of return.

• Exit to limit your losses. In case the market is falling down, have a predetermined limit below which you are not going to hold the shares of company. This is called stop loss limit and has to be followed rigorously.

3. Buy and Change Frequently: If you have studied the markets carefully, you might find that that there is a limit on the expected gains from shares of a company. If you really have reached this limit, you can exit out of this stock and choose another.

Choose a combination of strategies that suits you the most.

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