The classic image of the stock market is that of a place where fortunes are made and lost throughout the course of the day, and where those who take the biggest risks are rewarded by a hefty payout when all is said and done. Of course, this is the movie version of the market… no matter how thrilling the day-to-day dramas of investment trading become, they’ll never compete with the images of the stock market that have been created for the silver screen.

There is a small grain of truth to those images from the movies, however… those individuals who choose to deal in high-risk stocks can make a lot of money if they handle the risks correctly. If they don’t, however, then there’s a good chance that they could lose their entire investment.

Below you’ll find more information on the world of high-risk (and high-yield) investments, including ways to help insure yourself against major losses when dealing with higher levels of investment risk.

Defining High-Risk Investments

The first thing that needs to be covered when talking about investing in high-yield, high-risk stocks is exactly what is meant by the terms “high-risk” and “high-yield.” The risk of the investment is usually due to the very fickle nature of that particular stock… though it may be growing in value rather quickly, it’s obvious that the growth is going to stop soon and a very rapid and severe descent is going to begin.

The yield of the investment, on the other hand, refers to the money that could potentially be made by buying stocks early on in the increase in price, and then selling just before the value starts to plummet. Fortunes have been both made and lost (sometimes in the same day) with high-risk trading; the key is knowing exactly when to start buying or selling.

How to Trade High-Risk Stocks

When trading high-risk stocks, it’s almost essential that you have access to your brokerage account and that you’ll be able to buy or sell shares as soon as the price begins to fluctuate in one direction or the other. This can be done online, via the telephone, or in person if you don’t use an online brokerage firm.

You can also usually set up hold orders which will start buying the stock when the price reaches a certain level (up to the amount that you’ve specified) and that will begin selling shares as soon as the price drops below a certain point. Many online brokers allow these types of hold orders, and they can allow you to go about your regular day without having to watch the market ticker the entire time.

Guarding Against Loss

Of course, even with hold orders or a dedicated broker you can still end up losing money when dealing with high-risk stocks… that’s how they earned their name. In order to minimize this potential for loss it’s important to have a well-diversified stock portfolio to fall back on.

If your high-risk investments begin to fall in price too quickly and you end up losing money by the time the shares have been sold, the relatively stable value of some of your core portfolio stocks and indexes will help to even out your losses.

The fall of the higher-risk stocks might even stimulate some other portions of the market, causing an increase in other stocks in your portfolio. This will help take some of the sting out of your loss, and may end up giving you a greater long-term gain than you might have had from your short-term investment that went sour.

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

You may believe that professional traders have a huge advantage over the average “homegamer” as Jim Cramer likes to refer to the viewers of his very popular show on CNBC called “Mad Money”. You probably think the pros have a lot of advantages like top notch research and access to high level executives at many listed companies. Well, thanks to the internet, homegamers can now access that same research and thanks to Regulation FD, which mandates fair disclosure of all significant company information in a public forum like an SEC filing or a press release, those cozy one on one meetings are no longer legal although they probably still occur.

One of the professional trader’s advantages is something that you can easily adopt. It is called Money Management or Risk Management. There is nothing exciting or sexy about it, but without it you’re just gambling. I always recommend Vegas for gambling. The casinos there will at least give you a room, a meal and as many drinks as you can handle. Vegas makes it fun to gamble and lose. Wall St. will give you nothing but a quarterly statement reminding you that gambling does not work. Money management is the crucial step of calculating risk before entering every new investment or trade. In this article, I am going to explain how any homegamer can implement a money management system and start trading like a pro.

First, you need to assess your own risk tolerance. Are you willing to swallow large losses (greater than 2% of total account size) on any given trade or investment? Maybe you are only comfortable taking a ½ of 1% hit on any one idea. These are preferences unique to each investor. The next step is to set up the parameters for the trade. You need to be educated and realistic about expectations both good and bad. Stop price is the parameter you set usually based on analyzing a chart of the stock you’re considering for an investment or trade. The stop price could be a support level, a percent retracement from a recent high or a confirmation of a bearish chart formation. The idea of a stop price is to get you out of a stock before it really goes against you in an unrecoverable way. The target price is another parameter you set and is usually based either on a fundamental analysis of the stock to determine fair value or a technical analysis that uses charts to predict where the stock could ultimately move to before the momentum subsides. For example, let’s look at a potential investment in Microsoft (Symbol MSFT). The stock has traded in a $4 range for a year. If you decided to buy MSFT in October 2005 at $25 per share you can realistically frame your trade using the $4 range. You could set your stop price at $24 per share since that has shown to be a good support level during 2005. You could set your target to be $28 per share since that has been the top of the range for MSFT the whole year. Now if you plug in the rest of your parameters, let’s say 1% for risk tolerance, $100k for total account size into a Position Size Calculator such as the one available for free at http://broadbandbrew.com/positionsizing_calc.htm you will quickly see that you can safely purchase a maximum of 1000 shares of MSFT and still adhere to your risk management system. The Position Size Calculator is a calculator that uses parameters you set to determine the correct number of shares you should trade for each investment you are considering as well as the risk/reward ratio and total profit potential if your target is met. In the MSFT example the risk/reward is actually pretty good at 3.0 ($3 up and $1 down). The total profit for the trade is $3,000.00 (not including commissions) which is a 12% gain. That’s not bad for a homegamer.

The Microsoft example is one case. Now let’s look at another trade, one with very different dynamics. TLT Put Options that expire in 10 trading days. If you decided to buy this option at $0.25 on 11/28 and hold till maturity, it could very well be worth zero or several dollars. It actually was trading at $0.55 just 2 days after your hypothetical purchase. That’s over a 100% return in 2 days. You’re a genius or just real lucky. It doesn’t matter as long as you managed the risk.

How does one manage this high level of risk you might ask? Exactly the same way we did for the MSFT example. You could realistically use zero as your stop loss since it’s unlikely you will have a chance to stop out due to the extreme volatility. Using the same 1% risk tolerance and $100k account size, the Position Size Calculator comes up with 40 contracts, the maximum number of contracts (options trade in contracts where one contract leverages 100 shares) that you can safely buy and still adhere to your risk management system. If you sold the options at $0.55 you made $1200 (not including commissions) which is a 120% return in two days. Once again, that’s not bad for a homegamer.

I bring up these very different trading examples to make this point. By employing a risk management system, you can trade pretty much anything without fear of depleting your account beyond acceptable levels. Even if you lose, you will survive to trade another day.

I can’t stress enough the importance of risk management. The winning investments always take care of themselves. It’s the losing ones that cause homegamers problems. You just can’t let one losing trade impact your entire account to the point where getting back to even requires unrealistic returns.

It is interesting that most amateur investors and traders focus most of their efforts on investment selection and timing their trades. They spend little or no time on money management. Some always trade a fixed dollar amount while others use a fixed % stop loss regardless of the varying dynamics of each trade. If you don’t account for the different characteristics of each investment or trade, you are either taking too much risk or not enough. In the long run this will handicap your performance.

There are quite a few different position-sizing strategies that you can use. Some work best with stocks, while others are better suited for derivative trading (options, futures, etc…). All of them are anti-martingale strategies where the size of the position goes up as your account size grows. For a much more in depth discussion of money management systems and position sizing I recommend reading “Trade your way to financial freedom” by Van K. Tharp.

Yes you can trade stocks and options like a pro. You just need to focus on managing risk the way professionals do. You need to use position sizing models like the one employed by this position sizing calculator: http://broadbandbrew.com/positionsizing_calc.htm You need to be consistent in applying your own risk tolerance, and you need to have realistic parameters for each trade or investment you consider.

Anatole Raif is President and Founder of http://www.BroadbandBrew.com, an investor service of MicroE Technologies, LLC. Anatole is a professional stock trader. For over fourteen years Anatole has specialized in identifying and trading growth stocks in the short and intermediate-term time frames. http://www.BroadbandBrew.com is home to traders and active investors who are looking to benefit from working alongside professional traders. Anatole can be reached at anatole@broadbandbrew.com.

In today’s market the large institutions are buying shares by the millions. This is a huge demand on the stock and when demand is high the share price rises. So I make sure that the stock is being bought by institutions. This appears as high volume. Since the institutional buyer doesn’t want to buy all these shares at once and drive the price too high in one day, they will normally purchase shares over time, sometimes a week or a month or even several months. There are so many institutional buyers that while they are buying the volume will increase dramatically over time.

This volume can be seen on charts easily. I watch for a rise in price on increased volume over at least four days in a row. I sometimes use three days, but that is much riskier. On a chart you will see the rise in stock price and the increased volume for only three to seven days. Then the stock may back off a bit or flatten out for anywhere from a few days to a year or more. This flattening is called a base if the share price remains in a tight trading range. This seems to give the share price energy. If the company continues to perform well there will be a breakout on the price of the stock and it could shoot up dramatically in a short period of time. A breakout is when the high point to the left of a base is reached again and on large volume rises above the previous high. This is a perfect buy point.

Try not to buy the stock after it extends to far above this buy point. You will usually only have a day or two to buy the stock at the perfect buy point. If it extends too high there is a chance the breakout will fail and the price of the stock could easily fall back to or below the base, so be careful. A very strong stock will rise, flatten for a short time of anywhere from 3 days to 3 weeks and then breakout and shoot up again. This will happen several times so there are what looks to be tiers to the chart.

These are all breakouts with different buy points. The more breakouts there are the more risky the purchase if you purchase after the 3rd breakout. The institutions may start taking profits in larger groups now and the price will start to fall or flatten into another base. The length of time of the base varies so a strong company share price may move up quickly like the example I give above or the base may last for a period of months or years and be harder to spot. Look at different time periods of the charts so you have a clear overall picture of where the technical clues stand out. Of course any stock may shoot up like a rocket and seem to go forever, but what goes up must come down and a stock that rises like a rocket usually falls like one too. The hard part is guessing when this fall will happen. As you can probably tell, I don’t like to guess where money is concerned.

When you have a profit of 20% in a stock make sure you never hold the stock until the profit is erased. Sell before that happens. I will sell a stock when the price backs off on higher volume for three to five days. But if the stock loses 5% to 8% immediately after I bought it, I will sell as soon as I can. If you have that 20% profit though, wait for the higher volume sell signal. Sometimes the institutional traders will try to shake loose the weak, timid and scared shareholders from their shares and then drive the price higher again. This is called a shakeout. This will only happen on low volume so watch for the falling share price on higher volume. This is a true sell signal.

The higher your percentage gain the more room you have to maneuver as far as selling or holding the stock is concerned. If the sell signal doesn’t come you can let it ride but watch carefully in the later breakouts. After three or more breakouts the steam may be gone. You may wish to recoup your original investment by selling some of your shares and letting the rest pick up any more gains or hold for a long term investment. Or you could sell enough to have a decent profit and let a smaller percentage ride. Watch for the sell signals and let the rules guide you. If you sell all your shares for a 20% or more gain, don’t worry. Nobody gets broke taking a profit. Five of these trades a year and you have doubled your money.

With three startup businesses before he was 21 years old, Matt Fox has the experience to help you create your own businesses for your future. He is a professional investor of his money. See his blog at http://www.bizmaker.blogspot.com

In the classic golf comedy “Caddyshack,” the outrageously wealthy character played by Rodney Dangerfield gets a call from his stockbroker in the middle of the fairway. “I want you to SELL, SELL!” he yells into the phone, and then is stopped short. “They’re selling? Then BUY, BUY!”

There’s a nugget of market wisdom in that loopy dialogue: When everybody and his brother is selling, you can often grab a bargain by buying a stock as it bottoms out. Conversely, you can make some nifty profits by selling a stock when the fervor of buyers is at a peak.

Taking a couple of quick points off the board is a pretty good strategy, in our view, during this era in the market. Short-term investing is the name of the game. But if you’re not a day trader and must have your nose to the grindstone at work, you can’t closely monitor the action in your favorite stock to take advantage of a sudden price spike.

That’s when a sell order comes in handy. In the same way that a stop loss order protects the investor from downside risk, the sell order gives the investor the chance to maximize rewards to the upside.

It’s a simple procedure. If you purchase a stock at, say, 20 dollars share, you can immediately attach an order to sell the stock at perhaps 22, two points higher. If/when the stock price touches 22, a market order is triggered, and you pocket two points for a 10% gain.

You can adjust the order, setting it higher or lower at any time via your broker or electronically. You can cancel it at any time. You can be at the beach or on the golf course when the price hits your target and you cash in.

Here’s a situation where a sell order is particularly handy: Say your stock is poised to “gap up” at the open of the session and pop for several points because of good news (a new product, upgrade, merger, etc.). The problem is that the stock will often “fade” after the opening gap, reaching a peak in the first half hour of trading and then slowly sliding back. A four-point gain at 9:45 a.m. can dribble down to a one-point gain or nothing by 10:30.

If you recognize the good news before the open and realize that the stock is ready to gap, you can place a sell order a few points above the previous night’s closing price. If the stock closed at 20, you can place at the order at 22 or 23. At the open, there’s a good chance that the price will hit—or exceed—your sell price, and you’ll be safely out of the trade when shares begin to fade. If it fades back to an acceptable level, you can always reenter the trade.

The risk is that the stock will gap and NOT fade. The price could hit 22, then 23 and continue through 24 and 25 before slowing down. You might leave some points on the table. But you’ve made a nice return on your investment, and you can still reenter the trade when you are again comfortable with the price.

Savvy traders try to grab every nickel of a gap open by shifting their sell order higher as the stock advances. If the stock gaps to, say, 22 and continues to move, the trader might place a sell order at 23. As the price approaches 23, say 22.75, he might cancel the live order and place another at 23.50. If the price heads toward 23.50, he can adjust to 24. This can continue until the trader is convinced that he is selling at or near the short-term top. All it takes is a few mouse clocks.

Remember, if your sell order is triggered and the stock fades to below your sell price, you can reenter the trade at the lower price. Essentially, nothing has changed—except you’ve put some easy money into your account.

Plenty of traders use this technique while trading the Exchange Traded Funds (ETFs) that track the movement of the DOW–the “Diamonds”(DIA)—and the NASDAQ—the “Qubes” (QQQ). When the pre-market action in futures indicates a strong open for either of these indices, a well-placed buy order for these ETFs attached to a timely sell order can produce double-digit profits in a few minutes.

The technique also works in reverse for short sales in which the position gains in value when the underlying stock falls in price. If he senses a “gap down,” the trader simply places a “buy to cover” order a few points BELOW the current price. If the stock drops to his price, a buy order is triggered to cover the short for a quick profit.

Sure, some of these tactics are beyond the skill level or interest of many investors. But every investor should at least consider using a sell order whenever he places a new block of shares into his account.

The Stocks2Watch® newsletter has been published since 1998.

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In past articles I have touched upon how to play a penny stock or micro cap stock near its bottom. You will come across a lot of stocks at or near their bottoms when trading penny stocks, here are some tips for timing your purchase correctly.

Once you have found a stock you like, take a look at its 52-week high and its 52-week low. This will give you the stock’s trading range for the year. When a stock is trading near its 52-week low it has a better chance of moving upward in the trading range. When at a 52-week high, some traders may feel its to risky to purchase and will wait until there is a retrace in price. This is a general rule for the majority of penny stocks that trade within a range. There are some obvious exceptions, such as great news causing a penny stock to continually make new 52-week highs.

When a stock you like is near or at its 52-week low, you must investigate why. Search for any S-8’s, SB-2’s, or an increase in the amount of operating shares. These filings are dilution, the company will have added shares to the market causing an increase in supply and a price drop. If these filings are not present and there is no reason for the stock to have dropped this low, then it may be a good time to invest.

You should have a good reason why you like the stock before purchasing. Some major things to keep an eye on are stocks in very strong markets. Currently gold and oil stocks are strong, therefore finding undervalued gold and oil penny stocks is a good idea. Another of my favorites is finding a penny stock with an innovative product, these types of products can garner national media attention and often will draw the interest of other big companies in that field.

Ideally, you want to find a company that has increasing revenues and a lot of valuable assets. These types of companies are hard to find and you must investigate thoroughly. Often you must assume they will generate revenues in the future. Look at the amount of shares the insiders are holding: is there a small float with a large amount of insider ownership? This would be a sign that the insiders think that their shares will be very valuable in the future. At times you will also find that institutions are holding a percentage of shares, which would also be a good sign.

Using a stock screener you will be able to generate lists of stocks with institutional holders, insider buying, small floats, and strong revenues. After you generate these lists, separate them by their fields, such as technology, oil, or gold. Find the companies that interest you most in the strongest of fields and begin to read the filings. You will be able to dismiss some companies almost immediately. Keep narrowing down your search until you have a handful of companies into which you are willing to invest your hard earned money.

If you have done your research correctly, the company should continue to grow in value and in time other investors will realize the potential and the price of the stock will continue to rise.

About the author:

Keith Guyette M.Ed, J.D. is a professional trader and the owner of a stock talk board http://www.thepennystockblog.com as well as the head stock analyst for http://www.bottompicks.com

Equities finished mixed, in what was a fairly volatile week of trading. With a clear absence of market moving news, stocks struggled to find direction. The major theme was weakness in commodity and high beta tech shares. Meanwhile, strength was actually seen in large cap tech for a change. The strength in large caps stemmed from respectable results from Cisco Systems. More importantly, the networking company’s management sounded the most upbeat over business prospects in some time on the conference call. This gave investors confidence that the long awaited IT spending pick-up was finally about to unfold. The strength in large cap tech names also seemed to trigger relative performance in other large cap shares. This allowed the Dow to outperform the Nasdaq Composite and Russell 2000 by a wide margin.

In our trading we closed out one position for nice gains. We took a more defensive posture in our trading, because of uncertainty over interest rates. Our focus turned to industrial metal names as shorts, given that the momentum in the group seemed to be fading. As always, we’ll be carrying a number of positions into the week ahead that we remain comfortable with. A recap of our performance for the week (as well as year to date) can be found at:

Much like we have seen over the past three weeks, equities struggled to make much upside progress. Meanwhile, the downside was also limited due to hopes of the Fed stopping their rate hikes. After last Friday’s jobs report indicated that wage inflation could become a problem, expectations for two more rate hikes seemed to become largely the consensus. However, with the sharp commodity correction of recent days, the Fed could begin to tone down their hawkish talk a bit. Furthermore, after homebuilding bellwether Toll Brothers issuing another profit warning, if the Fed moves too fast, it could negatively impact the housing market. With that said, hopefully the Fed will avoid over tightening. If this is how things work out (i.e. the Fed backs off a bit on rates), we believe the stage could be set for a very powerful move to the upside in equities. Until further guidance is provided on the interest rate front, equities will probably continue to remain range-bound. This definitely makes trading more challenging. Therefore, it’s probably a good idea to keep cash levels on the high side until some more attractive risk/reward set-ups materialize.

All right then, that’s it for this weekend. We hope you have enjoyed this edition of the free weekend report. Until then, good luck in the markets!

Ray Johns is the founder and Senior Market Editor of Daytraders.com, Proudly serving day traders & short-term investors since 1996, at http://www.daytraders.com. Daytraders.com is the publishers of the award winning Morning Stock Market Report and the home of the Interne’ts finest real time trading desk. Ray has been on the forefront of trading and investing in the markets and has appeared as a guest on a number of radio and television shows including CNBC’s Market Talk. If you would like a free trail of the newsletter and the live trading desk log on to Daytraders.com. Comments and questions can be sent to marketing@TraderAide.com.

Wall Streeters will try anything short of a Ouija board to divine the next move of the market. The put-to-call ratio is popular and of some usefulness.

Experienced investors know that a call option increases in value as the price of the underlying stock or index rises. Hence, someone wanting to place a bet that the market is going to rally will buy calls. At the same time, a fund manager is likely to grab some call options as “insurance” in case his/her big “short” position goes bad in a booming market. The increase in the calls should absorb some or all of the loss in the shorts. This is a classic “hedging” strategy.

Conversely, someone who thinks the market or a particular stock is going to decline will load up on put options. Puts gain in value as the underlying asset falls. Hedge fund managers with a large “long” position will limit their exposure to a sell-off via a large purchase of puts.

The put-to-call, or put/call ratio is a mathematical equation that shows where investor money is heading—toward puts or toward calls.

The put/call ratio is often considered a “contrarian” indicator. When the market is leaning heavily to calls, the wise men say, there is an increasing chance of a sell-off. On the other hand, if all the money is going into puts, a rally can be expected. Sometimes the indicator is right, sometimes it is wrong.

Enter market dynamics. Wall Street hates when everyone is a bull or bear, and it likes fear. Well, if you thought the market was going to fall, you may buy puts, right? But the market will look at that two ways. First they look at it like, "OK, enough people are scared, it’s safe to buy some stock here." They might also think, “Well, if everyone thinks the market is heading down, who am I to argue with it?”

More times than not, we need to look at the length of time versus who is buying what. For the short term, a day or two, a big increase in call options in a particular stock often means that stock is going higher. Maybe there was a news leak, an anticipation of news, or a sector heating up. Likewise, if you see a ton of puts piling up on a stock, you can generally bet there is something brewing.

What about the longer term? Can the ratio of puts to calls on a particular stock tell you something about where the market is heading? Not as much as people may think. It’s another matter, though, with the actual indexes (DOW, S&P 500, etc.).

With a stock, there can be a ton of factors that influence whether people think it’s going up or down in a few weeks. Earnings, news, SEC investigations, you name it. But when the puts start appearing in force on an index, we have to look at the overall market, which could be setting up for a fall.

For instance, if we see a gazillion puts opening on the S&P, people are probably betting that the index as a whole is heading south. In some ways it is self-fulfilling because that amount of puts will frighten more people into thinking the market will slide, and often it does. But there will come a point when so many people are leaning to a downturn that the "buy when there is blood in the streets" adage will come into play, and the market will stage a comeback.

Is there a particular number on the put/call ratio that signals a buying opportunity? Well, after looking at it for years, the answer is yes and no, with no winning more than yes. The best way to use this tool is to watch the ratio, and if it is telling you that more people are getting bearish, plan to get cautious. Likewise, if it’s showing that more people are getting bullish, plan on getting long for a while.

The Stocks2Watch® newsletter has been published since 1998.

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Next week is options expiration week, which is typically volatile. Also, important economic reports next week may generate even greater volatility. The Fed (i.e. Federal Reserve) has adopted a "data dependent" policy, which makes inflation related reports most important for the stock market.

Next week economic reports are: Mon–None, Tue–Retail Sales, and Business Inventories, Wed–Capacity Utilization, Industrial Production, Empire State Index, Net Foreign Purchases, Oil Inventories, Thu–Building Permits, Housing Starts, Import & Export Prices, Unemployment Claims, and Fri–PPI, Michigan Consumer Sentiment, Philadelphia Fed.

Inflation related reports are Capacity Utilization, Import Prices, Unemployment Claims, and the PPI. Moreover, the market may perceive strong production and consumption as inflationary, although weak growth with inflation, i.e. stagflation, is also of concern. One month of data don’t make a trend. Nonetheless, the market may react strongly to these reports.

Over the next few weeks, the market will estimate future monetary policy by tying together recent economic reports. Real economic growth is expected to pick-up this quarter to above 3% from the 1% growth rate in the fourth quarter. So, inflation data will be of particular concern.

The unwinding of options will also generate volatility. Some Feb Max Pain expirations are: SPX 1,275 with the value of calls roughly three times greater than the value of puts, OEX 575 with the value of calls over three times more than puts, and QQQQ 42 with the value of calls about 25% greater than puts.

The chart below is an SPX daily chart. Last week, SPX traded within the Dec consolidation area (also, see extended Price-by-Volume bar on left side of chart) roughly between 1,250 and 1,275. Feb Max Pain expirations indicate SPX will trade in the consolidation area again next week. However, the following week, SPX should break to the upside or downside.

In late Jan, the MACD indicator moved towards a potential bullish crossover and then gave a bearish kiss (see circle). Consequently, SPX fell shortly afterwards. Currently, MACD is moving towards another potential bullish crossover, which may determine a breakout above 1,275 or breakdown below 1,250.

The recent bearish megaphone pattern (of higher highs and lower lows) favors a breakdown. However, a MACD crossover may cause a powerful short-term bounce, while another bearish kiss may cause a breakdown below the lower line of the megaphone pattern. Nonetheless, uncertainty about monetary policy may persist for several more weeks, while the market and the Fed are "data dependent."

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

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.

This is another of those activities in the financial industry that scoots under the radar screen of most investors but could be hindering returns in your mutual funds.

Redemption costs are an offshoot of the market-timing scandal that hit the fund industry in 2003. Market timers–individual traders–use the fund to quickly buy and sell securities depending on rapidly changing market conditions, especially discrepancies between the US and international markets. In most cases market timing is legal, and sometimes it can boost the net asset value of a fund.

Our goal is to be in equity funds during a market rally and out when stocks turns south. But in almost every case we’ll stick with funds for weeks or months until a trend dissolves.

However, the very short-term trading (one or two days) done by some fund owners leads to higher and higher redemption rates. When traders cash out their gains from market timing, fund managers must sell other securities to raise the money. That usually results in climbing brokerage and tax bills for other customers. Also, when traders jump in and out of a fund, the manager doesn’t have a chance to put their cash to work for the benefit of all fund holders.

So it is a good idea to learn your funds’ redemption rates. The best funds have single-digit or low double-digit rates. Some funds, on the other hand, have costly triple-digit rates. Most analysts think a good fund should have a redemption rate below 40%.

Already, the industry is trying to head off the problem. For many funds there are fees of 1-2% on withdrawals made within three months of investing. Sometimes the fee is imposed for up to one year.

Naturally, the majority of timing takes place in aggressive funds containing volatile stocks that are subject to large price swings. International funds are also targets of market timers.

You can find out the redemption rates of your funds by checking the annual and semiannual reports at company’s web site or at the Securities and Exchange Commission site, www.sec.gov. That will take more digging that most investors care to do, we think. In our opinion, it’s better to call the fund and make an inquiry.

Once you get a clear picture of your funds’ redemption rates, you can make an informed decision on whether the gains in the fund make possible higher costs acceptable.

The Stocks2Watch® newsletter has been published since 1998.

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The following article lists some simple, informative tips that will help you have a better experience with how to trade stock.

Aim for the best timing in stock market trading. It is the only option for a successful stock market investor learning how to trade stock.

In order to raise capital and invest in the business, companies issue their stocks and the public may then buy and sell. The price varies depending on the supply and demand. This is what a stock market trader takes full advantage of.

The business of stock market trading can offer better profits to the investor compared to ordinary stock enterprise. The stock market offers a wide variety of stocks to choose from for any investor to go on with stock trading. There is always a moving stock out there amongst the thousands of others registered.

However, a careless attempt to proceed with stock market trading can produce undesirable result. Big losses can be incurred if the market trend is not properly predicted. Small profits would also frustrate the purpose of doing stock market trading. An uninformed stock trader may also end up waiting for that decisive moment that would never come.

Market Timing

The more authentic information about how to trade stock you know, the more likely people are to consider you a how to trade stock expert. Read on for even more how to trade stock facts that you can share.

To avoid the adverse effects of poor stock market trading, investors use market timing to forecast when the market will change its course. Market timing presumes that the decisive point can be predicted ahead. The direction of the market is predicted through a thorough examination of the price and economic data.

Best Timing

The consistency of such trend prediction is subject to many factors, that is why the aim of any would-be successful investor is best timing. At first glance, market timing sounds like a guaranteed way to make it big. This however requires exertion of considerable effort and persistence in carefully studying the various factors this is the proper way to learn how to trade stock.

Avoid mere speculating. Speculating is a desperate move when the investor hasn’t done his homework.

Investors also buy stocks because they got a hot tip from someone. Most of these tips however prove to be false, as they are mostly given by parties with vested interests.

Market timing requires involvement in research to know the company’s history and calculate the trend by charting the movement of the stock’s price. This involves analysis of the value of the stock to come close to accurate in predicting the trend. This is ideal in developing standards for when to buy and when to sell for the investor must accurately settle on the proper time to sell. One must also correctly determine when to regain, reselling the stock bought when it reaches its peak value. This way, the maximum profits can be realized.

Is there really any information about how to trade stock that is nonessential? We all see things from different angles, so something relatively insignificant to one may be crucial to another.

Article by Ray Mills,

webmaster of http://www.find-information-about.com Discover tips and techniques to help you understand how to trade stock properly.

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