To trade without emotional involvement. It is a necessity, and yet it is virtually impossible. Certain things in life just bring out emotion, like making decisions that effect your financial outlook. There are two things that make this uniquely harder for traders, than for non-traders. One is, we are likely to be more involved in our financial well-being than non-traders. Some people would even say our priorities are out of whack, and perhaps they are right. But nevertheless, that is the way we are, and if we weren’t that way we wouldn’t be traders. The second factor that makes emotionless trading very difficult is, this is likely to be our passion. We aren’t singers, humanitarians (hopefully we do share our wealth), writers, politicians, spiritualists, we are traders, and are likely to be passionate about it. Many of us to be honest, love it. Love it like Pittsburgh loves their Steelers, irrational, all consuming, eats us up inside love it. And yet we know in our heart of hearts, or more importantly in our logical, rational part of our persona that we can’t be emotional about it. Not be emotional about that which we love?? It is one of the hardest things in the world. That is why Doctor’s don’t treat family members.

One of the easiest traps to fall in, is to be angry at the markets. Like a new love, nothing can get your hackles up so much as that which you love. And when the markets fail you, that love has disappointed you. And when love disappoints rage can easily follow, just ask your teenager. It really fires that special spot in your belly. The problem with becoming angry at the markets, is you want to get back at it. But to traders the market is the epitome of unrequited love. The market has no emotion, you are fighting a losing battle, if you think you are going to get back at it. Because it doesn’t care. The bad thing about this is that you are likely to trade horribly because of this emotion, if it goes unchecked. You will override your systems, you will trade without thought, you will in fact mirror the very thing you are trying to defeat. Emotion not thought out, which is what huge market swings are.

The second pitfall of anger is similar to the first, but perhaps not as devastating. You are not angry so much as you want to recoup your losses. Like a horse bettor who got skunked at the track,, and borrows money from Uncle Rich, you increase your bets, throw out money management principles and press to recoup. Financially this can be more devastating than anger all on its own. Often though it is the first step to the anger mentioned in the previous paragraph. The first curl in a spiraling out of control, that will likely break you in the end.

Anger isn’t he only emotion the markets bring out in us. The opposite of anger is euphoria, everything has gone your way. Some trades have gone beyond your wildest expectations. And ca-ching the money is rolling in. Up go your trades, and you are on a roll like no other. You have figured it all out, and the market is yours. She loves you, just you, and will do what you want. Again out go the principles that got you there, and out goes your winning streak. And viola you have fallen into the anger trap. Or at least the recoup trap, you beg forgiveness, if the market will just return you to where you were before euphoria made you greedy. You confess your sins and beg for mercy. But again the market has no mercy, the market cares not for you.

In my own experience it is after this roller coaster, has cut my trading funds in half, that I begin again to trade without emotion. So how did I get to the point, where there never happens again? Where the market does not elicit anger or euphoria. Well I don’t think you ever do. It is very hard not to have emotions when you get pummeled or a positions breaks to the upside wildly. So what do you do?

You admit it, you acknowledge it, you are aware of it. You say ,yes that just ticks me off, why would that trade do that. And you go form there. You decide what to do, if anything after you acknowledge your emotions. You stick to your trading rules. You can then go back and learn from the event. Which is the real value of mistakes. You can analyze what went wrong, compare it to what has gone right in the past. Perhaps change your rules, perhaps accept that things are going to go wrong in the game of trading. And that is the price you pay for the right trades. But you NEVER make a trade based on emotion.

You can still love the market, the game of trading. I do, and then I hate it too. I think about my sailboat beckoning, and want to bag the whole thing. And that day will come. But the difference is I love the markets from a distance, from a reflection, I love it as an accomplishment of man. It has been a huge part of my adult life, and has shown me every aspect of human emotion, and has taught me one very, very nice lesson, patience.

CT Larsen has been trading stocks since 1990. Now trading large cap stocks exclusively. He has recorded three straight years of greater than 50% annual returns. You can read his blog at http://livingonlargecaps.blogspot.com.

It has occurred to me that many of the readers of this article may be interested in a career change. If so, I suggest that becoming a stock market guru may be worthy of your consideration. It’s a job that — if you follow my advice — pays extremely well, doesn’t take much your time, requires almost no experience, and can potentially bring you fame and fortune.

I have been observing market gurus for many years and have noticed that there are certain traits that the successful ones have in common. So to get your new venture off to a roaring start, I’m going to tell you exactly how to be successful as a stock market guru.

1. First of all, you must do something to get the attention of the financial media. The way to do that is to make extreme predictions. No "the market is going up 10%" or "down 5%" kind of forecasts. You have to say things like "the Dow is going to 36,000" or "button down the hatches, the market is going to crash any day now."

   The best way to decide whether to be bullish or bearish is to measure the mood of the public. You will be much more popular if you’re wildly bullish at market tops or wildly bearish at market bottoms. You want to tell people what they’re already predisposed to believe.

   Also, you can never change your mind. The media doesn’t like that. So be a perma-bull or a perma-bear. But whatever you do, never, ever waver from your original stance.

2. After you have decided whether you want to make a living being extremely bullish or extremely bearish it is very important that no one remembers when you first made your original prediction. This one is going to be tricky and requires some skill. Don’t ever let anyone pin you down on timing issues. The way to do that is to just keep repeating your prediction over and over again until everyone forgets how long you’ve been making the forecast.

   For role models, watch the politicians. They are experts at not allowing anyone to pin them down on anything that they prefer you not to remember.

3. You must repeat your market prediction loudly, often, and with extreme confidence. When the market goes against you, simply keep repeating that you’re very confident of your stance and you have no doubt that the market will go your way very soon. Again, you must make people forget about timing issues and the best way to do that is through repetition.
4. The market will eventually go your way. It may take years, but it will happen. Now listen closely — whenever the market finally goes your direction, no matter how small a move it is, proudly declare victory. I mean shout it from the roof tops. You were right all along and it’s all because of your astute analysis.

   Do not make any mention of when you first made your original market call. If you are cornered and you must make a comment about your entry point, just say that you have been averaging into your position for quite some time. That way no one will know that you actually lost a lot of money.

5. Speaking of losing money, never follow your own predictions by investing your own funds. Otherwise, the income that you make as a famous guru will be taken away from you by the market.

Good luck in your new career. And when I see you on CNBC promoting your new book — Boom Times Ahead: Dow 38,437 or How to Get Rich During the Coming Depression — I’ll know that you took my advice to heart.

Copyright 2005

Larry Holmes invites you to visit http://www.smart-money-report.com/ Your common sense guide for financial and investment success.

Online stock trading is a recent way of buying and selling stocks. Now you can buy and sell any stock over the Internet for a low price and you don’t need to call up a broker.

You can buy any stock and sell any stock and it doesn’t take much to get started.

All you need is a brokerage account. A broker that I use is Scottrade http://www.scottrade.com/ and you can start an account with them for $500 and their commissions are only $7, so they are not expensive at all.

Once you have setup a brokerage account you then need to choose an investment method and then research different companies and then buy stock in the ones that you feel will go up because they are good sound companies.

So as you can see there are several benefits to online stock trading but let’s recap.

With online stock trading all you need is $500 to open a brokerage account, the brokerage commissions are low at Scottrade they’re only $7 and you can buy and sell your stocks from your home computer anytime that the stock market is open.

Well now that you know that you can do online stock trading with a minimal investment you should get started today and then start learning about the stock market and choose the stocks you want to invest in.

Reed Floren runs a stock market forum where you can find answers to all your stock market questions register for your free membership at this stock market forum http://www.reedfloren.com/forums/index.php?act=Reg&CODE=00

Many people believe that the stock market can make you rich one day, but also make you bankrupt the next. Well, how eould you like to know about a method of stock trading that completely saves you from unlimited loss, but still leaves the door open for unlimited profit? That method is buying and selling stock options. How to trade stock options would best be explained using the following example.

Lets say a person who thought that a stock selling in the market at 50 would decline to possibly 30, that person could buy a Put stock option. Not, however, that in buying a stock options, one should have some idea to what extent the stock might move.

In inquiring what a Put stock option would cost, the person might receive a nominal quote of, say, $350 for a Put at the market for 90 days. Most options are negotiated "at the market," which means at "the current market," when the option can be obtained by the option-dealer.

Suppose that the stock is selling at 50 and the quoted price of $350 is satisfactory to you. You enter your order: "Buy a 90-day Put on 100 XYZ [the name of the stock] for $350." If you are trading through your stock-exchange broker, the broker will give your order to an option-dealer who will contact one of their clients who sells options on that stock and will attempt to buy the option for you.

When, after this contact or several others, the dealer has obtained the Put option for you, the dealer reports to the stock-exchange broker who gave him the order, and the broker in turn reports to the customer: "Bought Put 100 XYZ at 50 expires December 30 for $350." Let us say that the person who bought the Put option, expecting a decline in the stock, was wrong, and that the stock, instead of going to 30 (as expected), advanced to 70 and was selling when his option expired. The person would have lost the $350 that they paid for the Put option.

Bear in mind that the limit of the person’s loss was the cost of the Put option, or $350, no matter how high the stock rose and no matter how wrong the person was, and that the person would draw on the equity in the account to that extent only. Suppose, on the other hand, the person had sold the stock short in the market. The loss would have been 20 points and still no knowledge as to the possible extent of loss until the person covered the short sale. But in the purchase of the Put option the account would read:

Bought Put on XYZ at 50 for 90 days: Loss $350

Remember, too, that no trade has been made in the stock, so no stock-exchange commission has been paid. A regular stock-exchange commission is charged by your broker only if a transfer of stock is made in connection with the option.

On the other hand, suppose the person’s judgment was correct and the stock declined to 30. If the person had instructed the stockbroker to buy 100 shares at 30 and exercise the Put option, the account would look like this:

Sold 100 shares at 50 (through exercise of Put) $5,000

Total Receipts $5,000

Bought 100 shares in market at 30 3,000

Bought Put at 50

Cost 350

Total Cost 3,350

Profit on trade $1,650

The profit then would be almost 500 percent of the cost of the Put contract. The profit is the difference between the cost of the stock plus the cost of the Put option and the proceeds of the Put that was exercised.

In all of these examples showing the use of options, the commission cost has been ignored. But at no time could the loss have been more than the cost of the option - $350 - and any stock-exchange commissions would have been paid out of profit or out of possible recovery of part of the premium which was paid.

For more FREE information and articles on how to correctly buy stock options, when to trade, when to not trade, tips, tricks and advice — visit http://www.UnderstandingStockOptions.com.

Are you wondering what the stock market is and how you can profit from it? So are many others, here is a quick overview.

The stock market is where stocks are traded. In case you don’t know some companies allow you to buy part of the company and these pieces of the company are called shares of stock.

The stock market takes place on various stock exchanges the two larges exchanges are the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ).

Typically stocks used to be traded at one general location called Wall Street which is in New York City in the United States, but now anyone with a computer can easily buy stocks and now computers do a lot of the work involved in keeping track of who owns what stock and how much the own.

The stock market is nothing new though, in fact in 1602 Dutch East India Company listed the first share of stock on the Amsterdam Stock Exchange.

I hope you have learned something new about the stock market and hopefully you have decided to learn more about this very popular investment method that is attributed to creating a lot of today’s fortunes.

Reed Floren runs a stock market forum where you can find answers to all your stock market questions register for your free membership at this stock market forum http://www.reedfloren.com/forums/index.php?act=Reg&CODE=00

Exchange traded funds (or ETFs) are better for most investors than mutual funds. The mutual fund industry has experienced tremendous growth over that last twenty-five years or so. But it’s a new era now. It’s the era of the ETF.

What are exchange traded funds? ETFs are similar to index mutual funds. Essentially, an ETF is a portfolio of securities that is intended to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the underlying benchmark index. ETFs trade on the stock exchanges. As such, they offer features of a mutual fund in a stock-like instrument.

There are at least six important advantages that exchange traded funds have over mutual funds…

1. ETFs, instead of pricing once a day after the market closes (like mutual funds), are traded throughout the day as if they were regular stocks.
2. Since an ETF trades like a stock, it can be bought and sold (and shorted at any time during market hours.
3. Investors can calculate the value of an ETF during the day because the composition of the underlying portfolio - normally a published index - doesn’t change. For example, the value of the SPDR ETF (SPY) that tracks the S&P 500 index is calculated continuously throughout the day.
4. An ETF can be exchanged for the underlying assets it represents with the issuing institution for a small fee. It means that ETFs will not trade at significant discounts or premiums to the value of the underlying assets of the fund. This is not true with closed-end mutual funds.
5. Because they are not actively managed and have very little portfolio turnover, ETFs carry some nice tax advantages over mutual funds because they distribute relatively few capital gains.

6. Most ETFs have very low management fees, especially compared to mutual funds. And the lower the expenses, the more money goes into the investor’s pocket.

So exchange traded funds offer most of the advantages of mutual funds — instant diversification and many to choose from — without the major disadvantages.

The primary disadvantage of an ETF is that if you are making small transactions on a regular basis, you will pay a commission on each transaction — just like you would by buying and selling a stock.

But, all in all, the advantages of an exchange traded fund far outweigh any disadvantages. I suggest that you use ETFs as an important part of your investment strategy.

Copyright 2005

Larry Holmes invites you to visit http://www.smart-money-report.com/ Your common sense guide for financial and investment success.

Are you frustrated in your effort to learn about stock investing? Here is a short overview to stock investing.

Stock investing is a popular tool that many use for creating wealth. Anyone from teenagers to retirees can own stock and many of them do. You can never be too old or too young to be an investor but the faster you start the better off you will most likely be.

So what are stocks anyway?

Stocks are just pieces of a company that you can buy or sell. Basically you become part owner in a company and when the company is doing well usually the stock will do quite well since other investors will want to invest in the company so they can profit.

Why invest in stocks?

People invest in stocks for many reasons, the most obvious one is you can make money doing it but there are other reasons such as it is nice to take part in this pastime and can be a fun and rewarding hobby if you work at it.

What do I need do stock investing?

Before you invest in stocks you’ll need to open up a brokerage account a broker I use is called Scottrade you can find them here: http://www.scottrade.com/ after you setup the account you need to research stocks and then choose which ones you think would do the best and then take action and invest in the companies.

Reed Floren runs a stock market forum where you can find answers to all your stock market questions register for your free membership at this stock market forum http://www.reedfloren.com/forums/index.php?act=Reg&CODE=00

A great way to identify and measure the trend of a stock is by using moving averages. A moving average is simply an average of closing prices over a specified time span. Charting software really makes your job easier as all you need to do is specify which time frame you want and the software does the rest. It will lay a smoothed line across the chart for you. You can now see whether or not a trend exists and in which direction it is heading. If the moving average is moving higher and the price of the stock is above it, then the stock is in an uptrend. If the moving average is heading lower and the price of the stock is below it, the stock is in a downtrend. As you can see, this is fairly elementary. Making money is not that difficult when you keep it simple.

If you want to look at trends over a short, intermediate, and long-term basis it will be necessary to use different moving averages. For the short term trend use something between the 10 and 20-day moving average. If you want to focus predominantly on the intermediate and long term trends, you would want to use between a 18- or 21-day moving average for the intermediate trend. For the longer term trend you can use between a 40- or 50-day moving average.

What you will have on your stock charts are two smoothed moving averages: one representing the intermediate trend and the other representing the longer term trend. We often use the 10-day and the 20-day moving averages. You can use just one or the other but using both will help you refine your buying and selling even more.

One rule of thumb in determining whether an uptrend exists is the following: when the 10-day moving average is above the 50-day moving average, and both lines are rising, then an uptrend is in place. A powerful uptrend is in place. A trend in motion tends to stay in motion.

Conversely, if the 10- is below the 50-day moving average and both lines are falling, then a downtrend is in place. Buying calls in hopes of a trend reversal would be foolish. All phases of trend point lower. Picking market bottoms is dangerous!

Remember, when both phases of trend are in sync it gives us the highest probability that the current trend will stay in place. Don’t fight or buck the trend. The trend is your friend! If you stick with this simple rule of thumb it will keep you out of trouble and also help you identify those stocks exhibiting the strongest trends. Buying stock and/or calls in downtrends or selling stock short/buying puts in uptrends is not a prudent thing to do. This is like stepping in front of a runaway train. Let the market tell you where it is going. There’s no reason to guess.

It should be pointed out that moving averages work great in a trending environment, either up or down. They are useless when stocks are in trading ranges. As you can see, it becomes impossible to determine where prices are headed.

So there you have it… the key to knowing when a stock is in an uptrend or downtrend. Suffice to say, the information is priceless! Begin using it immediately and you’re stock selection will improve dramatically! You may wish to try AskResearch.com for seeing and selecting moving averages

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Frustrated by all the symbols in a stock quote? Here’s a basic overview to reading a stock quote on Yahoo Finance.

If you’re like many new stock market investors you are learning all sorts of new things, one of the many things you need to know is how to read a stock quote.

Yahoo Finance has a nice stock quote page, please follow along and go to this web page http://finance.yahoo.com/q?s=msft and find out what everything means.

Near the top of the page it will tell you that you are looking up Microsoft Corp. (MSFT) this tells us what company we are looking at. You will then see the last price (which is delayed 20 minutes) and you will see how much the stock has gone up or down for the day.

If you scroll down the page you will find a table with a bunch of data.

Last Trade: This is the last trade that happened on this stock (delayed 20 minutes)
Trade Time: This is the date or the time of the trade
Change: Amount the stock traded up or down in dollars and percentage
Prev. Close: The amount the stock closed at the last day it traded. Generally the day before, unless holiday or weekend
Open: Price the stock opened at today or if weekend or holiday last day it traded
Bid: What various investors are looking to buy the stock for at the current moment
Ask: What various investors are willing to sell the stock for at the current moment
1 yr Est: Estimate for the stock’s price in one year’s time
Day’s Range: The range in price the stock has traded that day
52wk Range: Stock price from low to high over the past year of trading
Volume: Number of shares of stock traded so far today
Avg. Vol (3m): Average number of shares traded each day for the past 3 months
Market Cap: This is the market price for the company take the number of shares outstanding and multiple by the price of the stock
P/E: Price to earnings ratio
EPS: Earnings per share
Div & Yield: The dividend (if any) that you could receive from the company for owning stock

Those are the basic items on that Yahoo finance page; you can also find charts, headlines and some more background information on the company.

Reed Floren runs a stock market forum where you can find answers to all your stock market questions register for your free membership at this stock market forum http://www.reedfloren.com/forums/index.php?act=Reg&CODE=00

Our investing journey revolves around finding the fair value of a common stock. You can invest in companies that grow rapidly and lose money. On the other hand, you can also invest in companies in a declining industry, yet you can still make money. Investing profitably does not merely depend on what you invest in, but rather how much you pay for a given company.

Therefore, let’s look at company with negative earning growth. How do we value them? For a 0% growth company, P/E ratio for the fair value is 13.4, which is equal to 7.45% return year in and year out. For negative growth company, P/E ratio should be lower of course, since it is giving less and less as the year goes by.

Let’s try valuing negative growth with the following assumption. EPS growth is negative ten percent for the next five years and then stay constant. EPS for the current year is $ 1.00. So, after five years, EPS will come in at $ 0.59. Now, this is the constant $ 0.59 that we will get five years from now. The value of that cash flow today assuming 4.5% discounting rate is $ 0.47. Applying P/E of 13.4, this company is fairly valued at $ 6.34. Currently, earning per share comes in at $ 1.00 per share. If you look at the stock trading at $ 6.00, you may think that it is cheap since it is trading at a P/E of 6. But, if you expect it to have negative growth of negative ten percent for the next five years, this P/E of 6 doesn’t sound cheap after all.

If you expect negative growth, even a seemingly low P/E ratio does not translate into profitable investment. The industry I can think of right now is the auto industry. The US auto maker has been struggling for years to compete with its Japanese counterparts. Investors has priced in negative growth for quite sometime now. If you look at say GM or Ford, they have been trading at a seemingly low P/E ratio for several years. Until this year, both of them has been able to post profits. This year, they are all expected to post a loss. The moral of the story here is to watch out for company with low P/E ratio.

Want more investing ideas? You can get it for free by visiting our commentary section at http://www.noviceinvesting.com