One say’s "I bought "XYZ Company" at Rs.2200 and immediately after I bought the stock price dropped to Rs.2000." I feel sad. Another comes with a different version "I sold "XYZ Company" at Rs.2000 and it went up to Rs.2400 same evening" I made an imaginary loss of Rs.400 per share.

Solution:

You can buy more shares @ Rs.2000 and reduce your overall buying cost. This has to be done only if believe in the fundamentals,management and the future prospects of the company.

To do this you need to keep money ready.whatever money you have and want to invest,split it into two parts. Then keep 50% cash aside, only invest with other 50%.So if need to buy more of any stock when the price falls you have ready cash.

Also now if you have 200 shares of XYZ Company 100@Rs.2200 and 100@Rs.2000.Then the price goes up to Rs.2400. Sell only 100 of the shares.Then if the price further shot up, you have some shares to sell And participate in the rally to make money.

Next You sold the share and the price went up. The solution to this is never sell all the shares at one time. Sell only 50% of your shares.So if he price goes up later you still have the other 50% to sell and make profit.

The golden Rule is to first do your own analysis of the stock before investing and buy on tips. Also invest only in companies which declare dividends every year. To be sure that you are not investing in loss making companies.

Every Market expert advise to do your stock analysis before investing in the stock market. But nobody tells you how.

Well in my next article I will write about how to do stock analysis using various tools such as financial ratios and by checking the track records of the companies you plan to invest in.

P.S: If you are not Indian then replace the Rs. into your own local currency to understand the article

Jigar Vikamsey is a freelance writer and writes articles on stock markets and investments (http://www.sensex.in)

I hope you know how to differentiate a company that is out and a company that is down. We have discussed these in the past and you are welcomed to check it out at our commentary section. Today, though, we are going to talk more about reasons to buy company that is down.

Why should we as investors buy companies that are down? Why don’t we buy company that is out or company that is doing fine? Here are several reasons why:

Cheap. Company that is down usually sells at a discount. A company announces bad news and then the share price will drop as a result. If the company is solid and your long term picture has not improved, then the company that is down can be bought at a cheaper price than other similar companies.

Dividend. Company that is down normally has a long history of profitability. If the company is not in danger of going out of business, then it can continue paying its dividend to shareholders. Buying company that is down will give you higher dividend yield due to the drop in the share price. On the contrary, company that is out cannot afford to pay off dividend to shareholders.

Take Over Potentials. Companies would love to scoop up other companies at a low valuation. Company that is down normally have depressed share price while its core business remains intact. This is appealing to potential competitors. A lot of big investors and companies buy company on the cheap. For example, Carl Icahn the fame investor, bought Time Warner Inc. (TWX) cheap and he is trying to unlock values for the company.

High Potential Return. This is one reason investors should invest in companies that are down. The depressed share price will have a chance to recover once its short-term problem is sorted out. Company that is down normally have a low P/E ratio, many in the single digits.

It is crucial to know whether a company is down or out. There are a lot of companies selling at single digit P/E ratio, giving dividends and yet their survival is in question. These are companies that is out and not down. While, it might be difficult to identify, I can give you several examples of companies that are down: pharmaceutical companies, banking industry and companies selling hard drives. The demand for their business remains intact despite the short term downturn in the industry. However, each company within an industry is different as well. Please use the guidelines mentioned on the past article to differentiate company that is down and out.

Investing Idea is Free ! You can get it at our commentary section at http://www.noviceinvesting.com

Even traders want to be trendy when they buy stocks. Many traders make trades because of public opinion, not because the trade itself makes sense. When a particular stock seems popular, they rush in so they don`t feel they`ve missed an opportunity. As a result they end up buying at a price point where the trade can`t possibly work out. You should always avoid the emotion of the “hot” stock.

Here`s an example of what not to do when you buy stocks: Let`s say you`ve been following a particular stock which is in a “hot” sector, and it just announced a stock split. The stock is now at $18, and you calculate it could get to $25 or more by the time of the split. The market is currently bullish, and it looks like a great trade.

The problem is that the stock has been rising for the past four days. It started at $12, but you didn`t notice it until it hit $18, and it`s still rising. The stock split is a month away, and you know it`s likely to fall in price somewhat between now and the split. Still, everyone is talking about this stock. What if it continues to rise and becomes the next blockbuster? You become afraid that if you don`t make a trade you`ll miss a great opportunity. (And besides, you want to be able to tell people that you hold a position in this stock, because it makes you seem smart.) So you buy 1,000 shares at $18.50.

During the next two weeks, the stock goes to $19, then levels off, loses momentum, and drifts down to $17. Then a couple of leading NASDAQ companies give earnings warnings, the market drops, and the stock slides to $15, triggering the stop you`d set at $16 on half your holdings. The stock trades in that range for a week, and then begins to rise slightly going into the split. Your plan is to sell a day or two after the split. The stock rises a little beyond $20.50 by the second day after the split, and then the volume dries up and you sell it for a $2 profit. But since you stopped out of half your shares at $16, you lost $2.50 per share on that half, with a net loss of $.50 on 500 shares. What went wrong?

What went wrong was that you didn`t let the stock come to you. Instead, you chased it as its price rose, knowing perfectly well that, following the stock split trend, it would probably pull back before running up again. It was more likely to pull back than it was to continue on an uninterrupted run to $25, and you knew that if you bought at $18 or higher you were probably paying too much. You ignored what you knew was more likely in favor of what might happen.

You should have given the stock a chance to come to you, at a price you felt was reasonable. If the stock had pulled a surprise and never gotten down to where you thought it would, that would be okay. There were many other stocks to trade, and some of them would have come down to your price. You didn`t have to own this particular stock.

What was the right way to play this particular scenario? When the market is bullish, it`s very likely for a stock to rise when a split is announced, drift down after a few days` rally, and then begin to rise again a week or so before the split. If that`s the trend and there`s no solid reason to think the stock will rise immediately, wait a few days for the stock to drift down and stabilize before buying it. If you had done so in this case, you could have bought it at $16.50 and then sold it for $20.50 for a $4.00 profit on the entire 1,000 shares.

If you had a solid reason to think the stock might continue to rally, you could have bought half the total number of shares you wanted at a price that might have turned out to be too high, and waited for a lower price to buy the other half. If it had turned out to be too high, it would only have reduced your profit. (No stock goes up or down in a straight line. Wait for a pullback before buying.)

There is a good way and a bad way to buy stocks or trade a “hot” stock. The good way requires discipline and careful market evaluation. The bad way is to trade from your feelings. As you can see from this example, it`s always more profitable to trade the good way.

David Jenyns is recognized as the leading expert when it
comes to designing profitable trading systems.

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Many of us spend years looking for the holy grail trading system. Signal services can be a great way to use someone elses carefully developed system. By following a trading system, market condition will at times be favorable to buy and at other times be favorable to sell. Clearly defined conditions give ’signals’ that the educated investor can read and act on. Signals are not as crucial for the long term investor. For these people, market conditions and the value of particular companies can be watched on a daily basis. For day and what we call active traders, however, signals are crucial for acting quickly on stock market movements.

Investors who treat trading as a full-time job have the time to watch the market movements for signals. Oftentimes, however, signals can be automated and integrated into trading software. The investor can choose which signals to be alerted about and they will automatically appear on screen. Software signals are usually only available by subscription and some services charge hundreds of dollars a year for a complete package. This includes trading software and access to up-to-the-minute charts for the latest information about the stock market.

Investors who don’t have the time to watch the market closely can subscribe to services which publish signals on a daily or hourly basis. These services may employ market analysts who may follow several indicators to arrive at a particular signal. More commonly, however, their systems are completely automated with signals being generated by software which examines market conditions. Some of these services have a better track record than others – make sure you get a free trial before purchasing. Also, make sure you paper trade some of the signals first and see if they truly match up to reported results. This is the best test before spending your money on more books and software.

With any third-party signal provider it pays to know how the signals are being generated. Since there are such a large number of market indicators some of them may contradict each other. In addition, a particular indicator may send out conflicting signals depending on the time frame.

Market conditions also play an important part on the accuracy of indicators. During upswings in the market, for example, trend indicators will send out buy signals but longer-term oscillator indicators will view the market as being overbought and send out a sell signal. Generally speaking, trend indicators are most accurate during trend conditions and oscillators are best during times of transition. Both types of indicators are often in variance with the other.

Depending on the type of service you sign up for, signals can be delivered by email on a daily basis, available for viewing on a website, or be integrated into your trading software so that popups appear on your screen for particular signals that you are watching.

Companies which provide signals usually offer their services on a monthly basis. Some are quite expensive – as high as several hundred dollars a month. These are obviously aimed at the professional trader but other services are also available at more reasonable costs. Keep this in mind. We have frequently seen peoples with $1,000 to invest pay $200 a month for a system. That system might be great, but is it really going to make enough every month (20%+) to cover just your fees? If your starting capital is small, so must be the investment you make in signals.

The value of these services has to be weighed by the individual investor. They can be a great time saver but they may also encourage laziness when it comes to analyzing the market. A knowledgeable trader should have the tools necessary to judge the effectiveness of a signal system and do some of the calculations himself to keep on top of the market. Finally, make sure your signal service provides an exact strategy when to sell. When to sell is usually what is the difference between the small number of super successful traders and the larger numbers of unprofitable traders. If there is no exit strategy, you do not have a system and you’ll want to move on. The best signal services give non-subjective entries and exits.

Anthony Trister provides stock trading analysis and investing advice and reviews at http://www.stock-trading-resources.com

A beginner usually feels very attracted to the stock market while for example discovering a stock that’s being reported in CNBC or the news program and watching it rise fast and make new highs from $10 to $35 in just 2 months.

While learning about this successful news story he’s saying to himself … “ Oh boy if I was one of those lucky guys who bought that stock back when it was priced at $10 i easily would have tripled my money by now … That means my 20 grand would transformed in to a whooping 70 K ! hassle free … I would have been able to grab one of those big HUMMERs on the spot and probably pick up a nice Rolex by the way !

The stock market news constantly reports of hot stocks that are breaking out and making tremendous gains on the same day or doubling in price in just a few hours. Back in the bull market of the late 90’s you could easily see a good number of hot stocks sprouting out every week.

Those years surely made it look like every body could easily take LONG SHOTS and make a shiny pile of gold every day in the stock market. But today’s market is a different story. A totally different animal.

Some say that the stock market has gotten more realistic. Fantasy land is over and GAMBLING YOUR WAY TO RICHES is not an option anymore. You might get lucky a few times, but your constant loses can wipe you out sooner or later.

The fact that the bull market period has ended for now doesn’t mean that you can’t make a great deal of money in today’s market. A lot folks from many walks of life keep making excellent profits on a daily basis, pocketing hundreds & thousands of dollars by trading stocks online.

Success in day trading starts by applying a wiser and REALISTIC methodology for choosing hot stocks as well as for getting in and out of them with profits in mind.

You need to look at the stock market more realistically. You got to learn that you can benefit when stocks go up and also when they FALL down. You got to WORK SMARTER and get more selective about the hot stock trading opportunities that you choose. You need to embrace the nature of day trading and be fully prepared to take advantage of stocks that are poised for a BIG RISE on the same day.

The bottom line is you have to PREPARE YOUR SELF to be successful, just like you would do it in other areas of your life in order to achieve success.

Fortunatly there are some excellent day trading information websites that can help you prepare your self to pick hot stocks in a simple yet effective way.

In the end, stock trading is all about buying and selling according to your especific knowledge FILTER. Once you master and follow your proven filter parameters like a clock, you can expect to start making serious amounts of cash on a consistent basis.

Momentum Stock Pick helps day traders and investors pick hot stock trading opportunities every day at http://www.MomentumStockPick.com.

For some people, this subject conjures images of the devils in management at Enron, WorldCom and other bankrupt former high flyers. Mesmerized by the sweet profit projections coming from their corporate chieftains, all too many employees of these firms put all of their retirement nest egg in company stock. When the company was riding high, they were wealthy on paper. When the company and stock collapsed, they were devastated.

Of course, everyone now knows that it is a mistake to place all your chips in your company’s stock.

It can be an even bigger mistake to leave your money there for an extended period of time. That’s where the Enron and WorldCom employees took a pasting. They failed to sell some or all of their shares at the time the stock price was peaking and turning south. In most cases they had time to salvage at least a portion their nest egg; too many hesitated and lost all.

Despite the horror stories of the past, employee stock purchase plans, or ESPPs, can be a good deal.

You get shares at a discount, and in most cases you can sell your shares and pocket the cash. The returns will supplement your IRA, 401K or other employer-sponsored retirement plan. You just have to be careful about monitoring the stock and picking the right buy and sell points.

Make sure to check with the human relations department at your company for specifics on your plan.

The key question to ask: When can I sell? You want as much flexibility as possible to avoid an Enron-style fiasco. Some companies allow you to sell only once a year, and some allow it twice a year.

Companies also establish “offering periods” when employees can purchase stock, often at a discount of 15%. In about 80% of the plans, the purchase price is determined on the first or last day of the offering period, whichever is lower. This is a great deal because you have a built-in profit of 17.6% (based on the 15% purchase discount) no matter the how the stock performs.

Let’s say you start putting money into your ESPP at the beginning of the offering period when the price of your company’s stock is 20, but at the end of the offering period the price is down to 15.

In this case, you can buy the stock for 15 less the typical 15% discount.

That’s when the selling decision becomes critical. Many times you are able to sell as soon as the offering period ends, and you can immediately pocket that 17.6% profit.

If you hang onto those shares until the next selling period, you’re taking on the market risk that your shares might decline in value. Of course, the stock could take off and pad your gain. If one sales period is July 1, for example, keeping those shares would have been a good idea this year with the DOW and NASDAQ in the early stages of a long rally. If the selling period is, say, early in 2004, you might consider an immediate sale because the rally has gone a long way and your stock could be vulnerable to a sell-off.

Most important, don’t ignore the shares building up in your account and count on the continuing goodwill of your company’s management. That’s what got Enron’s employee-shareholders into trouble.

Sit down with your financial adviser and decide whether to sell or hold. Take control of your future!

In your deliberations, you’ll have to consider the tax consequences. If you sell immediately, the proceeds will be taxed as ordinary income. If you hold a year or longer, the proceeds will be taxed at the lower capital gains rate. There are other tax considerations; see your financial adviser before making your move.

This is a good time to find out what is available at your company. ESPPs are usually available to all employees, unlike stock options that tend to be handed out to upper management. Handling options is another story entirely.

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Happy New Year. 2005 is a wonderful ride for some and a horrible one for others. Now, it is time to sell your winners. Now? Yes, now. 2005 has brought some of these winners to incredible gains. It is time to sell these stocks. Check this out:

NutriSystem (NTRI), up 1,308% GeoGlobal Resources (GGR), up 1,032% Peerless Systems (PRLS), up 535% ViroPharma (VPHM), up 517% Fieldpoint Petroleum (FPP), up 512%

These are the best performing stocks according to MSN.com. You might argue that these stocks have more rooms to run. You might be right. But history is not in your favor. What does history tells us? History tells us that the best performing stocks of the previous year will not do well this year. Want more proof? Here are several examples:

Qualcomm Inc. (QCOM) up 1131% in 1999, down 47.7% in 2000. Taser International (TASR) up 2040% in 2003, down 61.5% in 2004. Travelzoo Inc. (TZOO) up 1056% in 2004, down 75.8% in 2005.

So, what causes their price to fall in the subsequent year? No. They do not make major misstep and become bankrupt. They are still delivering outstanding profit growth compared to their peers. But their stock price merely went up too much and too fast. Reality finally sets in and stock prices took a breather on the following year.

If you own the best performing stock for 2005, it is prudent to re-evaluate the fundamental of the company. If stock price went ahead of its fundamental, you’ll be better off to sell them now and wait until they get cheaper. Historically, it has been a wise decision for most of these stocks.

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Short selling as a technique is commonly used to profit from a falling or ‘bear’ share price.

The stock market does not always go up. There are periods when most stocks on the stock market are making lower troughs. These periods are known as bear markets.

There is no exact definition of a bear market; it will vary between market participants. An investor may class a bear market, as a 2-year period of overall downward movement.

Whereas a medium term trader may consider 3 months of downward movement as a bear market.

A bear market may occur in a select group of stocks, such in the same industry sector. A more severe bear market may occur across all stocks on a particular stock exchange.

Trading an upward move in a share price is called going ‘long’. A long position is simply when a stock is bought with the objective of selling it at a higher price. Profiting from a downward move on a stock is referred to as a ’short’ position. A short position is when a stock is sold (without owning it) with the objective of buying it back at a lower price.

By trading both the long and short side of the market you can obtain much better consistency in your trading. When the market is generally bullish your long trading system will perform well and when the market is generally bearish your short trading system will perform well. The end result is consistent returns, regardless of market conditions. Shorting a stock can be achieved in a number of ways:

* Short selling the physical share
* Selling CFD’s over a share
* Buying put options over a share
* Selling call options over a share
* Buying put warrants over a share

The least complex of the four techniques is short selling the physical share. Short selling involves dealing directly with the share, whereas the other techniques involve dealing with financial products that move as a result of a movement in a share price, which adds further complexity.

When you open a long position, you will make money if the share price goes up and you will lose money if the share price goes down.

When you open a short position, you will make money if the share price goes down and you will lose money if the share price goes up.

When you enter a short trade you are selling borrowed shares*. The proceeds of the sale is held by your stock broker until the borrowed shares are returned when you close your position by buying shares in the market place. The profit or loss for the trade is then credited to or debited from your trading account.

Most stock brokers firms will use a large financial institution such as AMP to borrow stock from. Because AMP manages funds, they have a very large and diverse portfolio. There are borrowing costs associated with opening short positions which are discussed in the section on brokers.

But always remember the risk. If a short position is opened, the loss is unlimited, as the price can theoretically increase to infinity whereas the maximum profit is limited to the original proceeds of the sale. Whereas if a trader takes a long position, their risk is limited to the total cost of the shares. The potential profit is unlimited, as the price can theoretically increase to infinity.

It is strongly suggested you go to http://www.asx.com.au/supervision/rules/asxl/asx_section_19.pdf and read the ASX rules on Short Selling.

*From a conceptual point of view, people often find it hard to accept that a share can be sold without actually owning it. This is possible as the shares are lent to the trader by an institution to cover the position. This process of borrowing stock allows short positions to be initiated without extra shares being created.

Jon Lynch is Marketing Manager of the Capital Intelligence Group of companies, including HomeTrader - Australia’s leading stock market education centres. We focus on teaching you how to create wealth through the share/stock market using a customised trading plan or system (including short selling training) that is right for you, your situation and your goals. Visit our website and register for your free introductory DVD "Learn To Make Money On The Stock Market" at http://www.learnshares.com.au

Tonight, we want to review shorting. I don’t know why but so many people become uneasy when they hear this term. I guess that occurs when there is not a clear understanding.

Shorting is used to capitalize on a drop in a stocks price rather then a rise in price. Buy a stock…goes up you make money. Short (sell) a stock…goes down you make money.

But how do I sell a stock that I do not own you may ask. You borrow the stock from your broker and sell it to someone else.

Your broker has it in inventory or they borrow it from another brokerage firm. They actually loan you the stock to sell to someone else. This is all done automatically and instantly when you place an order to short a stock.

Once you have shorted the stock (by borrowing it) you must eventually return the borrowed item…the stock, back to your broker.

You do this by placing a buy order on the stock you are holding short. The stock you buy is then returned. Again this happens instantly.

Example: You decide that stock ABC at $50 is about to go down so you want to short the stock. You click your online account "Short" button to place the order, let’s say 100 shares of ABC at 50.

The price of ABC goes down for you. Let’s say that ABC declines to $45. At 45 you decide that it may not decline much further, so you click your "BUY" button at your brokerage account to buy 100 shares at $45.

You shorted (sold/borrowed) the stock at 50 and bought it back at 45. You made $5 per share in profit or $500.

You sold the borrowed stock for $5000 ($50 X 100 shares) and bought it back for $4500 ($45 X 100 shares).

All the mechanics of borrowing the stock, debiting your account (when you buy), returning the stock, crediting your account (when you sell) is handled seamlessly by your broker.

Of course you can lose money if the stock goes up when you place a short order (like a stock going down when you place a buy order). That’s why it is imperative to be properly prepared when entering the stock market.

The point is, do not limit yourself to making money in only ONE direction. When the market is crashing you need to be shorting stocks, not buying or holding on to your buys. And when the market is taking off, you need to be buying.

Don’t limit your income potential by only purchasing stocks.

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If you pay attention to finance and investment news, you might hear something from time to time about buying on margin. It may sound intriguing, being able to purchase large amounts of stocks or other securities without having to pay the full cost of them… in most cases, though, that’s all of the information that is given and it leaves you to wonder exactly how buying on margin works. If you are in this situation, then the information provided below is designed to give you more details on margin trading and may help you to determine whether or not buying on margin is right for you.

Should you decide to try your hand at margin trading, do so with care… after all, there’s a lot of money that can be made, but trading on margin without realizing how and what you should be doing can also cost you quite a bit of money.

A Definition of Buying on Margin

Before getting into the hows and whys of margin trading, it’s important that you realize exactly what buying on margin really is. In essence, buying on margin is like getting a loan from your stock broker that will enable you to purchase larger amounts of stocks and securities than you might actually be able to afford at that moment.

The funds that you do pay go into a special type of brokerage account known as a margin account, and act as a deposit toward the total price of the purchase. The remainder of the price must be paid to the broker, either when you sell the stocks or after a predetermined interval.

Requirements for a Margin Purchase

Because of the specialized type of purchase that margin trading requires, you have to set up your margin account before being able to make any margin trades. Though the laws regarding buying on margin may vary from country to country, in most cases the setting up of a margin account requires that the brokerage has your signature on file authorizing them to set up the account.

A minimum deposit is also required for a margin account, which can be in the thousands… for many brokerages, however, they instead require that at least 50% of the value of the intended purchase is used as the deposit for the margin account though some may require as high as 60% to 75% for a first purchase.

The purchase made when buying on margin utilizes the value of your deposit as well as an additional amount which is borrowed from the broker… for experienced traders this can be up to 50%, though you can choose to borrow less for any trade.

There may also be additional rules concerning which stocks and securities can be purchased, as well as a minimum price for any individual stock share.

Payment of Outstanding Cost

As with any loan, money borrowed for a purchase on margin must be repaid in a timely manner. Usually, the money is recovered when the purchased stocks or securities are sold… the portion that was borrowed from the brokerage firm is repaid first, and the remainder then goes to the shareholder. In the case of long-term investments that are purchased on margin, however, payments may be required on regular intervals to maintain the margin loan.

Should you not make the required deposits to maintain the margin and pay down the loan, the broker may require you to sell your stock so that they can reclaim their money.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About The Author

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.