Investment Bonds – How To Buy Them
Mar0
Bonds are one of the main stream types of investment along with stocks and real estate, and if you want to learn how to trade bonds make sure that you get a good education in the subject 1st. There are a number of important points that you must understand about bonds before you start investing in them. Not understanding these points may cause you to purchase the wrong bonds, at the wrong maturity date.
Like all investments it is very important to learn about what you are investing in, and certainly don’t just take the advice given to you by a bond seller without checking it out 1st yourself. The three most important points that must be considered when purchasing a bond include the par value, the maturity date, and the coupon rate.
The par value of a bond refers to the amount of money you will receive when the bond reaches its maturity date. In other words, you will receive your initial investment back when the bond reaches maturity.
The maturity date is the date that the bond will reach its full value. On this date, you will receive your initial investment, plus the interest that your money has earned.
Corporate and State and Local Government bonds can be “called” before they reach their maturity, at which time the corporation or issuing Government will return your initial investment, along with the cash that it has earned thus far. Federal bonds cannot be “called”.
The coupon rate is the interest that you will receive when the bond reaches maturity. This number is written as a percentage, and you must use other information to find out what the interest will be. A bond that has a par value of say $2000, with a coupon rate of 5% would earn $100 per year until it reaches maturity.
Because bonds are not issued by banks, many people don’t understand how to go about buying one. There are 2 ways this can be done.
You can use a broker or brokerage firm to make the purchase for you or you can go directly to the Government. If you use a brokerage, you will more than likely be charged a commission fee. If you want to use a broker, you should shop around for the lowest commissions!
Purchasing directly through the Government is not nearly as hard as it once was. There is a program called Treasury Direct which will allow you to purchase bonds and all of your bonds will be held in one account, that you will have easy access to. This will allow you to avoid paying a broker or brokerage firm.
More advanced traders may try to buy and sell bonds to take advantage of the price movements, you can even swing trade them. But this is a very risky business if you don’t know what you are doing, you will need to take a swing trading course if this was something that wanted to, but again most people just buy and hold.
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Foreign Exchange Trading: What You Need to Succeed
Oct0
Foreign exchange trading requires particular things if you’re intending to do it successfully. One of these things is you need to take it seriously. It’s no good going into forex trading if you treat it like a game. You may never make any money, in reality you may lose the game. The way to win is to treat it more like a business.
This indicates that you want a plan. Not a business plan, though it may have a couple of things in common with that, but a trading plan. The trading plan comes in many versions, such as Correlation Code, but for all of the approaches, it is vital, as we said before, that you treat it seriously. It is a plan for your success and if you dip in and out of it, applying it only when it suits you and relying on intuition the rest of the time, you cannot hope to make money or maybe learn anything helpful from the experience.
Long-term foreign exchange trading plan
When you concentrate on your long-term goals for your currency trading, it is actually better not to think in terms of cash. You may be hoping to double your money in half a year or whatever, but in fact it is not so crucial how much cash you make. All that matters on the money front is that you make profit instead of loss. Even if it is $10 profit, you must be satisfied with that.
The reason being because having express fiscal goals it’ll just put you under even more pressure than you are already under when you are trading. You start to think, “I need to make $x this week to hit my target,” and then you begin to get into all sorts of trades that you should have left alone. Infrequently the conditions are simply too unsettled and they can stay that way for several days. You don’t need to be feeling that you’ve got to trade simply to make your $x.
Instead, target what you want to learn or master and express your goals in that way. For instance, developing new systems based on different indicators, even if you only use them in demo accounts. This can add a breadth to your trading and should be useful if you happen upon something that works. Or keep records of how many times you deviated from your system and have a goal of getting this down to nil.
Forex Trading Plan For Trades
Your actual day by day trading plan is more about your position size, stop losses, close point for a successful trade, for example. In this example you do have a profit target, voiced vis the number of pips you’ll take if the trade is profit-making. It isn’t a good idea to let trades drift, hoping for unlimited profits. Some folks do only close out half their position at a certain point, it’s correct, but if you are going to do that it should be a written part of your scheme, not a snap decision.
Do not carry your planned method in your head where you can easily get tempted to change it. Jot it down along with the rules of your trade in terms of the signals that you will act on. That way everything is clear and you can dump some of the stress onto the paper. Foreign exchange trading is a difficult as well as a dangerous business, and having a well thought plan is essential to the success of your business.
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Options Trading Tutorial
Sep0
Trading options is both similar to and different from trading stocks. Trading stocks offers many strategic possibilities from buying and holding a stock for the long term to a day trader’s use of technical analysis to make quick buying and selling decisions.In this regard,options and stock trading, are similar.
When an options trader is first starting out, he or she needs to understand the basic difference between an option and a stock. An option is a “right to purchase” a particular stock over a period of weeks or months,and it expires on a specific date.The price of the stock itself can fluctuate, as we all know,over the expiration interval so there’s the usual volatility factor in market prices.
Options, on the other hand, expire on a specific date, so you’ll need to exercise them on or before that date. And there’s no rule saying you have to exercise your option if you choose not to. And you can purchase a stock for much less than it’s market price by purchasing an option.Options traders can leverage their trades.through an option, they can buy a $100 stock for a fraction of that price.This way you can purchase a stock for only a fraction of its market price,leaving you the money to purchase more stocks.This leverage makes options very attractive as an investment.
There are several different types of options. “American” options can be exercised any time before their expiration date, while ”European” options can only be exercised on the expiration date itself.and to make matters more confusing, where you purchase the option has no bearing on whether it’s American or European.The European options tend to apply to indexes whereas American options apply mostly to stocks and bonds. And most options expire the Saturday after the third Friday each month. But U.S. markets are closed on weekends, so “American” options expire on the third Friday of the month and ”European” options the following day.
An option is a contract that gives you the right to sell (a put option)a stock or buy (a call option) a stock on or before its expiration date.There are several strategic choices when you purchase an option. You can exercise it any time either before or on the expiration date.Or you decide not to exercise it and try to sell the option before the expiration date and recoup a portion of your investment. If you don’t exercise the option before it expires, you lose your investment.Let’s look at these situations more closely:
Let’s say you buy an option for Acme Chemicals Corp.You can buy a $20 stock for only a $2 options cost. Now most options contracts require a minimum purchase of 100 shares, so you’d have to pay $200 (for 100 shares) for the contract.Acme’s stock rises to $25 shortly thereafter and you decide to take your money and run, so you exercise your option. You exercise your option and buy the stock for $20, then you turn around and and sell right away it for $25.After you deduct the $2 acquisition cost per share, you’re left with a $3 profit, or $300 less brokerage commissions.That’s a conservative strategy, but a profitable one.And that makes you happy!
But consider the opposite scenario. But what happens if Acme’s stock price declines. What about the scenario where the stock falls below $20? If you sold your options for half of what they cost you, in this example,you’d only be out $100. Bear in mind that owning an option does not require you to purchase the stock. In this case, you can sell your option and recoup a portion of your investment. This is a lot better than if you had actually purchased 100 shares of Acme’s stock. You could exercise your option as soon as you can realize a profit or you could wait it out and try for a bigger profit any time before the expiration date. My personal recommendation is to take the conservative approach and you’ll more likely see consistently positive returns, but most likely not any big killings. But that’s just me. Higher risk, higher returns. Greater profits. And potentially greater losses.Just like most other investments.
This is just a basic example of how options trading works. It is more complicated than this and you should really educate yourself before you commit much of your capital to it. The best options trading trading tutorial I know is the one taught by David Vallieres, which you can review here and the video above from the free demo video series he provides. This course is the best in my opinion because Mr. Vallieres not only teaches you the basics but also shares with you his money making guidance.
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How To Trade With Moving Averages
Aug0
One of the most popular technical analysis indicators is the simple moving average also known as SMA, if you learn how to use these correctly they can be a very useful tool to help you to make good trading decisions.
The 200 simple moving average, or 200 SMA, is simply the sum of the last 200 values for each period, divided by 200, this is a moving window, as time moves on so does the average. Notice that I used the term period because this indicator works on any time period in exactly the same way.
It can be used on monthly, weekly, daily, hourly, 30 minutes, 15 minute and on whatever time period you want to monitor and trade. Although the SMA is the most widley used there is also the exponential moving average or EMA. This is a weighted version of the formula using the mathematical exponent function to give more weight to the more recent values, this has the effect of making it a slightly faster average that many traders prefer.
The truth is that it probably does not matter if you used the SMA or the EMA, what does matter however is that you use one or the other and then be very consistent with it. Do not switch between them, it is more important that you trust your chosen indicator then a slight difference in its value.
The simple moving average is primarily used to determine what the current trend of the stock is, depending on the value used it could be a short term, medium term or long term trend. An important point to note is that moving averages are most useful when the stock is trending, if the moving average is flat, i.e. horizontal on your chart it can become very choppy, this is a good time to stay out of the market.
The general rule is that if the current price is above the SMA the trend is up, if below the trend is down. This is very important to understand because it forms the basics of trend trading and trading with the trend.
For the short term trend many traders like using a 5-8 SMA or EMA, here is a trading secret, never trade again the direction of the short term tend, actually this is really just common sense when you think about it.
Moving averages often act as support or resistance, many traders use the 15, 21 or 30 SMA for this purpose.
There are a number of other very important moving averages that you need to know about, these are the 50, 100 and 200 SMA, and this mainly applies to the daily and weekly charts. A lot of big money players in the markets, the mutual funds, investment banks etc use the 50 and 200 SMA as support and resistance, if they decide to buy or sell based on these you need to follow suite, the 100 to a lesser extent. These are very useful averages to watch if you trade EFT’s like an Oil ETF.
A very useful tip is that when a stock breaks through one moving average it will often move all the way to the next, for example, if a stock breaks the 30 it may move to the 50 before finding some support or resistance.
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How To Buy The Best Stocks
Jul0
Although it may seem obvious to most stock market traders there are a number of simple rules that you can follow which will ensure that you have more success when buying stocks:
In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These stock indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.
For example the DOW30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).
Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to quickly buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.
It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime.
Another consideration to make is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option in order to protect your stock.
Be very cautious about buying a stock just before it’s earnings release, stocks often drop significantly if you come out with a poor report. Earnings are released 4 times a year with one of them being the annual report.
If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.
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