Seecrets On Investment: Tired Of Making Huge Losses In The Stock Market – Part 1

Written by Stan Seecrets

Over 80% of all individual investors lose money in any given span of ten years. This figure is likely to be higher, given most people’s reluctance to reveal their losses. This article provides a broad outline of this financial landscape. It reflectsrepparttar author’s personal views as an individual investor and author of a stock charting software withrepparttar 139971 experiences learned fromrepparttar 139972 University of H.K. (hard knocks). Do not consider this article as any form of financial advice. Financial advice are available from licensed individuals and companies as required by law in your respective country.

Investment is a statistics game. You win sometimes and you lose most ofrepparttar 139973 time. To stay ahead, all you have to do is to make sure that your gains are more than your losses. More importantly, how to limit losses and reducerepparttar 139974 mistakes will be crucial in successful investing.

Take a typical fund manager. Out of ten positions,repparttar 139975 fund manager may only win 40% ofrepparttar 139976 time. Say, this manager makes an average return of 20% for each position. The rest are mistakes, but this manager cappedrepparttar 139977 losses at 10% each. Dorepparttar 139978 simple math, and lo and behold, this manager is ahead with gains. This is a simple example – professional fund managers use complex variations of this simple theme.

Another example isrepparttar 139979 venture capitalist. Say, out of ten ventures, only one succeeded. The successful venture could yield returns of 2000%, perhaps more. The other nine ventures failed miserably and these investments are written off. Using this model,repparttar 139980 venture capitalist is still ahead.

Headlines,repparttar 139981 media, advertising hype.

Most of us are familiar with this typical headline: “Whiz kid makes stock picks that outperformrepparttar 139982 market than most fund managers”. When such stories becomes headline news onrepparttar 139983 popular media, it is likely that they appear towardsrepparttar 139984 end of a great bull market. Stories like these typifyrepparttar 139985 misconception that anyone can pick stocks at random and win allrepparttar 139986 time.

Perhaps, a more tantalizing advertisement with “How I make 2600% (annualized) on a winning trade” may make us interested. Any seasoned investor will be able to provide a handful of trades that has spectacular performance like 50% in a week. Annualize this and it works out to be 2600% a year. However such trades are few. There is no one inrepparttar 139987 world that has such a method or strategy that is consistent and sustainable.

It is prudent to treat media reports with a critical mind and skepticism. Rationalizingrepparttar 139988 possible reasons on whyrepparttar 139989 story appears may provide some useful and not so obvious insights. For example, if you have a large position in a stock, then obviously you will only sing praises on why it will outperform its peers to encourage more buying momentum. The author remembers an analyst private statement: “I can write fantastic merits about a stock, conversely I can also write some damning things as well”.

Seecrets On Investment: Tired Of Making Huge Losses In The Stock Market – Part 2

Written by Stan Seecrets

Fundamental analysis.

Fundamentals analysis saysrepparttar best way to predictrepparttar 139970 future trends of a stock is to understandrepparttar 139971 financial figures ofrepparttar 139972 underlying company. The fundamental analyst would calculate a theoretical value ofrepparttar 139973 company using cash flow analysis, recent dividends and earnings, future dividends and earnings projections plus a host of other economic numbers. Ifrepparttar 139974 current stock price is lower thanrepparttar 139975 calculated value, a trader who uses fundamental analysis would buy this stock.

This writer hasrepparttar 139976 opinion that fundamental analysis is difficult to master for it to be useful as a forecasting tool. Understanding and analyzing balance sheets and profit and loss accounts is not enough. You will need to analyzerepparttar 139977 micro and macroeconomic picture as well. Often you will need to be haverepparttar 139978 same knowledge equivalent to senior-management of a company you want to analyze – minusrepparttar 139979 leadership and management skills.

Takerepparttar 139980 example of Google’s free 2 GB e-mail service. How much does it cost them? Probably about $2 yearly for each customer. Assuming 100 million internet users sign up,repparttar 139981 advertising revenues from this segment alone would provide a tidy profit. It isrepparttar 139982 analyst job to provide a good educated-guess of this number. More importantly, this new signings will provide a customer base to challenge Yahoo and Microsoft. With Google’s dominance inrepparttar 139983 search engine market,repparttar 139984 data mining of such a huge pool of internet users will provide them with an edge in deciding future strategies over its two nearest rivals. Try translating this to what can Google earn inrepparttar 139985 next two quarters.

One ofrepparttar 139986 better tools isrepparttar 139987 Z-Score, developed by Edward Altman, a financial economist and professor at New York University's Stern School of Business, in 1968 to predict corporate bankruptcies within a two-year period. This formula has a 70-plus percent accuracy rate

Technical analysis. The “price action discounts everything” premise is central to charting, also known as technical analysis. Technical analysis uses graphic representations for prices and makes uses of various quantitative techniques to forecast price trends.

A technician makes profits in any market by having positions in line withrepparttar 139988 price trend. Whenrepparttar 139989 trend is up, then buy. Conversely, whenrepparttar 139990 trend is down, then look to sell. Technical analysis is not an exact science, but it is easy to learn and effective.

Technical analysis is a good starting point for beginners. The foundation should include classical technical analysis, Japanese candlesticks, trendlines, RSI, MACD, ADX, stochastics and moving averages. Learners can complete these core topics within three to six months. With constant practice, you should be able to independently analyze and identifyrepparttar 139991 current trends inrepparttar 139992 stock market.

Most users of stock charts may only focus on daily charts. However, if users pay equal attention to weekly as well as monthly charts,repparttar 139993 picture is intuitively more complete. This is equivalent to understanding howrepparttar 139994 short, medium and long-term investors are viewingrepparttar 139995 markets, after all three main types of investors formrepparttar 139996 market. A handful of stock charting software has this feature of showing say,repparttar 139997 relative strength index forrepparttar 139998 daily, weekly and monthly values on a single screen.

Cont'd on page 2 ==> © 2005
Terms of Use