Category Archives: General Investing

General Investing

Investing Online For Novices

Investing online (online trading) can seem a little weird at first, especially if you’ve been using the Internet mainly for less serious things like playing games and updating your Facebook page.. After all, this is your hard-earned money you’re now thinking of transferring to a faceless website. So, notwithstanding that online trading is commonplace nowadays, you may want to learn more about how to set up an account and what to expect next before going further with this. You can experience exactly what’s involved in online trading at the Investing Online Resource Center.(investingonline.org). Here you’ll find out what it’s like to set up an account and get starting with trading, and you’ll also find descriptions and rankings of the various online brokerages. If you’re an experienced online investor you may also find the site useful. It covers a variety of topics in-depth, like day trading, after-hours trading, and provides discussion groups and even a complaint center.

The online brokerages most newcomers know are AmeriTrade and E-Trade. Both are pretty good choices for getting started. It costs $2,000 to open an AmeriTrade account and market orders (buys or sales of securities) cost $10.99. You get a trading demo and an investment education section called Investor Basics. E-Trade requires a $1000 deposit and market trades are $14.95 per trade up to 1,000 shares. E-Trade is known for its superabundance of investment tools, charts, reports, and market news.

But I personally use a lesser-known company called. TradeKing. This is a very good service if you want to pay very low fees for trades but still get fast, reliable service. TradeKing is a nationally licensed online broker offering low flat fees ($4.95 per trade and $0.65 per option contract) with no hidden costs or account minimums. It offers almost as much in the way of tools, research, charting, and educational information as E-Trade but at a lower cost. Personally, when investing online, I don’t see the point in paying any more than necessary for a standardized service like stock or bond trading.

Online Brokers for Mainstream Investors

By “mainstream” I mean investors who are experienced in investing online and do ten or twenty trades a year, but usually involving moderate amounts of money. These are average citizens like most of us who use online investing as a convenient way to manage all or a part of their portfolios. So they are looking for user-friendly online service, totally reputable and reliable (of course!), combined with easy access to their funds. But they are not professional investors, nor are they wealthy individuals dealing in six and seven-figure trades.

For experienced mainstream investors. Charles Schwab is an excellent choice. It offers top-notch basic service plus a variety of premium services like access to professional research and fee-for-service financial advisors. Schwab has extremely good customer service and is a premium online brokerage. Trades cost $9.95 and you must depost $10,000 to open an account.
Another possibility is TD Waterhouse. Waterhouse has the distinction of being associated with Goldman, Sachs, the powerhouse investment bank, and can provide you with access the Goldman, Sachs research reports and IPO information. An initial deposit of only $1,000 is needed.

General Investing

Stick To Your Plan And Forget The Rest

If you want to be successful at something, define beforehand what and how exactly you will do that and then set aside everything else that does not fit in your plan. I have learned that lesson from Jim Collin’s book “From Good to Great”. It is a great read and I would recommend you buying it. Pay close attention to all those lessons that are included in the book. Even if they were written with companies in mind, the lessons will apply to everyone in almost any aspect of their lives. That includes trading in the stock market.

Set your plan and forget the rest

When trading and investing in the stock market, you should define beforehand what exactly your strategy will be before you even open your account with your favorite broker. After you have decided upon it, forget and put it aside everything that does not fit into your plan. This might look easy to do it, but as you start you will soon realize that you will be bombarded every single day with different options and opportunities so you too, “can make a killing!”

Stick to your plan

If you have decided that you want a 3% yearly return to reach your financial goals, then great! Stick with that and forget everything else. Every day you will be hearing or seeing someone showing how they managed to pull off a 130% return on a single stock on a single day! That does sound great and you might start wondering how small is your goals comparing to that guy. Do not do that! If you have a plan that with 3% a.a. return you will reach your goals, then this is all you need.

Decide and make a good plan that you know that by the end of it, you will be fully satisfied. That way, you will not get distracted with all those “wonderful” schemes that everyone promises it will make you rich in a week! They won’t and if you keep paying attention to them, even if you do not follow them it will hinder your progress with your own plan. So, forget all that is going around you and focus on getting things done according to your plan.

General Investing

Advantages Of FX Trading

Very few people realize the benefits of FX trading over normal investments in stock or otherwise. This is mainly due to a lot of misconceptions about forex as a whole. Forex is an excellent avenue for investments, and if you play it right, you could substantially increase upon your investments. First, it is important to understand what forex trading actually is. Trading in forex means trading in currency or foreign exchange. It is basically a trading form that capitulates in the difference of values between two different currencies.

Currencies belonging to two separate countries will have a different value with respect to each other. Now taking the respective values of a US Dollar and British Pound, £1 equals $1.59. If you were to buy $159 worth of pounds, that is, £100, and the next day the currency values fluctuated and £1 equaled $1.61, you would have a profit of $2. This may seem small now, but the volumes in which people conduct FX trading is very large and this slight change can result in huge profits and losses. These variations depend on a number of factors. If you do your study well and make your investments safely, you can eliminate the risk of loss substantially.

The Advantages

FX trading market is open 24 hours, seven days a week. Money never stops and that is why you have an amazing freedom when you trade in currency. FX trading is different from trading in stock where you have to deal and trade during the day. For the people who have other full-time jobs, this can be quite tiresome. They cannot devote as much time as they want to their investments. This is troublesome, because if you are not fully involved, you could make a slip up and incur losses. With forex trading, you do not have to worry about such problems. The market is open always and you can check your investments at all times.
The next great advantage in FX trading is that of leverage. Leverage means that you only need a particular amount of money to take part in a trade or a deal. So, if the leverage is 20:1 on a trade worth $10,000, all you need is $500 to take part in the trade. This is an excellent thing that gives you the advantage of taking part in deals that will give you immense profit.

With foreign exchange, you can set the limit of your own losses, to the point up until which you are willing to bear them. So, if the currency you are investing in falls to that point, you automatically withdraw. This means that with leverage you have a chance of taking part in big deals with small capital. Imagine that in the above example of pounds and dollars, the deal was for $159,000. You can get leverage up to 32:1, so the profit is humongous. You can participate in these deals if you can come up with just 1/32 of this amount.

General Investing

Position Sizing

When building a futures trading system one of the most crucial aspects is how it will determine its position sizing. Specifically, how it will determine how many contracts to trade once it gets a buy or sell signal.

One of the best ways to do position sizing is through a formula designed to “normalize” the markets for volatility. This way, a market with high volatility trades much more cautiously than a market with low volatility. In other words, the high-volatility market trades with fewer contracts than a low-volatility market.

The next consideration is how much of the account to risk for each trade. As a rule of thumb, it is best to risk no more than about 1% to 3% of the account size for each trade. So, a $100,000 account should never risk more than about $1,000 to $3,000 for each trade.

Once a trader has determined the risk for each trade and the market’s volatility they can then calculate the contracts to trade with this formula: (account size * risk a trade / market volatility).

Another consideration is the risk for each sector. Traders should never risk more than about 5% of the account at one time in a given sector. So, the risk in highly correlated positions like crude oil, heating oil and gasoline should be summed together. It is this combined risk in a correlated sector that should not exceed about 5% of the account size. Violating this rule can cause traders to be too dependent on one sector and voids the benefits of diversification.

Besides risk for each trade and risk for each sector one should consider the total risk at any given time. This is the amount one would lose if every single trade they were in exited simultaneously at a loss. This amount should not exceed about 10%.

By managing risk, and carrying out position sizing this way, one can substantially cut the risk in trading. Finding trading software that can compute all these position sizing rules is extremely difficult. As far as we know there are only two software packages that can do this correctly. One is Mechanica and the other is Trading Blox.

This article directory limits us on the size of the article we can publish. So, traders wanting to learn more should visit DH Trading Systems website.Commodity trading carries risks and is not suitable for all investors. Past performance is not indicative of future performance.Traders wanting to learn more about position sizing from award winning futures trading system developer Dean Hoffman should click on the links above.

General Investing

Types Of Investment Bonds

There are many types of investment bonds in the market. Each type of investment bond has its own feature, which make them unique. It is very important to know the type of investment bond featured benefits. If an investment bond feature benefits the investor, then the investment has lower risk, so as the yield, and its price should be higher.

In the other way round, If an investment bond feature benefits the issuer, then the investment has higher risk and yield, and its price should be lower. Therefore, as an investor, once we know who benefits from the feature, then we stand a better investment position whether to pay more or less for the type of investment bond before investing. Below are some of the most common bonds in the market.

Government bonds – are issued by the monetary authority of a country. At the time of issue, government bonds have maturity period from as short as one year to as long as 20 years.

Corporate bonds – are issued by corporations, mainly bought and sold by private and public institutions. They offer limited interest from retail investors.

Secured bonds – are backed by some specified assets such as mortgages or account receivables for investors to be convinced to park with their money. For example, a mortgage backed secured bond bundles mortgage, and then sells investors the right to receive the payments that consumers make on those mortgage loans.

Unsecured bonds – or sometimes called debentures are the most commonly issued type of investment bond. Although it may sound risky, they are generally not. They are backed by the issuer’s credit quality. In general, the higher the issuer’s credit quality, the higher the chance the borrower will make the payment to investors as promised. Therefore, the investor’s risk is reduced. Debentures are issued by high credit quality corporations and institutions, and they are often more highly rated than secured, asset backed investment bonds.

Convertible bonds – are hybrid investment which contains a bond and a stock. If an interest rate risen, the bond will fall in value. However, investor can still benefit from the risen stock price by converting it to common stock. If an investor choose not to exercise the convertible, the investor can benefit from the bond’s interest income until the its maturity. These types of investment bond is suitable for investors with low risk profile, and seek for regular income with downside protection against falling share prices. Convertible bonds rate of return is lower than non-convertible bonds.

High yield bonds – as the name suggested, pay higher interest rates to investors. This types of investment bonds’ grade is lower, and are issued by emerging market economies such as those good companies which fallen on bad economy times. Therefore, they are riskier than investment graded bonds.

Zero-coupon bonds – pay no coupon interest during the tenure of the bond. But, the coupon interest is accumulated and paid in one lump sum at the time of maturity. This types of investment bonds are normally sold at a discount.

Floating-rate bonds – or name floaters, is a type of investment bond which periodically adjust the coupon interest rates base on the current market interest rates. If the market interest rates risen, the coupon interest rate will be adjusted to higher. If the market interest rates fallen, the coupon interest rate will be adjusted to lower.

Callable bonds – is riskier and offer a higher rate of return. The issuers have the right to call back the bond anytime and repay its debt before maturity. This occasion normally happens when interest rates fall, the issuers will call back the bond and reissue another bond at a lower rate of interest.