A recommended investment strategy is that of maintaining a constant value for the stock (or option) that you purchase. For example, you buy 1000 shares of ABC Corp. for 25 per share. That is an initial value (and constant value) of $25000. At the same time you will commit 10% ($2500) cash as a reserve to buy more later if needed. Your objective now is to keep your constant of $25000 in ABC Corp. You will monitor its price each day and adjust your position in ABC Corp. to keep it value at $25000. If it goes up enough that you can sell 100 shares and still have a value of $25000 in the stock, sell 100 shares. If it goes down enough that you need to buy 100 shares to get the value back up to $25000, buy 100 shares. You may do this in both directions several times while you hold the stock. The effect this produces is that you are always selling while the price is up and buying while the price is down. Always buy and sell stock in lots of 100 shares (and options in lots of 2). This will allow you to profit from a 10% move in prices. You will continue to monitor the value each day while you hold the stock and make an adjustment when necessary.

The amount that you commit to reserve is to be considered a common reserve to be shared between all of the entries that you are managing with the Constant Value Investing strategy. To explain this, in the example above you would have committed $2500 to reserve for your position in ABC Corp. You may also have another position in XYZ Corp. for which have committed $1500 to reserve. You now have a common reserve pool of $4000 that may be used to buy additional shares of either stock as needed. The important thing to remember is that before you enter into any new positions on other issues that you must keep your reserve pool. Don't deplete your reserve pool to open new positions because an important element of this strategy is to always have funds available to buy more shares when the price is down.

The SPX weekly chart below shows short-term resistance around 1,325, i.e. yearly high and weekly upper Bollinger Band. On Friday, SPX rose to 1,324 3/4 and was turned-back to close at 1,319 3/4. Also, the FOMC announcement is Wednesday. So, SPX may trade below 1,325 before then.

The daily NYSI (brown line) made lower highs throughout the current cyclical bull market, while SPX made higher highs. On Friday, NYSI closed at 727, which is below the 772 most recent high, while SPX hasn't reached a new high. So, SPX may rise to a new cyclical bull market high before beginning an intermediate-term downtrend.

Sentiment indicators, e.g. the CPC 10-week MA (above price chart), remain bullish. However, the NYMO 10-week MA (below price chart) has turned bearish. Another major mixed signal is September has been the weakest month for the stock market. However, the price of oil fell below a long-term support level a week ago (see daily oil chart below).

Also, the SPX chart shows there's major support around 1,280 (i.e. 10 & 40 week MAs and weekly middle Bollinger Band). Moreover, 1,290 is the W-pattern breakout, which is also major support. So, downside may be limited, perhaps for several weeks. Major resistance is 1,326 (yearly high), and around 1,350 (new cyclical bull market high).

There are many indications that the next downtrend, before the end of the year, will be steep, including the "Four-Year Cycle," where 8% to 36% pullbacks have taken place every fourth year, since 1962; the current cyclical bull market without at least a 9% correction, which is the second longest, since 1900; the geometric rises of the SPX to VIX and SPX to U.S. Dollar ratios; the inverted yield curve, e.g. the 10-year bond yield 45 basis points below the (short-term) Fed Funds Rate, etc.

Most people look for stockbrokers and financial planners who are in on every fast moving stock and make them money on everything that comes along. However that is truly the way to get burned, pay the most in commissions and over time lose all your money. Although it is not popular the truth really is that the Best Financial Planners put you in long-term stuff and act like a Security Guard.

Why you ask? Well really you could do this yourself you say. Sure you can, but few people do. You could study the best mutual funds and your risk tolerance and do it yourself, but would you? Probably not, you would get stupid and greedy and lose it all or you would seek to take some of that money and spend it on needless crap. And do not tell me you do not have any needless crap. I have been to your garage sales?

This is why I say that; The Best Financial Planners put you in long-term stuff and act like a Security Guard. Financial Planners are needed because Americans consistently plan to fail and fail to plan properly with their financial assets. So hire a financial planner who is a long-term planner and cares about your future and will not throw it all away one whim at a time for a quick commissions and silly requests by you. Stop being your own worst enemy and catch a clue. The winners of the game are the long-term crowd.

Most investors today want to invest sensibly, but many are not sure how to get started. Well, the first stage is to identify excellent companies as possible candidates for your investment dollar. One way to do this is to use a point-based scoring system, such as the trademarked Easy-Rate system presented in the new book, ''Sensible Stock Investing.'' This approach enables the individual investor, in a reasonable time, to score companies and rank them against each other.

There are three categories in which a company can score points:

--The company's Story.

--The company's Financial Picture.

--Bonus Points.

The company's Story is a few sentences about what it does and how it makes money. Famed investor Peter Lynch said that before buying a stock, he liked to create a two-minute monologue about the company: what's good about it, what's necessary for it to succeed, what pitfalls it faces. Lynch said, ''Once you're able to tell the story of a stock...so that even a child could understand it, then you have a proper grasp of the situation.'' The book Sensible Stock Investing shows you how to construct the story and how to score it. A handy questionnaire helps you to focus on the important facts. Answer those questions, and you'll have the company's Story down cold.

The importance of the company's Financial Picture should be obvious. The time-pressed individual investor needs to home in on the most important data and ignore the ''noise.'' Financial information is abundant and free these days. The danger is getting lost in the deluge instead of extracting meaning from just the right elements. Sensible Stock Investing shows you how to score the five most important financial factors in a company's record, plus how to rate its dividend policy. The book also provides a formatted way to record this information to make scoring the company easy. Even if you know nothing about finance and accounting, filling out the form is straightforward and fun. Sometimes your eyes will pop out as the financial picture takes shape--because not all highly touted companies are as sound as you might think, while others that you hardly ever hear of have beautiful businesses that are virtual cash-generating machines. In scoring the financials, you will literally see the companies separate from each other. The truly excellent ones rise up to the top of the rankings, and the bad ones sink like stones. Every time.

Bonus Points are awarded for third-party opinions, such as Wall Street's analyst ratings. They do not comprise a high percentage of the company's total score, but they can be useful and should not be ignored.

In a nutshell, that is how excellent companies worthy of your consideration are identified. Scoring a company takes about an hour the first time you do it, while periodically updating the score takes maybe 10-15 minutes. Updating should be done every few months. This is time well spent for the huge leg up it gives you on investors who do not do this most basic of homework.

Valuation means assigning a ''proper'' value, or price, to a stock. The quote marks around ''proper'' remind us that while the word implies that there is a single ''correct'' price, in fact the concept is theoretical. Valuation is nevertheless an important guide to what price at which to buy or sell a stock. If you pay too much for a stock—more than it is ''worth''—your returns will suffer forever after.

Many large-scale institutional investors—mutual funds, brokerages, hedge funds—have developed complex mathematical models for determining a stock’s ''proper'' price. The individual investor needs to go a different route.

Fortunately, a second method exists which is just as good, easy to understand, and readily available. This second method uses what are called valuation ratios.

Valuation ratios divide the stock’s current price (P) by quantifiable aspects of its business: its earnings, its revenue, its book value, and so on. Each ratio is then compared to historical norms to tell whether the stock is fairly priced at its current price P.

Here are some common valuation ratios that the Sensible Stock Investor uses:

--P/E, or price-to-earnings ratio. This compares the stock’s price to the company’s reported earnings. This is the famous ''multiple'' that one often hears about.

-- P/S, or price-to-sales ratio, which compares the stock’s price to the company’s revenue.

-- P/B, or price-to-book ratio, which compares the stock’s price to the company’s book value (as computed by accepted accounting principles).

-- PEG, which is the P/E ratio divided by the earnings growth rate of the company.

-- P/CF, or price-to-cashflow, which compares the stock’s price to its annual flow of cash.

Happily, all of these valuation ratios, plus others, are available for free on virtually all financial Web sites. They are usually current to the very day. If you know the historical benchmarks, it is easy to interpret each ratio as indicating whether, like Goldilocks’ porridge, a stock’s price is too hot, too cold, or just about right.

There are many people have been making millions for years. Many people believe that it is due to the fact that they are lucky. However, the main point is everyone can make money, it simply depends on how hard you want to try and by which means to do so. Investing in stock has been the trends for years, and people are making a lot and also losing lots. Therefore, in order to make a profit, you need to have good decision making and know what you are doing. Do not follow the peers or you are bound to crash.

Actually, investing in stocks is no longer a big mystery anymore. The knowledge is everywhere and all you need to do is to obtain it. Similar to many things in our life, stock investing is of no exception, there are many different ways to work with. You simply need to find the ways which suit you the most and you can be lucky enough to get some great ones.

There are a several reasons why many investors fail in investing stock. One of the most common one is that the investor did not really want to invest in the first place. They always hear people say huge amount of money can be made in the stock market, and they did not want miss the gold mine. So the investor jumps in with little knowledge immediately and expect to get some great return. Many individuals also do not have sense to cut their losses. They rather choose to sell too early and try to get out as they lost alot of money and can't afford to lose anymore. Most are not willing to pay for advice for a specialist, they believe that they will win the game. In fact, it is a very big mistake as they do not know what to invest, so they simply choose something they like and pray to god. They do not have a good investment plan. They just plan on buying a stock and making money, but no plan on the fluctuations and natural swing.

Therefore, when it comes to stock investing, remember to take your time. It is important to prepare for suffering from lose anytime. You have to control yourself well enough so that you are not that eager to invest in any stock if you not sure enough. If it is constantly rising in price and you are afraid to miss any chance, do not be panic, there will be alot more stocks and chances for you to make profit in the future.

Although divergence trading is not a new stock trading method it nevertheless is a powerful one. Through divergence trading you can take advantage of market trend reversals and uncover profit opportunities.

By locating trend reversals that other traders miss you can position yourself to benefit from hidden trading movements. This can be accomplished whether the market is bearish or bullish. Just by simply knowing which direction the market is going through divergent tracking you can realize considerable profits.

The divergence trading formula is an uncomplicated and straightforward method composed of simple indicators and simple rules that multiplies the power of trend reversal. The method consists of 3 elements: exponential moving average, simple moving average envelopes and stochastics. By monitoring these three indicators you can spot divergent trends that will forecast price changes you can exploit.

Also divergence trading is compatible with the more commonly used trend-following method. By coupling divergence trading with trend-following trading you can profit from both sides of any transaction and not leave any money on the table. And the best thing is that divergence trading can be applied to any trading market whether it be Forex, day trading, options, futures, etc. Divergence trading is multidimensional and can show you where to enter a trade, when to stop a trade and where to take profits.

So if you are a newbie stock trader or a seasoned veteran it will pay to learn how divergence trading can diminish your stock trading risks and make your trades more profitable. Add divergence trading to your stock trading toolkit and watch your trading profits grow.

Supporting the popular catch praise, “We love to make you smile”, investors of McDonald’s (MCD) may have different reactions to the drop that I foresee for this equity. With added competitors such as Jack in the Box, Burger King, and a broader enemy in the new fashion of going on diets, McDonald’s slowly will be feeling the pressures which it has repressed up to now.

Opening as an IPO in the late 1960s, McDonald’s has been known to be an incredibly valuable investment for those that caught into the craze early. Supporting a yield of nearly 1000% in its lifetime, McDonald’s, due to its large capitalization status and handsome dividends of 0.67, may seem like a stock continuing to be a safe long term investor. While there is a good sense that such a sentiment may be true, in reality with all the pressures McDonald’s has recently faced, continuing this ongoing upward trend, especially during times of economic downturn, will be an improbable task.

Typically McDonald’s does not figure to be known as a cyclical stock. Up until 2000, McDonald’s has avoided such tendencies to rise or fall during times of inflation or high unemployment, and with the exception of only a few fluctuations, McDonald’s has always had a strong and steady growth. However, these ideals seemed to change following the turning of the millennium as McDonald’s fell rapidly to a low of 15 points: an almost 75% downturn. Considering that this was the exact period where an economic downturn actively disrupted the market, I see the possibility of a close association between the price of McDonald’s and the current state of the US economy. Investors may make the argument that McDonald’s has a large percentage of revenues coming from foreign nations, but the truth remains with the fact that if the US economy suffers, the rest of the world tends to as well.

The reasoning for asserting such a sentiment about McDonald’s can be traced to the idea of consumer spending. Typically when Americans make more money when the economy is growing at a fast place, they tend to eat out more than they would if the economy was bad. The association, supported by unemployment and relative income levels, makes sense in the case of McDonald’s as any backdrop in potential customers may harm future guidance reports and overall earnings. McDonald’s, typically beating or matching expectations in terms of revenue or EPS, may find itself faltering over the next few quarters especially if the inevitable recession is a hard-landing. Both operating margins and revenue margins have slipped over the past few quarters, especially when compared to last year, and if it was not for a strengthening in investment activities, results from McDonald’s may have turned even worse.

While certain brokers tend to think of McDonald’s as a buy due to its large cap status at a point were these equities are favorably sought of, I tend to go against the norm in this case, believing that McDonald’s has entered a point of diminishing returns or diseconomies of scale which will have negative effects during the next few earnings’ results. While McDonald’s may rebound after this recession (pending how long), with increased competition from newcomers such as Chipotle and others, I would become a little hesitant of buying any shares for McDonald’s, especially during the next few months as an overbought stock.

The Derivatives and Futures Market is the most potentially profitable market in the world. But it can be the most distructive one too!

Derivatives

A derivative is a financial term for a specific type of investment from which the price over a certain time is derived from the performance of the underlying asset such as commodities, shares or bonds, interest rates, exchange rates or indices like stock market index or consumer price index.

This performance can determine both the amount and the timing of the payoffs. The diverse range of potential underlying assets and payoff alternatives leads to a huge range of derivatives contracts available to be traded in the market. The main types of derivatives are Futures, Forwards, Options and Swaps.

Futures

A futures contract is a standardized contract, traded on a futures exchange to buy or sell a certain underlying asset. at a certain date in the future, at a pre-set price.

The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price. The futures price, normally, converges towards the settlement price on the delivery date.

A futures contract gives the holder the right and the obligation to buy or sell, which differs from an options contract, which gives the buyer the right, but not the obligation, and the option writer (seller) the obligation, but not the right.

In other words, the owner of an options contract can exercise (to buy or sell) on or prior to the pre-determined settlement/expiration date. Both parties of a "futures contract" must exercise the contract (buy or sell) on the settlement date.

To exit the commitment, the holder of a futures position has to sell his long position or buy back his short position effectively closing out the futures position and its contract obligations.

Futures contracts, or simply futures, are exchange traded derivatives. The exchange acts as the counterparty on all contracts and sets margin requirement etc.

Forwards

A forward contract is an agreement between two parties to buy or sell an asset (which can be of any kind) at a pre-agreed future point in time. Therefore, the trade date and delivery date are separated. It is used to control and hedge risk.

One party agrees to buy, the other to sell, for a forward price agreed in advance. In a forward transaction, no actual cash changes hands. If the transaction is collaterised, exchange of margin will take place according to a pre-agreed rule. Otherwise no asset of any kind actually changes hands, until the contract has matured.

The forward price of such a contract is commonly contrasted with the spot price which is the price at which the asset changes hands ( on the spot date, usually the next business day ). The difference between the spot and the forward price is the forward premium or forward discount.

A standardized forward contract that is traded on an exchange is called a futures contract.

Futures vs. Forwards

While futures and forward contracts are both a contract to trade on a future date, key differences include:

·Futures are always traded on an exchange, whereas forwards always trade over-the-counter.

·Futures are highly standardized, whereas each forward is unique.

·The price at which the contract is finally settled is different:.

·Futures are settled at the settlement price fixed on the last trading date of the contract (i.e. at the end)

·Forwards are settled at the forward price agreed on the trade date (i.e. at the start)

·The credit risk of futures is much lower than that of forwards:

Traders are not subject to credit risk due to the role played by the clearing house. The profit or loss on a futures position is exchanged in cash every day. After this the credit exposure is again zero.

The profit or loss on a forward contract is only realised at the time of settlement, so the credit exposure can keep increasing

·In case of physical delivery, the forward contract specifies to whom to make the delivery. The counterparty on a futures contract is chosen randomly by the exchange.

I am amazed at how many investors have no idea about what Options really are. Many continue to provide the argument on how Options Trading is very risky…I would have to disagree as Options Trading is safer than just trading stocks. Now hold on a minute and let me explain. You are correct in that Options Trading does have risks. But, so does any strategy used in the Stock Market as no one knows what the stock will be in the future. So, let’s say you purchase stock in DELL so you are looking for an increase in value so that your investment increases. Now, what happens if DELL drops in price? Your portfolio value drops along with DELL. A $5.00 drop in stock price and you will be down $500 on your investment in DELL.

What would I have done differently? Let’s say I match your investment in DELL and purchase 100 shares as you have done. I however would sell a call again DELL ( in other words, sell someone the option to purchase my shares from me at a fixed price above what I paid for the stock) other wise know as a Covered Call. For selling these calls I would immediately receive $100 (or $1 per share for such a call sale).

Time to compare situations…your account value would be down $500 but mine would only be down $400. Therefore, I have effectively provided some downside protection while also reducing my per share cost in DELL. I would be able to do this every month to generate income and at some point I could exit DELL with a profit even though it never gained a penny in value while you on the other had would still be down $500. Now…does Options Trading seem as risky as you first thought?

Covered Calls are just one of the many option trading strategies I use in trading the Stock Market. Although Options Trading does involve risk there are ways in which they greatly help to reduce the risks of trading. Therefore, make sure you have a good understanding of any trading strategy before you invest your money

When the market is "on fire" a lot of interesting things happen. We are sure you have heard the old adage "a rising tide lifts all boats" and it is one of those "truisms". When the market is on fire just about everyone does well. But when the market gets nasty the rebounds are very often left to the "survival of the fittest". At that point the adage that you don't hear is that "when the tide goes out, only the best boats float".

We have seen this pattern before after major market crashes. Money comes back to the strongest and the fittest first. If you turn on CNBC you will start hearing pundits tell you that you have to be more selective about who you buy. Well the point is that if you are a trader, you have to take what the market gives you.

What is important is being in the right stocks at the right time. So we know that after a major pull back the "generals" lead the way back up. So as traders, these are the guys you want to be in so that you capitalize on the big rebounds. Does that mean you should never buy a hot new outfit or an old high flyer? No it doesn't. But it does mean that you cannot buy them until the overall market is so happy it will let a high flyer, fly high.

It is the overall market "tone" or attitude that will "tell" you where to place your trades, it is important to try your best to get the "feel". For instance when the market is giddy and everyone is flying, sure you buy the high flyers. But when there is good reason for the market to get nasty, or even cautious, it's time to take your money and move over to established companies or even old value plays.

Have you noticed that when we get a pull back on the NASDAQ, every one is talking about "the cyclicals"? Well sure enough they often gain a few points at the time. There is no reason you shouldn't take profits out of a high flying stock and park it in "value" when the market gets nasty. Likewise, when the market is on fire and no one cares about value, you "have to" buy some high flyers to get the short quick pops.

When investors get rocked and lose money, it will take a while before they want to buy speculative stocks again. But there will be a time when they will again and that will be the time to move back into the "periphery" stocks. Like everything else in life, the market is all about timing. When the time is right, you can venture into "junk" stocks, when the market isn't right, you have to rotate back into the stable.

Recently reporting their quarterly earnings, many investors look for a fair sized rally for this shoe making king. However, with the upcoming recession and implications that it might have on Nike (NKE) shares, I would be hesitant to purchase any more shares at such a high price during such a volatile period.

It’s true that Nike did something positive in their report a few days ago which propelled the stock by four percent the next day. However, this was also the first time in three quarters that Nike reported an EPS lower than expectations. While the surprise was low, Nike typically reports earnings well above analyst estimates, illustrating the potential decline of Nikes’ profits during the next possible few years. Already experiencing some negative margins from quarter to quarter, with yearly margins only mediocre at best, Nike looks to be an upsetting stock for investors in the months to come. Reaching a near record high this year, I can vouch that Nike is an overbought equity waiting to be shorted.

The reasoning for such an assertion can be based on the premise of what type of company Nike is. Selling sport shoes and other clothing products at an above market price may not be complacent with consumers with the upcoming economic downturn. As inflation worries have propelled the Federal Reserve to increase interest rates, a negative effect will occur for companies such as a decrease in purchases. Consequently, companies will have to compensate for the lack of sales by firing employees. This results in lower domestic income for Americans, creating even more negative effects for the economy. Because consumers will not spend at their previous rate, profits will fall for companies that sell products at high prices (like Nike) and will transcend the bad news to shareholders of their stock. As Nike perfectly fits this description, expect some announcements in the future, especially if there is a hard landing, of a lowering of guidance.

Historically speaking, when the recession of 2001 through 2003 took place, shares of Nike dropped dramatically to near 33% which is a big downfall for a large capitalization corporation. When the economy got back to a more prosperous state, shares of Nike rose because of increases in margins and earnings, placing Nike almost 100% ahead relative to the end of 2003. Will Nike follow a similar pattern when the next recession occurs? The topic is debatable, but Nike does seem to follow a relatively cyclical pattern determined by the economy and its fundamentals.

It is true that Nike has an excellent PE ratio of nearly 17 and a good dividend payout of 1.24 cents per share, but with the negativity of the economy conspicuously hurting the fundamentals of Nike, and a technical pattern similar to that of a cyclical stock, I would be very wary of buying any shares of Nike at the current time. If you were lucky and have shares of Nike that you purchased earlier, I would advise selling these shares, collecting your capital gains, and buying shares of Nike back when the economy goes through this recession.

The overall stock market has had a run of flat performance over the last several years. If you look at the performance of the S&P 500 from 1999 through 2005, you'll see that it was up about 0.2% compounded annual return, not much better than a money market fund, and the Nasdaq 100 has fared even worse. Granted, it got there in an interesting way, but overall it basically went nowhere.

For an investor looking to better that performance, what are the alternatives to index funds or buy and hold investing? Sector fund investing, using a rotation strategy has been shown to work by a variety of different newsletters and advisors. Many of the top performing newsletters in the Hulbert Financial Digest use some variant of this type of strategy. This is easily done using sector mutual funds, such as the Fidelity Select Funds family.

Here we look at a mutual fund trading system that trades the Fidelity Select Mutual Funds. The Fidelity Select Mutual Funds are a good choice for several reasons:

* Fidelity Select Mutual Funds historically have persistence in their trends so they can be held for the Fidelity imposed minimum 30 day holding period while realizing a return well above that of the market.

* If you hold the funds for a 30 day minimum, Fidelity allows unlimited trading with no redemption fees.

* With over 40 Fidelity Select Funds, there is a sector fund is available to track most market sectors. If there is strength in any domestic market sector, youíll probably capture it using Fidelity Select Funds.

* Fidelity's minimum investment requirement for the Fidelity Select Funds is only $2500 per fund, so thatís all you need to start. Fidelity has eliminated the load on the Select funds, so there is no up front cost†to get into them.

Many sector rotation strategies have been published, dating back to the late 1990ís, but this one is one of the simplest for you to follow. The steps are as follows.

1) Track the 25 day (or 5 week) price change in all of the Fidelity Select Mutual Funds.

2) Invest in the Fidelity Select Fund with the highest percentage gain over that 5 weeks.

3) Hold that Select fund for at least 30 calendar days, to avoid the Fidelity early redemption fees.

4) After 30 days, if that Select Fund is still the top Select fund, continue to hold it. Otherwise, exchange it immediately for the currently top ranked Select fund.

5) Hold the new Select Fund for 30 calendar days

For the 1999 to 2005 years that the major indices have been almost flat, this sector fund rotation system would have gained almost 200%, or over 16% per year.

There is one significant drawback to this system. It does not have a much better drawdown than the overall markets. During the down years of 2000 to 2002 this strategy had a drawdown of almost 50%. Fortunately, it has achieved new all time highs in 2006, but that kinds of drawdown need to be factored in to how much you might want to invest in this or any investment strategy.

As you can see, even a simple sector rotation strategy can give a real performance advantage over buy and hold investing. This type of strategy should be part of every investor's portfolio.