Generally, any stock that trades outside the major stock exchanges and also that is taken as depreciatory is known as “penny stock”. These major stock exchanges include NYSE, AMEX or NASDAQ. Sometimes the terms penny stocks, small caps, and nano caps are brought into use without interchangeably. But the rank of the penny stock is determined by share price, not by market capitalization or listing service.

Market caps of penny stock are often less than $500 million. Those that trade on low volumes over the counter take it as highly speculative. It is believed that it may prove hard task to sell penny stocks, once they are purchased. This is because of the fact that it may sometimes be difficult to locate quotations for particular penny stocks. Investors in penny stocks are expected to remain ready to face the possibility of losing their entire investment.

Nevertheless, the penny stock is able to lure new investors with its low price and its possibility to receive speedy profits that may reach up to one hundred percent in certain cases. In a very similar way, there always remains the possibility of severe drops that may even reach over 90 percent in the long term. Penny stocks are considered as investments, in which risk factor is highly involved. Consequently, investors must be aware of the various risks that are involved, such as limited liquidity, lack of financial reporting and fraud.

If liquidity is given prominence, then penny stock has very fewer shareholders. It is less “liquid”; this term means that in comparison to a larger company, it will buy and sell less shares. Any unnoticed change in the demand or supply can result in the unpredictability of stock price. Consequently, it may lead to the rapid rise in the stock price or bring it down to the earth. Therefore, due to the lack of liquidity and volatility, penny stock is more likely to be exploited by management, market markers or third parties. It becomes very tough to sell a stock specifically on a day, when there are no buyers because of the lack of liquidity.

Another reason is that to remain on the OTCBB, the listing requirements are very minimal as compared to NASDAQ or NYSE. Generally, what happens is that those companies which could not make on bigger exchanges or have been de-listed, here they have an opportunity to get re-listed on the OTCBB or Pink Sheets.

Moreover, if compared to major markets, stocks trading on the Pink Sheets hardly have any regulatory or listing requirements. There is nothing to provide protection to shareholders such as accounting standards, change in notification of ownership of shares and so on.

All these features make it easy to use penny stock in any deceitful scheme. However this does not mean that all stocks that are listed on the OTCBB are deceitful. A number of stocks on the OTCBB have fair-trading.

All investors are looking to find the top mutual funds for investing their money. We all want to know where our money will grow the fastest and be the safest. But sometimes it can seem overwhelming to sort through all the options available to sort out which are really the top mutual funds for us.

The first step in sorting out the top mutual funds and determining the best place to put your money is to identify your investment goals. This includes assessing the level of risk you’re comfortable with as well as how you need your money to work for you. For example, if you’re getting close to retirement, you probably are not comfortable with a highly aggressive and risky mutual fund, even if it is one of the top mutual funds in terms of performance. Instead, you’ll be likely to want to find one of the top mutual funds that are low risk and safe; even if that means that you may earn a lower rate of return on your money. On the other hand, if you’re young and have many years to weather the ups and downs of the market, you may want to find one of the top mutual funds that is more aggressive and higher risk, so that you can make more money over the long haul.

Once you’ve identified your investment goals and determined the level of risk with which you’re comfortable, you’re ready to start evaluating mutual funds to decide which one is right for you. Talk to your investment advisor about which of the top mutual funds are the best ones for you to research.

In general, when we talk about the top mutual funds, we’re referring to those that have weathered the market well, consistently making money for their investors. However, there are other things that can make a mutual fund one of the top ones to consider. It’s very important to consider the stability of the mutual fund company you’re considering as well as considering the fees you’ll be paying for the purchase and ongoing management of your mutual fund. Very often, you’ll see advertisements for no load mutual funds, implying that these are the lowest cost funds. However, when evaluating the cost of a mutual fund it’s important to compare all the fees you’ll be paying, not just the upfront load.

When you’re considering the top mutual funds, some companies that are consistently successful, and can typically be counted on to perform well include Fidelity, T. Rowe Price and Vanguard. These companies offer top mutual funds in all categories of risk, as well as sector funds, foreign investment funds and other specialty mutual funds. Whatever you’re looking for, it’s likely that you can find it at these companies. Plus, these companies have earned a reputation for conducting business fairly and ethically, and with being forthcoming about their fees.

When we’re searching for mutual funds, we all want to find the best for our money. Take a look at the top mutual funds available through these reliable companies and you can rest easy knowing that your money is well taken care of and growing for your future

Many find investing to be something of a mystery. Should you buy stocks, bonds, T-bills or real estate? It seems that for every person that gets rich investing in one spot a hundred others lose a fortune. In an age where you are constantly hearing about diversification and asset allocation the emergence of mutual funds seems to have hit an all time high. Promises abound of a fund that's right for everyone. But how do you know if it's right for you? Our office constantly fields the question: What is the best investment for my money? The only answer we give them is a definitive: it depends.

Many are already invested in mutual funds through their 401k, IRA's, brokerage accounts or variable annuities. But how do you know if you've chosen correctly? The first order of business is to look at their purpose and the different types available. The basic premise of a mutual fund is that a manager or management team oversees the buying and selling of equities. The idea is to spread capital, supplied by a pool of individual and/or institutional investors, among various equities and thus offer diversification within one investment.

There are literally thousands of funds that cover the spectrum of small, mid, large cap growth and value stock sectors. There are also a host of aggregate, income, short and long-term bond funds available. And then there are many offerings of both in what are considered blended funds. This is when a combination of stocks and bonds are combined in certain ratios to create a portfolio based to be conservative, moderate or aggressive. Choices are further complicated depending on the goal, asset size and management style of the each fund.

In the realm of equity funds lets take American Funds' flagship, the Growth Fund of America. It has a long-established track record of consistent performance as a large cap growth fund. Their largest holdings include: Google, Microsoft, Lowes and Target. Yet each stock constitutes no more than three percent of the overall portfolio. To put this in perspective the total asset holdings of the fund, as of 2005, are approximately $114.7 billion dollars. This means that investors who do not want to buy individual stock in these companies can purchase shares of this fund and still participate in the market. The main goal of these types of equity funds is to beat the respective index in which they participate. Investing in a quality fund that performs well often makes these suitable for those that are more comfortable with risk. This is an example of an actively managed fund whose performance helps to justify the expenses associated with the fund and others like it. The main appeal is management's track record of good returns relative to the index. For this reason, more aggressive investors may be willing to pay the related fees for the additional gains.

That being said there are index funds available. For example, stock index funds look only to mirror returns of a specified benchmark or index. The goal is to match it by buying representative amounts of each stock in the index. This avoids the expense of paying a manager to try to boost performance by choosing their own stocks or implementing their own strategies. Rather, index funds just seek to come as close as possible to equaling that market's index. Take the example of the first index fund, the Vanguard S&P 500 Index Fund. Since its inception it has nearly matched the Standard & Poor's 500 Index. It does actually out-perform many funds because of it's performance combined with lower expenses. Index funds generally carry lower fees and are not what many would consider actively managed. For these reasons index funds tend to appeal to more conservative investors.

Another choice available is that of the sector fund. These types of funds focus on one particular portion of the economy and invest within it. Let's take the Oak Associates Red Oak Technology Select Fund. The fund looks for long-term growth by investing primarily in companies which rely on technology in their products or operations. The expectation is that the companies will benefit from technological advances and improvements and thus be profitable. Its inception in 1998 was prompted by the expotential growth experienced by the technology sector at the time. Many funds with that focus outperformed the indexes and equity funds in the late 90's. Of course the last five years have shown the inherent risks associated with these types of investments. The growth potential can be great but, as illustrated by the rise and fall of technology the last ten years, it can also be the most risky. Many individual investors choose to avoid sector funds because of the volatility associated with them. However large institutional investors often use them to diversify their portfolios.

One of the most recent offerings to the mutual fund market are known as target maturity or target-date retirement funds. Although relatively new, the concept of these funds is based in the idea that one must be diversified and change their portfolio over time. Like blended funds, they possess both stock and bonds. The unique feature is that they are based around a particular retirement year. The further out the retirement year the higher the ratio of stocks is within that fund. As the time horizon for retirement nears the portfolio moves out of stocks and more into cash and bonds. As an example we can look at State Farm's LifePath 2040 fund which is managed by Barclay's. This fund currently has almost 87% of its portfolio in stocks with the balance in cash and bonds. As the fund approaches maturity the portfolio will move to have approximately 62% of its holdings in bonds and the rest of the balance in real estate, money markets and large cap stocks. The appeal of these funds is that an investor can put their money for retirement in one place and allow professional management to track the portfolio over time. The goal is to capitalize on the growth of the equity market early on in the fund's existence and then protect that growth by moving capital to the security of more stable investments.

Mutual funds offer several advantages regardless of the type you choose. The first is diversification, a variety of investments rather than putting money in one single entity. The second is liquidity, the ability to redeem your shares for cash fairly quickly. Keep in mind that there can be fees or penalties associated with this liquidation. The third advantage is to have someone manage your money, either actively or passively, without the investor having to watch it every day. In the next installment we will be taking a look at the moving parts of a mutual fund to help you see how they work.

Please note: This article is in no way an endorsement or detraction of any company or fund mentioned above. Examples are for illustrative purposes only and do not constitute whether or not you should invest in any vehicle mentioned. Always consult with your financial professional or advisor before investing and always carefully read any prospectus before making any decisions

Online stock trading is a convenient way to make stock investments, but there is a certain art to online stock trading, and there are plenty of companies who can help and make it a lot easier. The presence of an online stock trading community makes it much easier to do things such as, day trading, hedging and the use of intraday stock trading system.

So, are you intrigued online stock trading but not sure how to get started? Just as with any type of investing and trading, you must first define your overall goals. When beginning the process, it is important to find a reputable company, because online stock trading can be lucrative, but if the company you trade through doesn’t have a good reputation you could lose a lot of money.

Sudden Market Fluctuations

There are certain stocks that are extremely volatile – which means their prices can rise and fall rather quickly, and if investing in these stocks over the long term, you may lose money or barely break even. However, what if you were to take advantage of these sudden price changes? This is the basis behind day trading, and online stock trading makes day trading even more accessible to the investor.

What if you were able to quickly purchase a certain stock during a sudden price decrease, and then sell it once the price rises again? Online stock trading makes this kind of quick action possible and can help multiply your investing profits.

Research is Important

Yes, online stock trading requires only a few mouse clicks; however it is important to not become over-zealous. Because you are slightly removed from the process of actually handling your money, it is easy to forget that one wrong click can cost you thousands of dollars.

Instead, approach online stock trading as you would any of your other investment endeavors. Research is the key to making sure you take full advantage of this - that and the ability to make quick decisions.

Limit Order vs. Market Order

To help you with your online stock trading, it helps to understand the difference between a limit order and a market order. A limit order helps you because it lets you buy or sell at a set price - you literally set the limits. A market order is one where you don’t have control over this. To be successful at online stock trading, many prefer doing limit orders.

When it comes to online stock trading, the more informed you are the more successful you will be. The ability to analyze and make quick decisions is an art, and the sooner you master it, the better.

Did you know that the Russian stock market grew by a staggering 89.56% over the last year? Or that the Egyptian stock market grew by a no less impressive 57.98% a year over the last five years? Performance records in the emerging markets of Eastern Europe, Asia, the Middle East and South America have been nothing short of spectacular. Furthermore, an impressive number of companies in these emerging markets are rapidly turning themselves from regional success stories into huge multi-national conglomerates. As the UK’s Investors Chronicle recently reported: ‘If you are looking for decent, relatively cheap, relatively safe stocks you no longer have to limit your choice…the world is quite literally your oyster.’

Does it make sense, however, for a small, cautious, private investor to put his or her hard earned cash into this sector? For those who have already built up assets closer to home the answer could well be ‘yes’. We live in a global economy, stock markets historically outperform all other forms of investment and one of the golden rules of making money is diversification. So, now could well be a very good time to start dipping your toe in rather more exotic foreign waters.

Why do emerging markets offer such good potential? I have already mentioned globalisation and its effect should not be underestimated. The developed world depends for its own expansion on products and services purchased from the emerging economies. Growing political stability, developing equity markets and rapidly rising commodity prices all add to the attraction. It should also be noted that many companies are now listed not only on their local exchanges but also in London and New York.

What are the pitfalls? It is generally said that dips in the world’s major stock markets spell long-term bad news for emerging market stocks. This may have been true in the past, but is much less relevant nowadays. Many of the hotter markets, which suffered bad falls last May, have already bounced back. Anyway, it is a great mistake to lump all emerging markets together. Each one needs to be considered on its strengths and weaknesses, just as individual stocks do. There is huge difference between, say, Thailand and Brazil in the same way that there is a huge difference between, say, Delta and Ryanair.

How can you buy a little piece of the emerging market action? If you are willing to do the research you could invest directly. A good source of information is Boston Consulting’s RDE 100 list. The initials ‘RDE’ stand for ‘Rapidly Developing Economies’ and the list comprises 100 firms from developing economies that are leading the pack when it comes to globalising their businesses. The list is to be found at www.bcg.com. Some are already global players including heavyweight names such as Mexico’s CEMEX (one of the world’s largest cement makers); Hong Kong’s Johnson Motors (which has 40% of the global market for small electric motors); and Brazil’s Embraco (which as 25% of the global market for compressors). Others already enjoy national or regional dominance and are now poised for global growth. They include India’s Tata Motors; Turkey’s consumer goods firm, Vestel; and Egypt’s Orascom Telecom. Sixty of the firms on the list are, by the way, publicly quoted. If you would prefer less direct involvement there are plenty of managed funds to pick from. The top performer for the last five years has been Credit Suisse European Frontiers, which is currently showing a 292% gain.

While there is a certain argument that Google is king in terms of search engines, I like to think that Yahoo (YHOO) beats Google in all other regards. As both companies entertain the advertising business as their major source of revenue, the additional bonuses that Yahoo provides make this equity a worthy purchase. From Yahoo Finance to Fantasy Football, Yahoo controls a large portion of the market in these and other affluent areas which Google cannot compete with making Yahoo a valuable venture.

I say interesting because of the cyclical nature Yahoo seems to employ. Since Yahoo is based almost completely on advertising, revenue will come from consumers who click links directed for purchasing consumers. When the economy is near a recession, there is a lower percentage that a consumer will click a link to buy an item on a certain advertisement because of the increased potential that this consumer is out of work or controls a lower income than during periods of inflation and prosperity. Thus with little encouragement to click that link, Yahoo does not collect its amazing profits as during recession and faces lower guidance, hurting investors. While the task may seem rudimentary and miniscule, the impact upon earnings is more than marginal to say the least.

As you read this you may ask yourself why I should invest in Yahoo when there is a potential recession abroad. Excellent question. Right now I actually discourage anyone from buying shares of Yahoo for the cyclic nature that this equity utilizes. During the recession from 2001 through 2003, Yahoo dropped dramatically from near 100 points to near four points: a drop of almost 100%. However, on the flip side, during periods of growth and inflation, shares of Yahoo have increased in dramatic form as well. From its IPO date around 1997 to its peak around 2000, Yahoo grew nearly 2400% in such a short time period. You may argue that such an appreciation was during a time when the stock market was overbought in technology, look from 2003 to the present, where shares of Yahoo during this growth period have grown nearly 1200%: a very sizable gain contributing to the timely nature of the advertising business.

Yahoo also supports the fundamental credentials for its growth contributing to sizable gains during this inflationary period in terms of margins from revenue and growth. While investing and financing have been detrimental to the overall earnings, operating margins, the key to profit, has been positive and increasing every year over the past three years adding encouragement to investors. Now, while I do not suggest purchasing shares of Yahoo in this current state, I would like to remind any investor of the possible capital gains available from buying this equity right before a recession finishes. Thus, in the coming months or years as economic data supports growth again, look into buying a large capitalization stock in Yahoo, who not only supports excellent fundamentals but will sure to support high capital gains as well.

The cyclical bull market, which began in March 2003 (or October 2002 by some estimates), within the structural bear market, that began in March 2000, was fueled by monetary policy. The FOMC began an easing cycle in January 2001 when it lowered the Fed Funds Rate from 6.50% to 6%. The FOMC continued to lower the Fed Funds Rate, until it reached 1% in June 2003, and kept there for a year. In June 2004, a tightening cycle began. The Fed Funds Rate reached 5.25% in June 2006 (to neutral from accommodative), and then the FOMC paused in August for the first time in over two years. Consequently, there has been a great deal of speculation that the tightening cycle is over (a restrictive stance won't be taken) and perhaps an easing cycle will begin in 2007.

Below is a daily chart of NYSI (red line and right scale) and SPX (black line and left scale). NYSI made lower highs, while SPX made higher highs over the cyclical bull market. Currently, NYSI is near the top of the downtrend line, which indicates SPX is near an intermediate-term top, although NYSI pinpoints lows better than highs. Below the price chart is the NYMO 50-day MA, which is at a level similar to recent SPX intermediate-term tops. However, sentiment indicators, including the CPC 50-day MA (above price chart), which fell from an all-time high, and AAII and ISEE (not shown) show a great deal of pessimism, which is SPX bullish. It seems, almost everyone is expecting SPX to fall.

So, monetary policy and intermediate-term technical indicators are market bearish, while sentiment indicators are market bullish. Also, mid-September through much of October is historically the weakest market period. Consequently, there are major mixed signals. Nonetheless, the intermediate-term uptrend will turn into a downtrend at some point before the end of the year, if it hasn't turned already. Given December and January are bullish months, there may be an intermediate-term downtrend in September through November. However, sentiment indicators suggest an SPX trading range, although a quick rise to 1,350 and/or a capitulation below 1,200 shouldn't be ruled out. Unfortunately, there's little clarity at this point.

Putting your 401k in auto-pilot could be the right choice for your retirement. Studies have shown and you can probably attest to the report that most families can’t, don’t, or won’t put enough monies back for their retirement. The sad truth is, two thirds of American workers over 50, have less than $50,000 set aside in their retirement accounts.

IRA’s and 401k accounts are a great slow pay retirement method of choice, but Again, the keyword here is choice. It’s hard to contribute to a rainy day account when it’s already raining. With several American companies eluding from company pension plans and paying their employees with stocks or stock options, the new trend is to have a percentage of their employee’s paycheck automatically placed into a 401k account and this is slowly improving the retirement outlook across the nation.

IRA and 401k accounts are beginning to show signs of an upward trend in both account balances and popularity among American workers. Since many companies have either failed to perform as expected, or in worse case scenarios, have cut back mainly from the employee benefits, auto-enrolling and auto-contributions into 401k accounts are really a positive, yet slightly painful approach to generating a better retirement outlook for most Americans.

Considering the constant erosion of the American workers benefits and the increase in healthcare costs, it is to all of our benefit that we take a more aggressive stand to planning our retirement.

Auto-enrollment has shown that employers who automatically enroll new-hires and current workers into a 1 to 6 percent 401k payroll deduction with the option to allow employees to opt out has only seen a small percentage of employees actual choose to stop this deduction. By urging or actually enrolling employees into their 401k accounts has taken the positive steps toward seeing a more optimistic future for retirees.

Auto-investment is where a worker is automatically enrolled in a 401k plan and is generally assigned to an investment option of the company’s choosing or the employee can opt to choose from a list of investments such as a money market fund. To further offer more options, diversifying an employee’s choices can give an active investor the opportunity to select and track their monies for greater returns.

The main purpose of all the different options available is to strengthen the long term investing in your future and your retirement. Whether it’s an IRA, 401k or some other savings plan, you are responsible for your financial future. Any assistance that you think you need, there are financial advisors that will show you your options and what fits your budget and affordability to get the most from your efforts. Explore your options and expand on your understanding of how retirement should work for you instead of working through your retirement age. We all think we can live and work forever but the reality is quite different. The burden of support for you should remain with you.

The world has changed incredibly over the past couple of decades – and there is no greater indication of that than in the world of stock trading and investing.

In times gone-by, the majority of investors would pick their stocks via a traditional stockbroker at a brokerage firm. The transaction would involve paper based stock certificates being issued to the stock buyer. The types of investments available to the “average investor” were also highly limited.

Today, the same “average investor” can trade anything from single stocks to currencies, commodities and indices – all with the simple click of a mouse – and without ever leaving the home.

But with choice comes confusion – deciding on what stockbroker fits your needs like a glove can be a daunting process. This guide has been designed to give you an understanding of the different types of stockbroker services that exist, and help you decide which one is right for you.

Here are just a few of the many issues that you will need to consider when deciding on your preferred stockbroker:

- Do you feel comfortable executing your trades online, with one click ease, or do you prefer doing your business with an actual person, on the phone or even in person? The availability of technology has meant that firms are able to process large volumes of trades cheaply, so if you don’t need a person to talk with to make your trades then there are a large number of “no frills” online brokerage services that will allow you to do business for a few dollars per trade.

- How many transactions you make will go a large way towards deciding which brokerage service is the right one for you. Some firms will offer price breaks for frequent traders – so if you’re a day trader then you can find a service that’s far better equipped for your needs than if you were an infrequent investor.

- Do you require a basic “execution only” service or do you require some advice when making your trades? Clearly, an execution only service is going to be cheaper.

I am somebody who loves to invest money on the stock market. Some might see this as a bit of a gamble which in a way it is, there are however certain steps people can take to limit this risk which may well help them to make money.

I see the stock market as a bit of a rollercoaster in that it is always going up and down. It has many peaks and troughs which can make it hard to know when it is the right time to invest or to sell. Some people see an event such as the terrorist attacks on September the eleventh, where the stock market fell in a big way, as a good time to invest where as other people may panic and sell all of their holdings in case of another attack.

I personally prefer to buy when the market is going through a bad period as I believe it is likely to eventually pick up and should if history is anything to go by, be even higher in the future. My way of thinking is buy low, sell high.

When purchasing a single stock, such as shares in one of the top companies such as Vodafone, I always remember the price that I bought the shares at and give the stock a target price. This is the price that I will sell at, if it ever reaches that level of course. I have to say that at times I am very tempted to hold onto the shares when they reach these target levels in the hope of even higher profits. I am normally able to keep to my plan of selling high and when I have let temptation get the better of me and have held on to the shares they always seem to end up falling back. I hope that I have now learned my lesson for the future, I think I have!

If the share price after for example three months has fallen by about twenty percent, I then increase my holding by purchasing even more shares. I will then set a new target level and just repeat the process. This in a way is similar to how a unit trust works through the method of pound cost averaging, where you are able to purchase more units when the unit price is lower for your monthly premium.

What I do and have explained above is quite risky and you need to be able to hold your nerve when the stock has a bad run. You also need to have a lot of patience. I certainly would only advise people to invest money that they can actually afford to lose as one day for example I could invest in a stock which does not recover. This plan would then prove to be a disaster and would cost me a lot of money.

So far I have been quite lucky and the plan has been working well for me. I do not invest huge amounts of money and see it as more of a hobby than a way to get rich quick.

This revelation had me surprised too. I was idly flipping through my old physics textbooks yesterday when it suddenly struck me. I was amazed to realize that Sir Issac Newton’s laws of physics points to so many profound and important rules in the stock markets today.

So, here we are… the physics of the stock markets.

Newton's First Law of Trading

“A Stock at rest tends to stay at rest and a Trending Stock tends to stay in trend unless acted upon by an equal and opposite reaction or an unbalanced force.”

This law teaches us the same thing the old commodity traders will… that the trend is your friend. If a stock is trending sideways, it tends to stay sideways until a powerful enough market force takes it out of its trend. If a stock is trending up or downwards, it will tend to stay moving up or downwards until drastic changes happen to the company or the market at large creating an “equal and opposite reaction”. We should therefore always trade in the direction of a trend and always be vigilant for signs of an ”equal and opposite reaction” or the “unbalanced force”. Such a force may take the form of a drastic change in the market sentiment at large or drastic change in the performance of the specific company in question.

Newton’s Second Law of Trading

“The acceleration of a stock as produced by a market consensus is directly proportional to the magnitude of that consensus, in the same direction as the consensus, and inversely proportional to the mass of the stock.”

This law teaches us that a stock moves up or down into a trend due to a force created by market consensus. How much a stock moves up or down that trend is determined by the magnitude of the market consensus and how “massive” a stock is. By “massive” we are talking about the price of a stock. The more expensive a stock is, the more well established the company has been and the lesser in percentage you will make out of the same move in absolute dollar versus a smaller, less massive stock.

The force of the market consensus is directly proportionate to the event that spurred it. If a company produces a breakthrough product on a worldwide patent, it creates an extremely strong market consensus that is likely to take a stock very far. If a company merely scores a marginally higher earning this quarter, it is unlikely to produce a market consensus that will go very far.

Newton teaches us to not only look at what the news is but also how well established the company is in order to determine how much momentum it will produce in a given trend. The same breakthrough that drives a small company’s shares up by hundreds of percentage points may perhaps move a big company’s shares only by a fraction of that percentage.

Newton’s Third Law of Trading

"For every action, there is an equal and opposite reaction."

No need to explain this one in much detail, do I?

For every buying or selling, there must be an equal amount of buyers or sellers on the other side. The stock market is a zero sum game. For every buyer, there must be a seller and for every seller, there must be a buyer. The real question is, who is profiting from each of their buying and selling. There is really no such thing as more buyers today than sellers or vice versa. Every trader needs to understand that you can be on the wrong side of the table at anytime and only a sensible portfolio management system can help you go in the long run.

I have traded actively in the stock markets for over a decade and survived with ancient wisdom such as what you have read here. There is indeed wisdom to be found in every corner of our life and if we care to look carefully, we will never be in a lack of guidance.

Foreword

Over the past few years the stock market has made substantial declines. Some short term investors have lost a good bit of money. Many new stock market investors look at this and become very skeptical about getting in now.

If you are considering investing in the stock market it is very important that you understand how the markets work. All of the financial and market data that the newcomer is bombarded with can leave them confused and overwhelmed.

The stock market is an everyday term used to describe a place where stock in companies is bought and sold. Companies issues stock to finance new equipment, buy other companies, expand their business, introduce new products and services, etc. The investors who buy this stock now own a share of the company. If the company does well the price of their stock increases. If the company does not do well the stock price decreases. If the price that you sell your stock for is more than you paid for it, you have made money.

When you buy stock in a company you share in the profits and losses of the company until you sell your stock or the company goes out of business. Studies have shown that long term stock ownership has been one of the best investment strategies for most people.

People buy stocks on a tip from a friend, a phone call from a broker, or a recommendation from a TV analyst. They buy during a strong market. When the market later begins to decline they panic and sell for a loss. This is the typical horror story we hear from people who have no investment strategy.

Before committing your hard earned money to the stock market it will behoove you to consider the risks and benefits of doing so. You must have an investment strategy. This strategy will define what and when to buy and when you will sell it. History of the Stock Market

Over two hundred years ago private banks began to sell stock to raise money to expand. This was a new way to invest and a way for the rich to get richer. In 1792 twenty four large merchants agreed to form a market known as the New York Stock Exchange (NYSE). They agreed to meet daily on Wall Street and buy and sell stocks.

By the mid-1800s the United States was experiencing rapid growth. Companies began to sell stock to raise money for the expansion necessary to meet the growing demand for their products and services. The people who bought this stock became part owners of the company and shared in the profits or loss of the company.

A new form of investing began to emerge when investors realized that they could sell their stock to others. This is where speculation began to influence an investor's decision to buy or sell and led the way to large fluctuations in stock prices.

Originally investing in the stock market was confined to the very wealthy. Now stock ownership has found it's way to all sectors of our society. What is a Stock?

A stock certificate is a piece of paper declaring that you own a piece of the company. Companies sell stock to finance expansion, hire people, advertise, etc. In general, the sale of stock help companies grow. The people who buy the stock share in the profits or losses of the company.

Trading of stock is generally driven by short term speculation about the company operations, products, services, etc. It is this speculation that influences an investor's decision to buy or sell and what prices are attractive.

The company raises money through the primary market. This is the Initial Public Offering (IPO). Thereafter the stock is traded in the secondary market (what we call the stock market) when individual investors or traders buy and sell the shares to each other. The company is not involved in any profit or loss from this secondary market.

Technology and the Internet have made the stock market available to the mainstream public. Computers have made investing in the stock market very easy. Market and company news is available almost anywhere in the world. The Internet has brought a vast new group of investors into the stock market and this group continues to grow each year. Bull Market - Bear Market

Anyone who has been following the stock market or watching TV news is probably familiar with the terms Bull Market and Bear Market. What do they mean?

A bull market is defined by steadily rising prices. The economy is thriving and companies are generally making a profit. Most investors feel that this trend will continue for some time. By contrast a bear market is one where prices are dropping. The economy is probably in a decline and many companies are experiencing difficulties. Now the investors are pessimistic about the future profitability of the stock market. Since investors' attitudes tend to drive their willingness to buy or sell these trends normally perpetuate themselves until significant outside events intervene to cause a reversal of opinion.

In a bull market the investor hopes to buy early and hold the stock until it has reached it's high. Obviously predicting the low and high is impossible. Since most investors are "bullish" they make more money in the rising bull market. They are willing to invest more money as the stock is rising and realize more profit.

Investing in a bear market incurs the greatest possibility of losses because the trend in downward and there is no end in sight. An investment strategy in this case might be short selling. Short selling is selling a stock that you don't own. You can make arrangements with your broker to do this. You will in effect be borrowing shares from your broker to sell in the hope of buying them back later when the price has dropped. You will profit from the difference in the two prices. Another strategy for a bear market would be buying defensive stocks. These are stocks like utility companies that are not affected by the market downturn or companies that sell their products during all economic conditions. Brokers

Traditionally investors bought and sold stock through large brokerage houses. They made a phone call to their broker who relayed their order to the exchange floor. These brokers also offered their services as stock advisors to people who knew very little about the market. These people relied on their broker to guide them and paid a hefty price in commissions and fees as a result. The advent of the Internet has led to a new class of brokerage houses. These firms provide on-line accounts where you may log in and buy and sell stocks from anywhere you can get an Internet connection. They usually don't offer any market advice and only provide order execution. The Internet investor can find some good deals as the members of this new breed of electronic brokerage houses compete for your business! Blue Chip Stocks

Large well established firms who have demonstrated good profitability and growth, dividend payout, and quality products and services are called blue chip stocks. They are usually the leaders of their industry, have been around for a long time, and are considered to be among the safest investments. Blue chip stocks are included in the Dow Jones Industrial Average, an index composed of thirty companies who are leaders in their industry groups. They are very popular among individual and institutional investors. Blue chip stocks attract investors who are interested in consistent dividends and growth as well as stability. They are rarely subject to the price volatility of other stocks and their share prices will normally be higher than other categories of stock. The downside of blue chips is that due to their stability they won't appreciate as rapidly as compared to smaller up-and-coming stocks. Penny Stocks

Penny Stocks are very low priced stocks and are very risky. They are usually issued by companies without a long term record of stability or profitability.

The appeal of penny stock is their low price. Though the odds are against it, if the company can get into a growth trend the share price can jump very rapidly. They are usually favored by the speculative investor. Income Stocks

Income Stocks are stock that normally pay higher than average dividends. They are well established companies like utilities or telephone companies. Income stocks are popular with the investor who wants to own the stock for a long time and collect the dividends and who is not so interested in a gain in share price. Value Stocks

Sometimes a company's earnings and growth potential indicate that it's share price should be higher than it is currently trading at. These stock are said to be Value Stocks. For the most part, the market and investors have ignored them. The investor who buys a value stock hopes that the market will soon realize what a bargain it is and begin to buy. This would drive up the share price. Defensive Stocks

Defensive Stocks are issued by companies in industries that have demonstrated good performance in bad markets. Food and utility companies are defensive stocks. Market Timing

One of the most well known market quotes is: "Buy Low - Sell High". To be consistently successful in the stock market one needs strategy, discipline, knowledge, and tools. We need to understand our strategy and stick with it. This will prevent us from being distracted by emotion, panic, or greed.

One of the most prominent investing strategies used by "investment pros" is Market Timing. This is the attempt to predict future prices from past market performance. Forecasting stock prices has been a problem for as long as people have been trading stocks. The time to buy or sell a stock is based on a number of economic indicators derived from company analysis, stock charts, and various complex mathematical and computer based algorithms.

One example of market timing signals are those available from www.stock4today.com. Risks

There are numerous risks involved in investing in the stock market. Knowing that these risks exist should be one of the things an investor is constantly aware of. The money you invest in the stock market is not guaranteed. For instance, you might buy a stock expecting a certain dividend or rate of share price increase. If the company experiences financial problems it may not live up to your dividend or price growth expectations. If the company goes out of business you will probably lose everything you invested in it. Due to the uncertainty of the outcome, you bear a certain amount of risk when you purchase a stock.

Stocks differ in the amount of risks they present. For instance, Internet stocks have demonstrated themselves to be much more risky than utility stocks.

One risk is the stocks reaction to news items about the company. Depending on how the investors interpret the new item, they may be influenced to buy or sell the stock. If enough of these investors begin to buy or sell at the same time it will cause the price to rise or fall.

One effective strategy to cope with risk is diversification. This means spreading out your investments over several stocks in different market sectors. Remember the saying: "Don't put all your eggs in the same basket".

As investors we need to find our "Risk Tolerance". Risk tolerance is our emotional and financial ability to ride out a decline in the market without panicking and selling at a loss. When we define that point we make sure not to extend our investments beyond it. Benefits

The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It's true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!

The Internet has make investing in the stock market a possibility for almost everybody. The wealth of online information, articles, and stock quotes gives the average person the same abilities that were once available to only stock brokers. No longer does the investor need to contact a broker for this information or to place orders to buy or sell. We now have almost instant access to our accounts and the ability to place on-line orders in seconds. This new freedom has ushered in new masses of hopeful investors. Still this in not a random process of buying and selling stock. We need a strategy for selecting a suitable stock as well as timing to buy and sell in order to make a profit. Day Trading

Day Trading is the attempt to buy and sell stock over a very short period of time. The day trader hopes to cash in on the short term fluctuations in a stock's price. It would not be unusual for the day trader to buy and sell the same stock in a matter of a few minutes or to buy and sell the same stock several times a day.

Day traders sit in front of computer monitors all day looking for short term movement in a stock. They then attempt to get in on the movement before it reverses. The real day trader does not hold a stock overnight due to the risk of some event or news item triggering the stock to reverse direction. It takes intense concentration to monitor the minute by minute movement of several stocks.

The two most common types of orders that you may place with your broker are Market and Limit. In addition your may enter a Day Order which will remain in effect only for the current day or a Good till Cancelled Order which normally remains in effect for 30 days or until you cancel it. It is recommended that you only enter day orders unless there is some special circumstance that would require you to enter a good till cancelled order Market Order

A Market Order will be executed automatically at the current bid or ask price. If you enter a market buy order it will be executed at the current Ask Price when your order reaches the floor of the trading exchange. If you enter a market sell order it will be executed at the current Bid Price when your order reaches the floor of the trading exchange. A Market Order almost always insures that your order will be executed although the actual price at which your order is filled may be better or worse than you expected.

Limit Order

Another type order allows you to specify the most you are willing to pay when buying or the least you are willing to accept when selling. This is known as a Limit Order. For instance if you enter a limit buy order at 53.21 you will only pay 53.21 per share (or less) for your stock. If you enter a market sell order at 54.16 you will only sell for 54.16 (or more) for your stock. Because of the potential price differential with the bid or ask price, you order may not be executed.

When entering a limit order it is suggested that you specify a price somewhere halfway between the bid and ask price. When closing out a position because you think the price is ready to reverse, always enter a market order. Stop Loss Order

A Stop Loss Order allows you to specify a Trigger Price for a stock you own. Once the stock drops to (or below) your Trigger Price, the order becomes a Market Order and will be sold at the best price available (even if the stock price turns back up). This is a way to protect yourself from a sudden decline in price for a stock you own or to protect your potential profit if the price has gone up since you bought it. Many investors use the Stop Loss Order as insurance against an unexpected price decline. About Bid and Ask Prices

The Bid Price is the highest price anyone is willing to pay for a particular stock at the moment. The Ask Price is the lowest price anyone is willing to sell a particular stock for at the moment.

If you enter a Market Order to buy a stock you will pay the Ask Price when your order reaches the trading floor. This could be a good bit different from the Ask Price when you placed the order. On a fast moving, thinly traded, or volatile stock these prices can and will change very rapidly. You could pay substantially more than you expected! If this is a major concern, you may want to place a Limit Order instead.

The following web sites provide Stock Market Quotes and other useful financial information

* Yahoo! Finance - get stock quotes, mortgage rates, up to date news, portfolio management resources, international market data, and message boards.

* The NASDAQ Stock Market- detailed market and security information for the Nasdaq "Over The Counter" stock exchange. Also includes portfolio tracking and IPO information.

* Quote.com- Lycos Finance - get stock quotes and streaming LiveCharts.

* CNN/Money - combines practical personal finance advice, calculators and investing tips with business news, stock quotes, and financial market coverage.

* PC Quote Online- free delayed and real time quotes and charts and news covering stocks, futures, options, and mutual funds.

* BigCharts- stock charts, screeners, interactive charting and the latest breaking news from the markets.

* MSN Money- investing, investment tools, business market news, headline news, articles, reports, stocks and quotes, message boards, and a stock ticker.

* INO.com- futures, stocks, FOREX, options quotes, charts, and news for futures and options traders.

* ADVFN- free stock quotes, stock charts, market news and live stock charting tools.

* eoddata.com- free end of day stock market data and historical quotes for many of the world's top exchanges including NASDAQ, NYSE, Toronto, FTSE, SGX, HKSE, and Paris.

* Reuters.com- provides stock information including, stocks, stock quotes, stock investment strategies, and key company developments.

* TradingCharts- source for free quotes and charts - over 30000 stock market, commodity futures, and forex price charts and quotations.

Producing the necessities of the bathroom and other everyday items, Procter and Gamble (PG) continues to be an excellent investment in all areas. With marginal competition and loyalty from its workers, PG will provide investors with an excellent opportunity to achieve high capital gains.

Elusive to negativity, Procter and Gamble continues to follow its high respectability with its amazing fundamentals presented each quarter. Over the last four earning reports PG had beat expectations in terms of EPS all four times and beat revenue estimates each time as well. The laud extends to the PG’s excellent margins in terms of revenue, profit, and operating margins, and especially there should be high praise for PG doubling the amount of total assets over one year for this flourishing company. The P/E remains solid at around 23 which is supported for some reluctant investors with a great dividend payout of 1.24.

PG also has the reputation of providing long term investors with a steady persistent growth without too much volatility. While PG did falter a bit during late 2000 to 2001, the situation remained dubious for all equities of all sectors. However, unlike some of these other equities, PG remained resilient and in a matter of a few years returned back to its record high of near 65 points: an almost 100% increase over about five years.

With an inevitable recession approaching in the coming months, stocks like PG, equities that rise during times of economic downturns, tend to be the best acquisition for investors wagering this storm. While some investors may argue that PG is at an all time high and may be reluctant to purchase shares at such a price, I would make the argument that because of the economic problems the country is facing, the excellent fundamentals that PG provides, and the incredible steady nature which is advocated for long term investors, PG should have no problem being bought by big institutions in the future. Such a sentiment will do nothing but increase capital gains for consumers who hold or even buy PG at such a high price.

A stock split occurs when a corporation decides to issue new stock and distribute it to it's current stockholders. This is a decision made by the company's board of directors.

The most common stock split is a 2 for 1 split. When this happens the stockholder will now own twice as many shares as before the split but at half the price. The total value of your stock does not change. For instance, if you owned 100 shares before the split and the price was $50 a share, after the split you would own 200 shares at $25 a share. After the split the shareholder owns exactly the same percentage of the company as before the split, only the number or shares and share price has changed.

While a 2 for 1 split is the most common, companies also distribute 3 for 1 splits, 3 for 2 splits, 5 for 1 splits, etc.

Why does a Company Split their Stock?

Companies will split their stock when they feel that the share price has grown to the point that it will no longer be considered affordable by many investors. Since most stock transactions are in round lots (lots of 100 shares), the total cost for 100 shares might be out of reach for some investors. Once a stock price hits $100 a share, for instance, evidence shows that many investors consider it to be too expensive. If the price per share were reduced it would be more affordable. The effect of more people buying the shares will hopefully lead to a price gain. What effect does a Stock Split have on the Share Price?

When a company splits it stock it sends the message that the company has been profitable and it will probably continue to prosper. Companies normally announce their upcoming stock split some time in advance. Many investors and traders search for these companies and consider them prime candidates for a further price increase.

In theory a stock split should have no impact on the value of the stock, it should be a neutral event. The only thing that has changed is the share price and number of shares. When you do the math you still have the same value and the same percentage of ownership in the company. In practice however, companies who split their stock most often see price increase when the split is announced or after the split actually occurs. The company knows this and is eager to see it's stock price increase.

Reverse Split

Sometimes a company will issue a reverse split. When this happens the shareholder will have less shares at a greater price. For example, a typical reverse split is a 1 for 10 split. For example, if a company has been trading at $1 a share and you have 100 shares, after a 1 for 10 split you will have 10 shares at $10 a share. A company might perform a reverse split when their share price has dropped to a very low level and they want to increase the share price to appear more respectable to potential investors. In addition, some exchanges will de-list a stock when the price drops below a certain level for 30 days.

I'll give you the short answer first!

Stocks go up because more people want to buy than sell. When this happens they begin to bid higher prices than the stock has been currently trading. On the other side of the same coin, stocks go down because more people want to sell than buy. In order to quickly sell their shares, they are willing to accept a lower price.

Having said this, we'll take a look at the various reasons that cause traders to want to buy or sell a stock.

It is possible to look at the financial statements of a company and determine what the company is worth. Investors who take this approach are said to examine the company's "fundamentals". They attempt to find an undervalued stock - one that is trading below it's "book value". They feel that sooner or later other traders will realize that the company is worth more than the current price and begin bidding it up.

Another investment psychology it called the "technical approach". This is when traders closely examine charts of the stock's past performance looking for trends that they feel will be repeated in the near future. These traders also look at what is happening in the market as a whole trying to anticipate the effect it will have on an individual stock.

Sometimes companies trade at half their "book value" while at other times they may trade at double, triple, or even higher. When this happens it can create some sudden and large price swings. This volatility is what makes it possible to make large profits in the market. It is also responsible for huge losses.

The stock market is essentially a giant auction where ownership of large companies is for sale. If some investors think that a particular company will be a good investment, they are willing to bid the price up. By the same token, when many investors want to sell a stock at the same time the supply will exceed the demand and the price will drop.

Watching the stock market can be likened to watching a ball bounce. It goes up and comes down and then goes right back up. This can be extremely frustrating for many investors who want it to go up in a steady pattern. It is this volatility in the market as a whole and in the individual stocks that the experienced trader profits from. In the absence of a lot of experience, the individual investor needs a proven source of information and direction. The daily stock market recommendations from www.stock4today.com can supply this need.

Many investors (as opposed to traders) have a "buy and hold" philosophy. This would work well in a constantly rising market. Unfortunately, the stock market does not go up in a straight line. There are ups and downs that frustrate this type of investor. Today many investors have become "traders" who buy and sell on the fluctuations of the market and the individual stocks. These traders make money in any market - up or down!

Another well known investment site www.fool.com lists the following reasons for stocks going up and down: Why Stocks Go Up

* growing sales and profits

* a great new president hired to run the company

* an exciting new product or service is introduced

* more exciting new products or services are expected

* the company lands a big new contract

* a great review of a new product in the press or on TV

* the company is going to split its stock

* scientists discover the product is good for something else

* some famous investor is buying shares

* lots of people are buying shares

* an analyst upgrades the company, changing her recommendation from, for instance, "buy" to "strong buy"

* other stocks in the same industry go up

* a competitor's factory burns down

* the company wins a lawsuit

* more people are buying the product or service

* the company expands globally and starts selling in other countries

* the industry is "hot" -- people expect big things for good reasons

* the industry is "hot" -- people don't understand much about it, but they're buying anyway

* the company is bought by another company

* the company might be bought by another company

* the company is going to spin-off part of itself as a new company

* rumors

* for no reason at all

Why Stocks Go Down

* profits slipping, sales slipping

* top executives leave the company

* a famous investor sells shares of the company

* an analyst downgrades his recommendation of the stock, maybe from "buy" to "hold"

* the company loses a major customer

* lots of people are selling shares

* a factory burns down

* other stocks in the same industry go down

* another company introduces a better product

* there's a supply shortage, so not enough of the product can be made

* a big lawsuit is filed against the company

* scientists discover the product is not safe

* fewer people are buying the product

* the industry used to be "hot," but now another industry is more popular

* some new law might hurt sales or profits

* a powerful company enters the business

* rumors

* no reason at all