Predicting the stock market has always been a fascinating science. It can be done in different shapes and forms. Here are a few:

1. Stock Market Prediction based on Gurus

We see a lot of them on TV. Many seasoned traders and brokers appear on financial TV channels, and by using either fundamental analysis, technical analysis, or both, predict the move of a certain stock, whether for the next week, month or even for a longer term period. Even though these predictions can be used for long time investors, short term traders normally use personalized tools to predict the next movement in a particular security.

2. Stock Market Prediction based on Fundamental Analysis

Fundamental analysts scrutinise the company pertaining to the stock which they are going to trade. They get all the possible data figures for that company, they enquire on the directors and main shareholders, learn on the products or services they produce, keep a constant eye on news, not only financial, but information pertaining to their line of business, and more. Based on this information, analysts predict the stock movement for the next few days, weeks or months.

3. Stock Market Prediction based on Technical Analysis

Technical analysts look at charts, they draw trends on the chart by joining low points with high points, they insert formulas which produce various calculations based on past highs, lows and volumes. Lines can be drawn determining support and resistance levels. These are the basis of predicting a stock price based on technical analysis. Many times information like company dividends, news and directors are of no value to technical traders.

4. Stock Market Prediction based on Software Training

Predicting the stock market with state-of-the-art software is a possibility today with all the advances in technology. Some stock market software packages have the possibility to import data for the past weeks, months or years of a security, and based on specific formulas and equations, using complex algorithms, can train themselves on this data and on the movement of the stock price. The result of this is the prediction of the future price of the stock. Normally these packages work on technical information, but some are now also introducing fundamental analysis as part of this training and prediction process.

5. Stock Market Prediction based on Momentum

Many day traders use what is called ‘Level 2’ data to base their trades. While the stock market is open, the trader can see a list of buying orders on one side and a list of selling orders on the other side. Price and volume are shown, together with other information, from which seasoned traders gauge the momentum of the stock and take short term trades, normally lasting only a few seconds or minutes, to profit from a sudden change of price.

Successfully predicting the stock market, or even, one security, is a must for every trader. Success or failure depends on this. One needs to gain as much knowledge as possible on all possibilities available, and when one is comfortable with a pre-tested and working system, that system can be used as the basis on which to invest or trade in the stock market.

The stock market offers various opportunities for trading. Apart from the main securities, which one can trade on various exchanges like the New York Stock Exchange and Nasdaq, there are other forms of trading like forex trading, currency trading and ‘contracts for difference’ also known as CFDs.

Stock market trading normally involves opening a trade by going ‘Long’ (buying) or going ‘Short’ (selling). The later has been possible through the last few years. One can today ‘sell’ a stock with the aspiration that the stock goes down and buy it cheaper at a later time, thus making profit as a result of the diminishing of the stock value.

Greed and Fear Stock market trading can be very profitable but if not mastered correctly can lead to heavy losses and the loss of ones own capital. Various psychological factors can affect the way one trades. The most predominant ones are ‘greed’ and ‘fear’. Greed kicks in when your system directs you to exit a trade but rather than exiting, one remains in the trade with the hope of closing the trade at a better price. On the other hand, fear is also a very dangerous factor which can lead to exiting trades when the time is not right, or exiting trades too early.

The best way to keep these feelings away is only one – follow your system vigorously. In order to fully trust a system, it would first need to go through a lot of testing in order to seed in one’s mind the thought that the system works and is completely reliable. It is only when one is convinced of this that when the feelings of ‘greed’ and ‘fear’ rise, they are controlled and ignored.

CFD Trading
One very interesting way of trading is CFDs (contracts for difference). Rather than buying and selling the actual shares, one would enter into a contract with a broker to buy or sell a particular share at an agreed price. The price would still be the market price at the current time, and the speed of transactions is similar to the speed of actually trading the shares, i.e. a few seconds. One of the advantages of CFDs is ‘trading on margin’. Some brokers offer very competitive margins where, for example, with a capital of $20,000, one could trade shares for a total of $100,000. This can be very dangerous and is only advised to the professional market players.

Technical Analysis
Hundreds of technical tools exist for traders. Various software systems can display a stock’s chart in real time, enabling you to draw trending and trading lines, include calculations like moving averages and ratios, and some can even predict the price based on a combination of factors and previous training and testing cycles.

Charts
Charts are a must for most stock traders. A chart tells the story much more than words do. By looking at a chart, a professional trader can diagnose the condition of a particular stock, just like a doctor does with his patient. Adding some analysis tools to a chart can further help in understanding what is going on with a particular stock.

On charts one can determine whether a stock is overbought or oversold, whether a stock is reaching a support or resistance level, is heavily in demand and short of supply or vice versa. As a result of these factors and many others which one can include in a system, a decision to buy, sell or exit trades can be taken.

It is not easy to start trading on the stock market when you have no financial background at all. It shouldn’t be difficult to prosper, though, if you follow certain guidelines. Being organized and disciplined are two very important factors in this business. Don’t let all the information you gather confuse you. Make sure important decisions are taken before you start risking your money.

Decision 1 – Investing or Trading?
The answer to this decision can be found in the type of person you are and the time you intend to dedicate to the stock market. Here is a guideline that should help you understand the type of investor or trader you can be.

Type: Long/Short term investor
Hold Period: Months to Years
Time Required: A couple of minutes every week
Being an investor is different from being a trader. Investing can be done through a broker and shares bought can be kept for a long period of time. Daily market fluctuations are not really your problem and the time required to check your investments is really minimal.

Type: Swing Trader
Hold Period: Days to Weeks
Time Required: A couple of minutes every day
Swing traders normally buy and sell shares every week, with the intention to hold to their positions for only a couple of days, sometimes a week or two. Being a swing trader, more time is required in front of your computer, or on the phone with your broker, and the profit is made as a result of a move in a stock that occurs in a short period of days.

Type: Day Trader
Hold Period: Minutes to Hours
Time Required: Several hours every day
Being a day trader is the ultimate in stock market trading. This requires a good setup which should include a PC with a couple of monitors, and a fast internet connection. Day trading is not for everyone, but if mastered could be the most profitable form of buying and selling shares on the stock market.

Decision 2 – Fundamental or Technical?
Buying or selling a stock should always be a result of a trading system already in place. If not, that is where trading becomes gambling. A trading system can be either based on news and figures related to a particular stock, known as ‘fundamental trading’, or one could have a system based on charts and analysis of the stock, known as ‘technical trading’. A combination of the two can also exist, but normally traders tend to stick to either one or the other system.

Again, this decision is also based on the type of person you are. If you are a person who likes watching news every day and don’t find problems in getting to know all there is to know on a particular stock, getting to know about the company, its directors, what they really do, their products and services, then trading based on fundamental analysis could be for you. If on the other hand, you prefer working with charts and software that can be used as a technical tool, as well as back-testing systems, then you would probably feel much more comfortable trading the technical way.

Beyond the decision
Whatever decision you take, one of the most important aspects of trading is to stick to your system and your plan. Don’t improvise during market hours. If your system is not trading profitably, you can always go back and see what’s wrong at a later time when you are not trading.

While picking exchange-traded funds for you global portfolio, have you ever thought; “maybe I should invest in the companies that develop and sponsor the ETFs?” If so, now is the time to take a stake in Barclays PLC the sponsor iShares which is the largest family of ETFs.

Barclays PLC (BCS) is a huge global financial services firm with 114,000 employees and Barclays Bank is the flagship subsidiary that traces its roots back to the 17th century. It is the second largest bank in the UK servicing 14 million consumers and 600,000 businesses. This is a cash-cow business and the business bank profits have grown more than 20% annually since 2001. The bank is also active in France, Italy, Portugal and Spain as well in Asia and the Middle East.

A related business is Barclaycard which is Europe’s biggest credit card issuer and accounts for about 13% of the groups total profits. Barclaycard issued the first credit card in the UK in 1966. Then there is the dynamic investment banking arm Barclays Capital which accounts for 23% of profits. This group focuses on debt and is getting stronger in Asia and emerging markets.

Now we come to the founder of iShares and second largest money manager in the world, Barclays Global Investors (BGI) that has operations in 47 countries and relationships with 2,500 clients. BGI created the first index strategy in 1971 and the first quantitative index strategy in 1978. Then came the creation of iShares in 2000 which ignited the ETF revolution in investing. I say revolution because iShares ETFs capitalized on and combined three major developments in 20th century investing: the growth in the popularity of common stocks, then mutual funds and finally indexing.

With more than 100 ETFs on the market iShares has garnered the majority of the ETF business and shows no signs of sitting on its lead. BGI now has more than $1.5 trillion under management and contributes 10% to Barclays bottom line while a sister group handling wealth management adds 3%. BGI now offers more than 111 iShares ETFs totaling $207 billion assets under management. In May, 2005, it added ten new subsector ETFs.

Just last week Morningstar raised its target price for Barclays PLC ADR (BCS) to $59, a nice premium to its current share price of $46 price. They estimate that the 20% return on equity for 2005 will rise to 24% and that operating profit will grow at an annual 12% clip through 2010.

There are many mutual funds and ETF on the market. But only a few performs results as good as s&p 500 or better. Well known that s&p 500 performs good results in long terms. But how can we convert these good results into money? We can buy index fund shares.

Index Funds seek investment results that correspond with the total return of the some market index (for example s&p 500). Investing into index funds gives chance that the result of this investment will be close to result of the index.

As we see, we receive good result doing nothing. It's main advantages of investing into index funds.

This investment strategy works better for long term. It means that you have to invest your money into index funds for 5 years or longer. Most of people have no much money for big one time investment. But we can invest small amount of dollars every month.

We have tested performance for 5-years regular investment into three indexes (S&P500, S&P Mid Caps 400, S&P Small Caps 600). The result of testing shows that every month investing small amounts of dollar gives good results. Statistic shows that you will receive profit from 26% to 28.50% of initial investment into S&P 500 with 80% probability.

We must note that investing into indexes isn't risk-free investment. There are results with loosing in our testing. The poorest result is loosing about 33% of initial investment into S&P 500.

Diversification is the best way to reduce risk. Investing into 2-3 different indexes can reduce risk significantly. Best results are given by investing into indexes with different types of assets (bond index and share index) or different classes of assets (small caps, mid caps, big caps).

Half of all the households in America invest in mutual funds. For most people mutual fund investment is better than keeping money in the bank. Mutual funds are companies that invest money in stocks, bonds and other securities. When you buy mutual funds your money is a portion of the holdings of the fund. Make money in Mutual funds in a sure and safer way rather than following the swings on Wall Street.

Not all mutual funds have delivered and putting your money in a mutual fund does not necessarily give you good returns. How can you make money from mutual funds?

• Income from mutual funds is earned from dividends on stocks and interest on bonds.

• If securities have increased in price and the fund decides to sell the securities, then the fund has made a capital gain which it passes on to its investors.

• The mutual fund holds shares and if these shares have increased in price. You can sell your mutual fund shares for a profit.

• You could reinvest your earning and get more shares as well.

• Mutual funds is a long term investment option

Is Mutual Fund investment a good option?
Get to know mutual fund basics and invest in the best mutual funds and your investment is a wise one. Why are mutual funds safer than stock market? Since the money of the fund is diversified the risk of the company is less. Even though gains in some investments are minimized due to losses in others they still stand to gain in transaction costs as it is for large amounts of securities. The good about mutual funds is that you do not have to follow the prices of stock and get worried about loss. Liquidity is also there since you can convert your shares into cash at any time. Many banks have their own mutual funds and a small investment of $100 on a monthly basis can reap good rewards. On going yearly fees and transaction fees are the costs that eat into your mutual funds profits. Fees for the sales persons and brokers also eat into your funds. These are called loads. There types of loads are front end loads and back end loads. So it is best to choose a fund with no loads.

Types of mutual funds
Each fund describes its investment objective. Since it is predetermined you can choose whether to invest in it or not. Each All mutual funds are variations of three basic classes.

• Equity Funds invest in stocks

• Fixed-income funds invest in bonds

• Money Market funds are diversified

Equity funds require a long term capital growth with some income. The best returns can be understood by the companies invested in. Large cap companies are the safest equity investments.

Bond/Income funds give you higher returns but are risky if they are not invested in government securities. Also another factor is the high inflation risk which brings down the profit on your investment.

Money market funds are investments mostly in treasury bills. This is a safe investment option. Your returns may be twice that offered by banks, though not much your principal is safe. Other varieties of mutual funds are

• Growth funds are the investment in the equity of fast growing companies.

• Specialty funds are the investment in equity of companies that are of the same sector or region.

• A balanced fund is a combination of fixed income funds and equity funds. Asset allocation fund has objectives similar to that of a balanced fund.

• Socially responsible funds do not invest in industries such as tobacco, alcoholic beverages, weapons or nuclear power. Maintaining a healthy conscience is a criterion of this fund.

Penny Stocks.

Even the name of them hints at the promise of something for nothing!

Spend a Penny - get back one, two, ten dollars!!

Penny Stocks investing is one place and time where you MUST leave your emotions at the door and become utterly 'Spock' like.

Spock like?

Yup - use pure logic! No emotions.

See, you need to always keep in mind that these penny stocks are companies starting out in the business world, not the big dogs trying to make another penny. They aren’t necessarily bad investments, but they aren’t good enough to get an investment banker’s money in an IPO.

Be realistic about penny stocks and realize that you won’t find the next tremendously big thing here, but you can find some exciting opportunities with good work.

So what to look for, what are the signs that would indicate a Penny Stock investment worth considering?

• A consistently high volume of shares that are actually being traded is one thing that you should definitely look for in a penny stock investment. But be careful here, because it's possible to skew the results of average volume trading, go with the consistent volume to get a good idea of what the stock will provide as an acceptable rate of return. Also, make sure the liquidity of the penny stock is something you make a note to look at, how many people are selling and buying everyday? Don’t end up being left with “dead money”, effectively money that you can only release by selling the penny stock at the bid (dumping, in other words) and losing money because the price is diving.

• The company’s profitability is also very important. If it is a start up company that is running a loss then see why they are losing money. It's not at all uncommon for this to happen but you need to assure yourself that they can manage it and turn it around or will they continue to struggle and lose money for your future. If they grow then your investment grows. Try and make time to do some in depth research to find the right companies and find the best return you can get for your dollar. The more diligence you put in at the beginning - the more profit you look to take out at the end.

• Understand the danger of penny stocks, the speed within which they can and normally do rise and fall in value. Always create an exit plan on any investment (i.e. knowledge of "at what price you sell the stock regardless"), have a solid plan on where to start and make sure it includes where exactly to finish. If you buy a stock and make a 20% return on investment then you are doing extremely well. Do it right five times and you are in the money, wrong five times and you may very well be done. Listen to what the market is telling you, if it is time to get out, then get out. (No emotions, remember Spock!!)

• Place some confidence in how you found out about the stock only if that source warrants your confidence in the first place. If it was in a mailing list then who, where, and when did you get it - and more importantly, WHY?? What's the connection of you and the sender / recommending party. Nothing? Bin it! trust me - gifts of that nature don't happen, ever!

I get an average of 10 emails a day with "stock tips" I'd be a fool to ignore! So I do, 'cos I'm a fool.

Oh looky, super hot tip number one has just plummeted, crashed and burned. Shucks, and I was just about to invest in it - NOT!!

Some are real and reliable updates and advices whilst others (most others) will attempt to "pump and dump" to make money off of the innocent.

Don’t be caught in the middle of someone pumping the stock, and then dumping its shares to unwitting subscribers. Subscribe to a newsletter and then track their investment. If they are legitimately making money then they are probably safe, if not, then it is time for you to move on to the next possibility.

As investors, and we all are investors these days, it is important that we understand the idiosyncrasies of the Stock Market pricing data we use to help us in our decision making efforts. On Wall Street, investing can be a minefield for those who don't take the time to appreciate why securities prices are at the levels that appear on quarterly account statements. At least four times per year, security prices are more a function of institutional marketing practices than they are a reflection of the economic forces that we would like to think are their primary determining factors. Not even close... Around the end of every calendar quarter, we hear the financial media matter-of-factly report that Institutional Window Dressing Activities" are in full swing. But that is as far, and as deep, as it ever goes. What are they talking about, and just what does it mean to you as an investor?

There are at least three forms of Window Dressing, none of which should make you particularly happy and all of which should make you question the integrity of organizations that either authorize, implement, or condone their use. The better-known variety involves the culling from portfolios of stocks with significant losses and replacing them with shares of companies whose shares have been the most popular during recent months. Not only does this practice make the managers look smarter on reports sent to major clients, it also makes Mutual Fund performance numbers appear significantly more attractive to prospective "fund switchers". On the sell side of the ledger, prices of the weakest performing stocks are pushed down even further. Obviously, all fund managements will take part in the ritual if they choose to survive. This form of window dressing is, by most definitions, neither investing nor speculating. But no one seems to care about the ethics, the legality, or the fact that this "Buy High, Sell Low" picture is being painted with your Mutual Fund palette.

A more subtle form of Window Dressing takes place throughout the calendar quarter, but is "unwound" before the portfolio's Quarterly Reports reach the glossies. In this less prevalent (but even more fraudulent) variety, the managers invest in securities that are clearly out of sync with the fund's published investment policy during a period when their particular specialty has fallen from grace with the gurus. For example, adding commodity ETFs, or popular emerging country issues to a Large Cap Value Fund, etc. Profits are taken before the Quarter Ends so that the fund's holdings report remains uncompromised, but with enhanced quarterly results. A third form of Window Dressing is referred to as "survivorship", but it impacts Mutual Fund investors alone while the others undermine the information used by (and the market performance of) individual security investors. You may want to research it.

I cannot understand why the media reports so superficially on these "business as usual" practices. Perhaps ninety percent of the price movement in the equity markets is the result of institutional trading, and institutional money managers seem to be more concerned with politics and marketing than they are with investing. They are trying to impress their major clients with their brilliance by reporting ownership of all the hot tickets and none of the major losers. At the same time, they are manipulating the performance statistics contained in their promotional materials. They have made "Buy High, Sell Low" the accepted investment strategy of the Mutual Fund industry. Meanwhile, individual security investors receive inaccurate signals and incur collateral losses by moving in the wrong direction.

From an analytical point of view, this quarterly market value reality (artificially created demand for some stocks and unwarranted weakness in others) throws almost any individual security or market sector statistic totally out of wack with the underlying company fundamentals. But it gets even more fuzzy, and not in the lovable sense. Just for the fun of it, think about the "demand pull" impact of an ever-growing list of ETFs. I don't think that I'm alone in thinking that the real meaning of security prices has less and less to do with corporate economics than it does with the morning betting line on ETF ponies... the dot-coms of the new millennium. [Do you remember the "Circle of Gold" from the seventies? Isn't GLD, or IAU, about the same thing?]

As if all of these institutional forces weren't enough, you need also consider the impact of tax code motivated transactions during the always-entertaining final quarter of the year. One would never suspect (after watching millions of CPA directed taxpayers gleefully lose billions of dollars) that the purpose of investing is to make money! The net impact of these (euphemistically labeled) "year end tax saving strategies" is pretty much the same as that of the Type One Window Dressing described above. But here's an off-quarter buying opportunity that you really shouldn't pass up. Simply put, get out there and buy the November 52-week lows, wait for the periodic and mysterious "January Effect" to be reported by the media with eyes wide shut amazement, and pocket some easy profits.

There just may not be a method to actually decipher the true value of a share of common stock. Is market price a function of company fundamentals, artificial demand for "derivative" securities, or various forms of Institutional Window Dressing? But this is a condition that can be used to great financial advantage. With security prices less closely related to those old fashioned fundamental issues such as dividends, projected profits, and unfunded pension liabilities and perhaps more closely related to artificial demand factors, the only operational alternative appears to be trading! Buy the downtrodden (but still fundamentally investment grade) issues and take your profits on those that have risen to inappropriately high levels based on basic measures of quality... and try to get it done before the big players do. To over simplify, a recipe for success would involve shopping for investment grade stocks at bargain prices, allowing them to simmer until a reasonable, pre-defined, profit target is reached, and seasoning the portfolio brew with the discipline to actually implement the profit taking plan.

Many people who have traded have heard how important your psychology, or mindset is to your trading success. Books have been written, entire seminars presented and numerous tea breaks at traders club meetings across the world are devoted to the subject of the ‘psychology of trading’. Many traders would argue, I included, that your mind is the largest part of your overall trading success.

I always wonder however, how many people truly understand what it is they mean when they talk about it and its relationship with trading. In reality, your mindset controls anything you do and consequently, any endeavour you undertake. Trading is no different and it could be argued that it is even more applicable in trading as your money is involved, and that triggers many other emotions inside of us.

Numerous examples that confront the mind and our natural emotions include wanting to be right all the time and getting our own way, having our opinion matter and having some influence and control over what happens. In trading, these natural thoughts within many of us will place us in a position of disadvantage. These are just some examples of why our mindset and preparing our mind is so important to our overall success.

Furthermore, you would have thought previously about why some people are so successful in life and others are not. How many books have been written about having a positive attitude and taking action towards your goals? There is, and always has been, a single ingredient that separates people who are successful in life from people who are not. It is the mind and how we use it. Many people live their lives with an endless series of "what if" questions that they ask themselves.

An activity I will perform when I speak to a large group of traders about the mindset involves asking for a volunteer. I would have spent the last 10 minutes or so explaining how traders must often ‘think outside the box’. In other words, don’t think and act upon natural thoughts … think beyond normal thought. I say to the group, “OK, for my next session, I need the assistance of a volunteer from the audience just for a few minutes. Can someone come up here and join me please?” When I say this, I make sure that I look down at the floor and don’t make eye contact with anyone.

After asking, I continue to avoid eye contact with the audience as I pretend to fiddle with my notes or have a drink of water. About 15 seconds pass and no one has made a move. I then look up at the audience and again, I ask for a volunteer for my next session. The atmosphere begins to become slightly awkward as the people in the audience begin to wonder whether my next session will go ahead without a volunteer presenting themselves. I stand there and wait, not saying anything but still determined to wait long enough until someone volunteers. Almost out of pity, someone will inevitably stand up and declare themselves the volunteer and make their way to the front to join me.

As they join me and I introduce myself to them, I provide them a copy of my book with my compliments, thank them for volunteering and then ask them to return to their seat. Often the person will then receive a round of applause as he makes his way back to his seat. This simple activity illustrates how the vast majority of us are perfectly happy in our comfort zone. When I ask for someone to come up in front of everybody else and therefore expose themselves to the possibility of embarrassing themselves, everyone feels uncomfortable and hopes that I don’t look directly at them. Therefore, nobody wants to take action. Yet, to trade successfully and master the trader’s mind, we need to be prepared to think beyond natural thoughts and subsequently take action based on those thoughts.

You know it’s absolutely crazy. Every time you think you understand the stock market, something comes up that makes you wonder whether there is any sanity in it at all.

I mean, just take a look at the way the DOW has been behaving of late. One would be forgiven for assuming that the market has been taken hostage by a bunch of aliens, aiming to wreak havoc on our investments!

It would seem that no sooner does the DOW Jones recover from a bad day’s trading it swings back into a disastrous trading the following day. And these wild swings appear to have spread to other major indices as well.

Exactly what is one to do under such circumstances and how do you protect your investments from being completely wiped out?

Well there appear to be two schools of thought as far as this is concerned and depending on your risk appetite you can determine which way to go.

The first school of thought is, move with the market, whichever way it goes. In other words, buy when the market is generally moving up and sell when the market is generally moving down

In this case short selling of stocks would be the route advocated by this school of thought. This is good advice if you actually know how to do so and have the expertise to come out ahead.

It is however a disastrous route to go, if you have no experience in this process, as it could quite easily result in complete loss of investment.

The second school of thought suggests that if the market is this choppy and undecided, then this is the time to move into cash and stay there. In other words if you imagine the market as a bad storm, you need to take cover until the storm is over and calmer weather returns.

Frankly, rather than try and be a hero, I think the second school of thought is far more appealing and sensible for the average investor. I would rather not make any huge returns, but have my capital investment safe, than put it to risk and which it gets wiped out on investment methods that I do not fully understand how to execute.

Put another way, when the going gets tough, then the tough (wise) move to cash at the earliest opportunity. So ask yourself, are you going to try and remain wise, or do you want to risk being a directionless hero? The choice is yours, but I know what I’m going to be doing.

Today, computers and trading software make it so easy to access information from almost anywhere. Never before have so many people had useful tools readily available to them at their fingertips.

I believe this situation presents a problem for a lot of people, in that they try to overcomplicate matters that don’t need overcomplicating. With the features of some charting software, people will try and write formulas to identify the most bizarre and complex things.

I once had a client present his entry signal to me which I estimated took 10-15 minutes to do so. After two minutes of listening, I am already starting to shake my head inside. It included things like, “well, I wait for that indicator to cross that one and then … “ and “now if that indicator is still below 50 for the next 3 days and that indicator doesn’t cross above that one … “ and how about “must cross over that blue line at an angle of more than 45 degrees … “ and the explanation goes on and on.

I believe that people have a tendency to complicate matters where in most instances a simple solution will be more than adequate - our entry signal when trading is no exception. As mentioned, some examples I have heard involve numerous indicators crossing each other at various angles and changing colours and all sorts of trivial conditions. In these cases, if I was to take their notes away from them, they wouldn’t be able repeat 20% of their entry signal. This is a concern.

Generally, two big problems that traders face are not having a trading plan and if they do have one, not following it. There is no need to complicate things beyond simple comprehension. One thing I have learned about trading plans, is that the easier it is to understand, the more likely you are to follow it.

People have been trading various types of markets for hundreds of years – and making money doing it. It wasn’t too long ago that a computer was not common place in every home as we find it today.

Computers were once restricted to people wearing white lab coats and they filled up entire rooms accompanied by the deafening noise of cooling fans whirring away. In these days, hand drawn charts with few if any technical indicators were used. Yet, despite this, people still made money trading. They followed the rules that have stood the test of time.

So, if people at the beginning of the 20th century were profiting from speculation in a market, yet they didn’t have access to a PC, charting software, various technical indicators and customized lines covering a chart, clearly having these tools is not an absolute must, nor even necessary. No doubt, they are useful tools today and many people enjoy the benefits of them but they are not the most important ingredient to your success – they are not even close.

I believe a lot of people think that the more time that can spend developing and refining their entry signal, the better off they will be – sometimes to the detriment of more important areas.

How do we fix this? The important point to be made here is to focus. Focus on the right things and the things in your trading plan that are important. As an example, several years ago, a colleague and I were running a full day course where we both presented on different topics throughout the day and the attendees could decide which presentations they attended. As the day started, the group split themselves quite evenly to listen to the two separate presentations. This even split continued throughout the morning as people moved between the two seminar rooms between breaks and maintained a fairly even split.

After lunch, the first two presentations were on industry sector analysis and money management. The group split themselves up again however this time, 80% of the people went into the seminar room for the presentation on industry sector analysis and the remaining 20% entered my seminar room for my presentation on money management. Before I started my presentation, I said to my attendees that this is another reason why most traders fail. 80% of the group thought that industry sector analysis was more important than money management and therefore decided to listen to that presentation. There are not too many more important things than money management and industry sector analysis, which was designed to help them with their entries, is certainly not one of them.

The lesson here is to focus on the right things. Don’t focus too much on your entry signal, as most people do. Keep it simple and then move onto the more important areas like position sizing, setting exits and preparing your mind for successful, disciplined trading.

Openwave Systems Inc. provides Communication Service Providers (CSPs), including wireless and wireline carriers, Internet Service Providers (ISPs), portals, and broadband providers worldwide, with the software and services they need to build boundary-free, multi-network communications services for their subscribers.

Openwave has a very unique and valuable business in the wireless data market. It has a dominate market share of 50% in both the browser and in the gateway transitions for mobile phones. Both products are a core element in the data cell phone market.

Our philosophy is to own the critical elements in markets that appear to have revolutionary growth. In January 2004 we wrote an article saying the wireless revolution has begun. Today based on very recent guidance from Texas Instrument (NYSE:TXN) Qualcomm (NASDAQ:QCOM) and other third party data it appears that wireless data market is actually accelerating. That appears opposite common wisdom judged by the way the world equity market and Openwave stock is trading for the last month. Usually revolutionary growth acceleration is misunderstood. I believe that robust growth from wireless data will catch many people by surprise when it is fully recognized.

The browser and the gateway business are key’s to Openwave's success. Again it is our philosophy to own critical monopolistic elements inside an industry. We often equate our philosophy to a roof over your head and the gutter that controls the flow of water. Most water when it rain will land on a shingle but will collect in high volume in the gutters. Thus a single gutter can control as much water as all the shingles combined. This model of finding the essential elements or monopolist companies, judged by the many top rankings awarded to us by third party profession indicates a very successful approach.

In wireless data market the gateway and the browsers form what we believe are that critical element in the industry with Openwave a dominate position in both those markets. This dominance of the critical element/monopoly creates a natural mote or barrier as Openwave is in a better position to bundle, integrate, and test its products, thus become a natural extension of their browser and/or gateway for every new service they enters. This bundled approach as Microsoft has proven over time not only has a higher comfort advantage for it’s users but also often could be produced at a far lower cost which the phone companies enjoy. These many economies of scale of a dominate player is attractive to the phone companies when they are both reviewing new or existing services. Put yourself in the place of a large carrier do you want to work with a new firm, with no proven history which would include additional integration, testing, billing plus on going maintenance or would you prefer an existing firm to increase their service or possibly just bundle the service into a existing product. That’s why it’s very hard for new wireless firms to make a presence in the wireless data market and the more established companies to consolidate when newer wire data services form.

It appears industry wide that the consolidators including Comverse Technology Inc. (NADSAQ: CMVT) and Amdocs Ltd. (NYSE:DOX) appear to have advantage over many newer companies. Both of those companies specializes more on the back end. The higher growth market for phones will be with the data services and in my opinion Openwave is the best positioned as the industry continues to consolidate.

About 60% of Openwave quarter is already booked not including about an addition 10% is pay as you go. That means Openwave needs about 30% of addition new revenues in the quarter. That indicates that Openwave has far smaller hurdle rate than most companies. The data supports that the number of new data phones growing combined with the rising usage of each phone with no new major competitive threats entering the market the probability of carriers to reorder is increasing.

Openwave's high valued license revenues.

Last quarter Openwave reported that licensing revenues was over 50% of total revenues and it had 97% gross margins. The licensing revenues make up over 70% of Openwave's gross profit. Understanding Openwave's business model is very simple if the licensing long term grows so will the profits so if licensing long term declines so will the profits.

One of the things that separates successful traders from the majority of market participants is that they have a detailed plan that guides them when to close trades. For them, this is essential. It is fair to say that when a lot of traders buy shares they have little idea of under what conditions they would consider selling. It would also be fair to say that a fair percentage of market participants routinely adopt a ‘buy and hold’ approach.

Whilst trading routinely involves decision making, there are no more important decisions you have to make than when to sell shares. Many traders often overlook this part of trading or underestimate how important that it is.

Importantly, the outcome of every trade is dependent on the exit. If you enter in a timely manner and then exit poorly, the trade could very easily be a loss. If your entry happens to be poor but your exit is good, you might actually still salvage a profit, or at the worst, minimise a loss. The exits, and not the entries, determine the outcome of your trades.

Any form of backtesting will illustrate this point. You can take an entry signal but combine it with different exit strategies. You will quickly discover that you can drastically affect the overall results with only minor adjustments to the exit strategy.

It could be argued that you cannot even conclude that a particular entry signal is effective because the final results are so dependent on the exit strategy used. Bad exits can make a good entry look bad and good exits can make a bad entry look good.

Selling shares is probably the most difficult decision you will face but it is the most important. The decision is especially difficult when you are faced with a loss and all you want to do is wait for the shares to return to your buying price. The situation is made worse when the shares continue to move away from you, making your loss even greater than you would have ever imagined.

There are a number of reasons why people will not sell shares when they are faced with a loss. Consider the emotions in a person who is contemplating cutting a loss. Cutting a loss means that you purchased some shares and they went down. Your initial decision to buy was wrong and selling the shares at a loss validates your mistake. Cutting your loss means accepting that you were wrong and unfortunately there are many people who cannot bring themselves to do this. Yet, it is essential.

Of the more than six billion people on earth, not one of them knows what is going to happen in the markets tomorrow or any day in the future. No one else knows, so how can you expect yourself to know for sure?

Those people who run their own business realise that they make some decisions that work out very well and others that in hindsight, were poor and perhaps result in losing money. However, another thing that is for certain is that they would all accept the latter as being par for the course in running a business. People who manage successful businesses would naturally accept that experiencing a loss is just a part of trading.

US home builders' bonds have become the biggest losers in the market for debt, with ratings below investment grade.

The debt sold by D.R. Horton Inc., KB Home and other construction companies has fallen an average 3% since May, leaving investors with losses around 1.1% for the year, including reinvested interest.

It equals the worst performance of the 37 industries tracked by Merrill Lynch & Co.

The bonds returned an average 2% through April. Many investors remained confident that the housing market would be able to handle higher interest rates. Yet, with continued increases in rates in both May and June, mortgage rates went to the highest levels in over four years.

The index measuring home-builder confidence has fallen to the lowest level since 1991 for July.

"You have to ask yourself if the worst is over or yet to come," said Timothy Compan, head of corporate bond strategy at Allegiant Asset Management.

The extra spread that investors demand to own home-builder bonds over Treasuries is widening as the housing market declines.

Building permits fell 4.3% in June, according to the Commerce Department. The sales of new houses are expected to fall 9% for the year, said David Berson, chief economist for Fannie Mae. Prices could rise only 2.6% for the year, he said.

KB Home, the nation's fifth-largest home builder, announced last month that profits will grow at the slowest pace in five years for 2006. This is due to higher mortgage rates cutting demand, according to the company.

"Every downturn is longer and deeper than people expect," said D.R. Horton Chief Executive Donald Tomnitz.

D.R. Horton is the third largest builder in the nation. Last week, the company reported its first quarterly profit drop in its 28-year history.

"We are assuming the worst," said Tomnitz.

But the slide among home builders isn't a reason to jump out of the market just yet, said Steven Brooks, an investment-grade debt analyst at T. Rowe Price Group Inc. in Baltimore.

"The credit quality is sound," said Brooks. Housing companies are "very well positioned to manage through a downturn as long as we have reasonable economic and job growth, and interest rates don't go through the roof. It's hard for me to imagine a serious downturn."