Archive for July, 2009


Stock market investment

Filed Under: Glossary by Bill — Comments Off
July 26, 2009

Stock market is a fortune maker for many people and a fortune destroyer for others. I have seen many people making tons of money and other losing tons of money in the stock market. One of the main reasons that people lose money in the stock market is lack of study. Stock market is not a playground and doesn’t suit the noobs. To enter and gain in stock market you need years of studies and the good prediction ability. When we say prediction ability it don’t have anything to do with the astrology but the strategy and accuracy of predicting on market conditions with the help of years of studies.

Stock market is like gambling, you may win money in the start but if you get in the habit of making money through the market using short sells or intraday you may lose everything soon. So what are those short sell and intraday concepts? Short sell means selling the shares you don’t have. By doing a short sell you will gain the money equivalent to the share value that time and you will buy the same shares at the end of the day. Here the trick is you can gain money if the shares are falling in value and lose if they get hike in that day.

Intraday means you will buy the shares and sell them on the same day which enables you to get very high profit in a day as the charges on intraday trading are very low. These both tricks requires high study and knowledge of the share market but still you can try out your fortune by investing in emerging market like India. Indian stock market is getting very strong these years and the future looks good for it.  Do review some indian stock market guides before venturing into this area. This will save your money and you can try some of the above tricks too.

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History of Stock Market Performance

Filed Under: Investment Strategy, Stock Pick of the Day by Bill — Comments Off
July 24, 2009

Often you’ll hear numbers thrown around by stock market advisors saying things like “the stock market performance has been 8% a year…” however, this hasn’t always been true, this is only been true for a given slice of stock market history.  It’s interesting to look at stock market performances over different periods of time.

Stock Market Performance Pre WWI (1871-1911): The stock market (S&P) went from 4.44 to 9.27 for a CAGR of only 1.8%

Stock Market Performance WWI to WWII (1912-1944): During this period the stock market only returned 0.7% per year raising to 11.85.  The Great Depression followed by a New Deal government spending it was hard for poor and rich to gain any traction.

Stock Market Performance WWII to Vietnam (1945 – 1965) Here was the first era of serious prosperity with the stock market climbing nearly 10% (9.9%) per year each year.  Imagine the wealth gained by those savers who learned to earn in a time of 1 – 2% returns.  I believe part of it was the beginning of woman moving into the workforce (though most returned after the war until the 1960s and a serious improvement in manufacturing productivity.

Stock Market Performance Vietnam to Desert Storm (1966 – 1991) 5.2% returned a year during this period.  I think it’s interesting to note that this period and after Desert Storm to present are about the same rate of return.  It almost appears the economy is becoming so large, or the face of war has changed so much that the war doesn’t have as much impact on the financial markets.

Stock Market Performance Desert Storm to Present (1992 – 2009) 5.7% returned – again about the same as Vietnam to Desert Storm, though the number would have been a bit better if I would have stopped it at the return to Iraq.

Why did I choose wars as a point to break down eras?  Why not?  You just never know what will pop out at you when you take the time to look at the details and not just muck it all up in one round number.  Why not try the numbers in some way that makes sense to you and tell us all about it?

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NYSE Stock Market of Stock Markets

Filed Under: Glossary by Bill — Comments Off
July 15, 2009

nyse_opening_bellThe New York Stock Exchange (NYSE) has it’s early roots in moving the war debt of the Revolutionary War.  That’s right, we’re talking 1790.  The federal government refinanced it’s debt into bonds (a whopping $80 million, can we say Bill Gate’s dryer change?) which were publicly traded securities.  By 1792 two bank stocks were added to the exchange.  In 1836, trading around 8000 shares a day, the NYSE banned trading in the streets.  In 1844 the telegraph was invented broadening the stock market trading world outside of New York City.  Fast forward to 1863, surviving one crash of an insurance trust and a civil war, the NYSE officially becomes the New York Stock Exchange.

The exchange pretty much evolved from there applying new technologies (tickers, phones, computers) and dealing with each scandal (bad accounting, watering stocks (unauthorized share dilution)) by applying new rules and regulations to protect the investors the NYSE has matured to where it is today:

  • 5 billion daily shares traded
  • Has expanded into options and futures
  • Recently Acquired AMEX
  • Almost completely electronic trading (except a few really high priced stocks)

Thousands plan a New York Stock Exchange visit each year as it’s an American symbol of capitalism.

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Trading Stock Market – Ups and Downs

Filed Under: Technical Analysis by Bill — Comments Off
July 15, 2009

A trading stock market or a range bound market is when the price of the market (or individual stock) is trapped between two prices or a trend of prices.  This happens when there is lots of reasons for both the bears and the bulls to be right in their assumptions.  There a couple of fairly well known clues to fiding trading ranges and trying to take advantage of them.

  • Moving Average Bound – Often the price of a stock will get trapped between a short term moving average and a long term moving average.  There is often a dynamic between the traders with a short term mentality and those fundamentalist who are following the long term path of the stock, or whole economy.  The common choice is watching between the 50 day simple moving average and the 200 day simple moving average.  However, the ideal choice will vary from stock to stock or market to market.  You’ll have to experiment.
  • Fibonacci Bound – Another set of support and resistance lines which were used as the basis for the Elliot Wave Theory are fibonacci ratios.  I’ll leave the details (and coolness) of the number sequences for it’s own writing, but the basics are you’ll look for is after a big move the ups and downs of the market start get smaller.  When the market is in this mindset look for retracements of 38%, 50% and 62% from the previous high from the previous hard low.  These waves will shrink smaller and smaller within the support lines until the next big break out.  It may be difficult to tell which way the breakout will happen but you can trade within the retracement range for awhile.
  • Range Bound (Squeeze) – This is a chart players favorite, and they’ll name all kinds of shapes into it.  Essentially what you are looking for is a consistent support line (price or trend of price) and lower and lower highs.  When you see this you know (or at least have a better chance) that the stock price is going to continue to trade in that range until there is almost no difference between the highs and the lows and either the bulls or bears win out.

A trading stock market is no place for complacency.  You’ll have to stay on top of your trades more until a strong direction is developed again.

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