Trading Strategies

Did you know that income from your employment often helps you to diversify your investment risk? Much of the value in a young private business is the anticipated contribution of the principals of the business over the years ahead. The same applies to employees who allow for the value of their future earnings potential in making financial decisions (for example, in taking out a mortgage): prospective earnings reduce financial risk for any individual. This will have more value for someone who is young than for someone who is old, or for someone who is healthy than for someone whose future earnings are constrained by ill health. It has been recognised for some time that investment strategy should take account of the flexibility provided by future earnings from ... [read full story]

There is another fascinating phenomenon that has been found in the early stage of all winning stocks. Refered to as "the great paradox." Most professional and amature institutional money managers are bottom buyers - they feel safer buying stocks that look cheap because they're either down a lot in price or selling near their lows. The hard-to-accept great paradox in the stock market is that what seems too high and risky to the majority usually goes higher and what seems low and cheap usually goes lower. Haven't you seen this happen before? Stocks on the new-high list tended to go higher, and those on the new-low list tended to go lower. Put another way, a stock listed in the financial ... [read full story]

Using the SEC definition of an insider as a director, manager or employee of the firm, you can compute the percent of stock held in a company by insiders. In companies like Microsoft [MSFT] and Oracle [ORCL], in which the founders still play a role in management and have substantial holdings, you will find insider holdings to be a high percent of the outstanding stock. In Oracle, for instance, Larry Ellison owned in excess of 20% of the outstanding stock of the company in April 2003. In more mature companies that have been in existence for a while, insider holdings are reported to be much smaller. There are only a few companies where insiders hold 70%, 80% or even 90% of the outstanding ... [read full story]

Buying on Bad News - Acquiring Undervalued Stock Turning Bad News Into a Lucrative Opportunity for Your Portfolio Even the best companies, industries, and sectors fall out of favor from time to time. A fully-informed investor, with a pocket full of cash and a firm understanding of the situation, can calmly stride into a turbulent market and buy up shares of these underdogs at a fraction of their intrinsic value. How do you know which companies are permanent losers and which are undervalued gems? Use these tests of quality to determine if you should invest your money or keep it stashed in cash. Is the problem temporary or long-term? You must be careful not to simply invest in a company because everyone else is ... [read full story]

Market timing is the most important expertise you must master to become a successful trader. This is where the majority of stock market traders fall by the wayside. Buy too early and you are squeezed out on any temporary falls. Sell short too early and you are squeezed out on any up moves, even if, after a few days or so, you are proved correct in your analysis. Understanding what the volume is telling you; recognising testing, stopping volume, up-thrusts, or no demand, will get your timing surprisingly accurate. Some investors, especially academics, believe it is impossible to time the market. Other investors, notably active traders, believe strongly in market timing. Thus, whether market timing is possible is really a matter of opinion. It is very ... [read full story]

The following Qwoter stock market advice topic discusses investment and trading strategies that can be effectively applied to penny stocks (read what is a penny stock). You should read over the following strategies a few times over. After reading the trading strategies and becoming familiar with them you should select the strategy that fits your tolerance for risk. The strategy should fit your over all investment philosophy and preferably match up with your skills. Some people prefer long-term strategies to short term strategies. The following trading strategy may entail a great deal of risk. But like the saying goes, no pain no gain. Reverse Merger Strategy Buy stocks that are being used for reverse mergers. When a company that has no operations announces ... [read full story]