Stock Trading Tips and Tools

Massive Trading Loss Tarnishes J.P. Morgan Chase

Posted on May 14, 2012 by StockTrading.net | 1 Comment

With the recent trading loss by J.P. Morgan Chase (JPM), more bank investors are losing their trust in banks. They have good reason to show concern.

J.P. Morgan Chase lost $2 billion from high-risk, derivative trades in only six weeks.

The C.E.O. of J.P. Morgan Chase, Jamie Dimon, said that the bank could suffer an additional $1 billion in losses. In a conference call with analysts on May 10, Dimon said that “egregious errors” were made. However, he refused to concede that the company needed a stronger regulatory framework.

The mark-to-market losses came from the bank’s chief investment offices. This trading unit of the bank was set up to hedge J.P. Morgan’s loan portfolio and to invest excess deposits. The office drew heated controversy in April based on reports that a J.P. Morgan Chase trader in London was making big bets in credit derivatives.

People within the firm have said that top traders for J.P. Morgan, such as Ina Drew, campaigned vigorously to keep this trade going. According to former executives for the company, Drew told traders at the bank’s chief investment office to execute trades that were meant to shield the bank from the turmoil in Europe. She believed that these bets could protect the bank from losses and that they could even earn a tidy profit.

When the credit market took a turbulent turn in April and Read more

Category: News

What are Options in Stock Trading?

Posted on February 24, 2012 by L.C. Boris | No Comments

Several nights ago I was grocery shopping. After gathering everything I needed from my list I started approaching the front of the store so I could check out and pay for my groceries. Arriving at the front of the store there were two cashiers and lines available to be checked out from that were seemingly of equal length as far as a head-count goes. Just like any shopper approaching the same situation, you do your best and try to factor in any and all relevant information you can pick up on that will help you determine which line you should invest yourself into that would let you exit the store and get your groceries home faster.

Although both lines had the same amount of people, one line had a fast cashier and a high grocery-to-person ratio (each person had a lot of items), and the other line had a slow cashier and a low grocery-to-person ratio. During the milliseconds that this analysis was taking place I noticed someone approaching rapidly to get into a line and I therefore had to make my decision quickly despite the uncertainty of which line would be faster. I took the slow cashier and low grocery-to-person ratio line, and my competitor was forced into the fast cashier high grocery-to-person ratio line. Unfortunately my competitor was checked out several minutes before me and in situations like these it makes me very happy to know that you can protect yourself from this when stock trading by learning how to use a simple financial instrument known as the option. Read more

Category: Behavioral Finance, Day trader, Derivatives, Options trading, Tips

How Much Should I Save For Retirement?

Posted on February 17, 2012 by Susan Porter | 2 Comments

I have a friend who knows what she is going to have for dinner a month from now. My friend has each meal mapped out on a calendar so there are no surprises along the way, and makes grocery shopping a breeze for her because she knows exactly what she needs long before she walks through any grocery store doors. The irony of my overly zealous consumption-conscious friend is that when I asked her how much of her income she was saving and investing for retirement, she didn’t have an answer like you would expect after viewing her meal calendar. My friend is an amazing example of how tough it is to think that far out into the future despite the tenacity many of us put toward planning. With bestselling books like “Getting Things Done,” and “The 7 Habits of Highly Effective People” it’s intriguing to me that many of us don’t put forth much income toward one of the most important milestones in our lives: Retirement.

The fact is that we aren’t going to be generating an income once we reach retirement, and you can ask just about any acquaintance over the age of 65 how difficult life becomes after you Read more

Category: Behavioral Finance, Brokerage firms, News, Tips

What are Commodities in Stock Trading?

Posted on February 13, 2012 by L.C. Boris | No Comments

The English language is a very complex tool that can confuse many of those who are learning it as a second language. Nuances such as the difference between “minute” as in time, and “minute” as in small will easily confuse even native English speakers. The fact that there are multiple definitions for the same word as well as different pronunciations can lead many people astray, and one particular word in stock trading that has no very important meanings is the term “commodity.”

What is a commodity?

When we hear the term “commodity” many of us think of gold prices, corn prices, pork belly prices, coffee prices, oil prices, and other physical properties that are used as raw materials. Commodities in economics have a much broader meaning that Read more

Category: Commodities, Online stock trading, Tips

When to Sell in Stock Trading?

Posted on February 5, 2012 by L.C. Boris | No Comments

Once you’ve grown more acclimated to the investment periodical landscape you’ll begin to notice that many of these sources of information only seem to tell would-be stock traders how to get into stock trading, often neglecting those who are already trading on their own account. Despite there being many questions about getting started, there are just as many questions involved once you’ve begin practicing stock trading techniques that need to be addressed. One of the most valid questions to ask once you’ve created a portfolio for yourself is what is the most optimized time to sell?

To justly answer this question we have to first figure out the scope of your investment strategy, are you planning on day trading and jumping in and out of stocks on the fly or do you plan on taking a longer approach to investment by purchasing shares in good companies that you can hold for a very long time.
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Category: Brokerage firms, Day trader, Online stock trading, Tips

Excel Formulas for Stock Trading

Posted on January 28, 2012 by L.C. Boris | No Comments

So you finally want to begin taking your stock trading knowledge to the next level by applying it. From personal experience I can attest to the fact that there is more writing on investing and the philosophy surrounding it than any of us will be able to read in our lifetimes, but due to the elusiveness surrounding stock trading it can be very tough to find solid ground to base your investment decisions on and it can only feel right to want to continually learn just a little bit more. Here are a few formulas you can plug into excel to help you find solid ground when analyzing a company for stock trading:

Price to Earnings Ratio

This is one of the oldest and easiest financial ratios to calculate, all you do is plug in the market price of the stock at any given time and divide it by the company’s annual or quarterly earnings, which you can find in the financial statements of the company. Fortunately, most of the sources found at Stocktrading.net will have the ratio already done for you. In excel it will look like this:
Read more

Category: Day trader, Formulas, Online stock trading, Tips

What is a Derivative?

Posted on January 20, 2012 by L.C. Boris | No Comments

If you are brand new to stock trading and have only just started skimming through the headlines of financial news sources, or even if you are a seasoned investor who has been investing your own money for most of your life, there is a concept that has been appearing with greater frequency in the news over the past several years due to the 2008 financial crisis and most recently due to the European debt crises of Greece and Italy. The concept I am of course talking about are derivatives and they are perceived to be so profound and complex that people shudder at the mere mention of the term. It is no doubt that derivatives are complex in practice but they are not as difficult to understand as many people believe them to be and shouldn’t scare you away from learning everything you can about them because that will help you become greater at stock trading.
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Category: Commodities, Day trader, Derivatives, Futures trading, Options trading, Tips

The Folly of Anchoring in Stock Trading

Posted on January 13, 2012 by L.C. Boris | No Comments

The Folly of Anchoring in Stock Trading

If you are like many investors, then one of the metrics you use to gauge whether or not to purchase a company’s stock is based on taking a glance at the company’s price on a chart and seeing how their price has fluctuated over some past increment of time. There’s a certain rush that comes when you see a chart-based opportunity while performing some stock trading analysis that involves a graph that, for the most part, is at an appreciating 45 degree angle and has been appreciating that way for quite some time. The urge to buy stock in a positively moving company like that seems to make intuitive sense because a price that has been moving upward in the past should continue to do so in the future – Right?

In psychology there is a concept known as the cognitive bias that is used as a way to describe a number of patterns when we as humans fail at using rational judgment. Many of them have fancy names like, “Hyperbolic Discounting,” and “Irrational Exuberance,” but one in particular we need to focus on as stock traders analyzing charts is known as Anchoring. Anchoring is the bias involved when a person goes about analyzing a situation and relies too heavily on one piece of information over the rest of the available information. Of course when this is applied to Read more

Category: Behavioral Finance

Interview With Howard Feigenbaum

Posted on March 30, 2011 by StockTrading.net | No Comments

Howard Feigenbaum has been an investor since he was in the seventh grade when he and his classmates pooled their money and bought two shares of Standard Oil of New Jersey. He has been in the financial services business since 1981 helping clients plan for retirements with a variety of investment products and strategies. For the last twenty-two years he has owned a broker-dealer firm, Sharemaster (www.sharemaster.com), that specializes in mutual funds that pay dividend income.

1. What are the main reasons people should consider investing?

Investing allows an individual to participate in owning parts of successful businesses or businesses which are on the path to becoming successful; or, conversely, an individual may benefit from identifying businesses which are declining in value and benefit from the decline in ownership value. An individual may also loan money to businesses who have offered an attractive return to gain capital.

There is inherent risk in taking a financial position in ownership or lending. For many people the return or profit from taking the risk may be attractive; the risk may seem prudent or worthwhile. However, there is always risk. There is also risk in not investing.

When someone deposits funds in the bank and receives a one percent rate of interest, there is inflation risk. The asset may be guaranteed against loss by FDIC but the value of the deposit may decline because of inflation. If the inflation rate is four percent per year but the interest rate is one percent per year, the asset is losing value at the rate of three per cent per year. When businesses experience inflation, they pass the increase costs on to their customers.

A good example is gasoline. Oil producers do not sell the product at the price you prefer; when their cost goes up, your cost goes up. If you own shares of an oil producing company, the value of your shares may stay the same or go higher, even in the face of inflation.

Some companies pay dividends. They distribute their profit among their shareholders. If they do well, you do well. It’s nice to be an owner. If they don’t do well, then you don’t do well. Then it’s not nice to be an owner.

The essence of investing is Read more

Category: Brokerage firms, Tips

Which Stock Trading Technique Is Best For You?

Posted on March 10, 2011 by StockTrading.net | No Comments

There are numerous options when it comes to choosing a stock trading strategy and choosing which one to go with can be a complicated decision. If you really want to make it big in stock trading it will be important for you to become educated and understand the different strategies available to you. Then, you can go with the strategy or strategies that you think will work best for you. Here is a brief look at some of the most common short-term strategies that you can consider using.

Diversification

The first strategy, considered by many to be the most important, is diversification. No matter what type of trading you choose, it is always good to diversify when it comes to stock trading. Keeping some funds safe and going for higher risk on others helps to round out your portfolio. The most important thing to remember when it comes to diversification is that you should always be reviewing what you have, and making tweaks along the way in order to help boost your profits.

Fundamental Trading

It is a long term investment, owned with the intention of holding the stocks till there is an appreciable change in the fortunes of the company. The long term protects the stocks from the volatility of the market. The stocks can be held for a period of a few months to several years.

Day Trading

One of the riskiest forms of stock trading, day trading involves buying and selling of financial instruments within the period of a single day transaction window. Multiple positions are changed throughout the day such that all the positions are closed before the markets are shut down. Earlier, the stronghold of large financial institutions and professional investors, day trading is becoming popular with the advent of online trading. The intention of this type of stock trading is to make maximum money by using immediate information about the company and the market.

Scalping

Scalping is a form of stock trading that aims to make quick money from small commissions on hundreds of different trades. It takes advantage of the ask/bid spread and the volume of the trade conducted by a scalper. Since the commission is small, the profit is generally maximized by handling large number of accounts.

Swing Trading

It usually lasts for a day or more but less than the duration of the long term trading. Swing traders do the trading at the peak or bottom of a price swing of a particular stock caused by market volatility.

Momentum Trading

It is another risky form of stock trading. It takes advantage of the extreme volatility and swings of the market. It involves making use of the information from other sources about the mood of the market. Making money in this form of trading is more about getting in and getting out at an opportune moment.

Penny Stock Trading

In penny stock trading, you purchase what you hope will be an up and coming stock. These stocks are priced very low, usually under $10.00 a share. While many of these stocks go nowhere, if you learn how to pick the right one, you could see huge profits.

Shorting Stocks

Shorting stocks is the trading strategy when you benefit from a stock declining in price. The idea is that you sell a stock into the market that you have borrowed, collecting cash from the sale. Then, once the price of the stock has decreased you buy it back for a lower price than what you sold it for, and return the borrowed stock from where you borrowed it making a profit on the difference between what you sold it for, and what you bought it back for later.

Insider Following Trading Systems

This strategy involves researching what others are purchasing to find trends. You look at what major players like large shareholders are purchasing and follow their lead. This strategy can be used with other stock trading strategies to help increase your chances of success. Public companies list their biggest shareholders, and when you see these major shareholders buying and selling, they often have more valuable and pertinent information that hasn’t yet been distilled to the major news sources.

News Trading

News trading is a form of the momentum trading strategy that works if you are a day trader and can move quickly when it comes to trading strategies. You need to keep abreast of what is being reported in the news that might affect stock prices. Real time news releases often give insight to where a stock will go and if you act fast enough, it could pay off.

Category: Day trader, Online stock trading, Tips
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