Tuesday, December 05, 2006

Blog of the Week: Invest 2 Success

Fundamental Principles of Investing

Stock trading basics are a necessity for traders to become prosperous in the stock market. It is necessary, if you will, to establish some fundamental principles as you are beginning investing in the stock market. Here are some basic strategies to follow:

Stock Trading Basics

Develop a stock trading plan! It’s pretty difficult to make a cake without a recipe and the same definitely applies to stock trading basics. Even the most experienced traders can get themselves into trouble by not following their plan. When are you going to buy a stock? When are you going to sell it? What are you going to do to prevent losing a lot of money if your stock goes bad?

Once you’ve developed your stock trading system, stick with it.

Trade safe and often. Especially for beginner investing, this is an important stock trading basic. Although your daily profit might seem small, it accumulates over an entire year. It is always better to win small than to lose big!

Look for stocks with the highest growth possibilities, and don’t hold stocks when their growth possibilities are close to the average value. When this happens, a wise stock tip is to switch to a stock that is more profitable. This requires stock technical analysis, but the results are worth the effort. Remember to factor in your transaction costs such as bid-ask spread and brokerage fees.

Avoid risks as much as possible and only take calculated ones at that. The most important stock trading basic is to remember that you are in this to make a profit and the best way to do that is conservatively. Don’t put all of your capital into just one stock. Portfolio diversification will be the thing that keeps you alive in the market, especially as you learn the stock trading basics.
Risk Reward Ratios...

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Friday, October 06, 2006

Blog of the Week: Kirk Report

How To Trade While Away

AirlinesSome of you have asked me how I trade when I'm away, and my answer is that, I simply don't do it. If I'm away, I'm out of the routine and that puts me in a severe handicapped position.

When I'm home and working you can literally set your watch to the trading routine I have every day. Having a consistent approach to how you manage your investments is important. While you can't possibly control what the market and your portfolio is doing, you can control how you approach it. Every successful trader I know has a set routine and does not alter it very often.

That being said, a few years ago Alan Farley wrote an excellent article that outlined the 10 tips for effective remote trading. In that he provided the following tips...

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Monday, September 25, 2006

Blog of the Week: Stock Market Beat

More On Commodities

We recently wrote that an investor’s starting point for exposure to commodities should be their relative weight compared to all possible investments.
For example, if commodities are 5% of the investable universe, the average investor has to be at 5%. If all investors shifted to 10% it would simply bid the price up artificially. On the other hand, it is reasonable to assert that investors have had too little exposure to commodities historically, and that the weight may still be too low to reflect the fact that the investing world has to play catch-up.
Morgan Stanley’s Stephen Roach sees the trend as having reached bubble proportions.

Virtually every major institutional investor I visit around the world — from pension funds and insurance companies to mutual fund complexes and hedge funds — has a large and growing commodity department. The same is true of foreign exchange reserve managers and corporate treasury departments of multinational corporations. One major Wall Street firm is now run by a former commodity executive, and another has turned over management of its global bond division to the architect of its thriving commodity business.

Of course, the same could have been said in the mid-1980’s regarding equity departments, when they still had a long run ahead of them. As you know, we are not shy about drawing comparisons between today’s commodity markets and the mid-1980’s equity market. Roach, too, has picked up on this.

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Monday, September 18, 2006

Blog of the Week: Global Growth Investor

10 ways to keep your chart reading fresh

While on a short break last weekend, I picked up Did You Spot the Gorilla? in the hotel library. Yes, it’s a cheesy self-help book, but it did have some good tips on creating the right mindset to spot opportunities.

One of the points the book made was how the human brain shifts to autopilot when we repeat things over and over. “When the world becomes too familiar, your brain reverts to autopilot and stops thinking and noticing,” the book said. “This is when opportunities can be missed. Stimulate your mind and switch to manual.”

It got me thinking about things I repeat every day: going for a walk in the morning, checking email when I get into work, walking home from the station . . . and chart reading! Technical analysis lends itself to repetition. You download your data each day and plough through hundreds of charts. If you have a system you’re trying to stick to, there is little variation.

One thing I realised is that every day for years I’ve scanned candlestick charts using the same software on the same computer. Yet when I check stocks at work on the shared Bloomberg machine it is in OHLC form because that’s what everyone else looks at. I have realised that chart patterns often look clearer and I spot more opportunities on the Bloomberg.

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Monday, September 11, 2006

Blog of the Week: Going Private

Win Ben Stein's Ire

smug portrait As a rule, I usually don't spend a lot of time on reader mail, or on the analysis of it here in these pages. It always feels self-serving to wax poetic at audience response to one's writing. For the same reason I don't turn comments on for the entries here. (A few readers have asked me to, and sometimes I actually consider it). Recently, however, reader mail has been interesting and insightful enough to warrant more comment. The three recent posts that have gotten me the most reader interest (as measured by influx of mail) here at Going Private include:

1. Imminent Death of Private Equity Predicted,
2. Nicole Kidman Should Run a Hedge Fund, and;
3. Voodoo Economics.

The majority of replies to "Voodoo Economics," my critique of the piece in last Sunday's New York Times on the evils of management buyouts by econ guru, general figure of shareholder menace and sometime economics teacher actor, Ben Stein, began with some version of:

"Ben Stein is off his rocker, but..."

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Tuesday, September 05, 2006

Blog of the Week: Daily Options Report


Interesting interview with Kyle Rosen Rosen in this week's Barron's. His main point? Volatility is historically cheap.
We've seen how quickly risk can be repriced. We will see a lot more of that, and there will be some wild swings back and forth. But across the board, risk premiums have been taken down to almost zero.

In options, a simple historical analysis of reversion to the mean shows implied volatility has averaged around 20% in any rolling three-, five-, 10-, 15- and 20-year period since options have been trading. Now we are hovering around 12%, a 40% discount just to the average. Even if we get back to the average, a lot of money can be made trading volatility. As implied volatility has been coming down near all-time lows, actual volatility has been creeping up.

He's right; risk premium in options is effectively zero. We are priced to perfection.

Unfortunately, I am not so sure 20 is *fair* VIX any more, I suspect it is lower now. The last decade has seen historic improvement in...

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Friday, September 01, 2006

Blog of the Week: The Fly on the Wall Blog


Through TheFLY's Eyes: Money Matters

from Theflyonthewall.com

Editor’s note: In our new “Money Matters” column, look for incisive commentary on this blog featuring a summary and analysis of the week’s most important issues affecting money, markets, and investing. It’s no-nonsense analysis timed to arrive when you have the time to read.

The U.S. Economy At Mid-2006

Four years into the current global expansion, it is not a stretch to state that the United States and global economy is entering a critical period. It’s appropriate, then, to review the economic health of both at this juncture, in mid-2006.

The U.S.’s $13.2 trillion economy continues to grow at a healthy rate in 2006, after registering a solid 3.5% GDP growth rate in 2005. In Q2 2006, the most recent quarter, the economy grew at a 2.5% rate after registering a red-hot 5.6% rate in Q1 2006.

The Fed’s Controlled Slow-Down

The deceleration in GDP growth in Q2 2006 primarily reflects a deceleration in orders for durable goods, equipment & software, private inventory investment, nonresidential structures, exports, and state & local government spending, partially offset by a deceleration in imports, services, and private inventory investment.

The deceleration also reflects the intentions of the U.S. Federal Reserve.

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