INDIAN ONLINE TRADING SITES-BEST AND WORST

Before I dwell on this topic related to brokerage charges I can assure you after you have gone through the writeup you will be able to come to a firm conclusion that you are being overcharged by these brokerage firms and thus it is your every right to haggle them for a good brokerage rate as a penny saved is penny earned. Undertake the direct encounter of your brokers by showing them the brokerage charges in Reliance Money which is an aggressive player to brokerage charges ICICI which is a slow and steady winner. However off late it has come to notice that ICICIdirect has also improved and one can recheck the same as they keep coming with innovative schemes near festivals and try to bind you with minimum commitment of trade value. We have studied a number of models and have given due cognizance to brokerage charges for Sharekhan, Motilal Oswal, Reliance Money, SBIcap and number of operators in the field. The below analysis has been arrived at by virtue of personal experience and is an individual opinion and is in no way to defame any brokerage house in India as every entity has its pluses and minuses.

I have the opportunity of having been associated with a number of online trading platforms as a user or as an analyst.Time and again I have seen this question cropping up regarding the best online platform and for the sake of a beginner or a layman and to put all the doubt to rest, I hereby give my assessment on the sites accessed/used by me.

(a) Indiabulls: I can say with authority that "Power India Bulls" software provided by Indiabulls is ultimate and I have not seen any other software matching all the capabilities including updated live chart for any stock.The brokerage is also competitive to let a customer survive and take back something to home.The relationship managers and branch heads are cooperative and atleast I can say the same for Ludhiana branch where I am holding my account. Offlate Indiabulls is also going to introduce the security token system for online trading wef 29 Oct 2009.

(b) ICICIDirect Site is suitable for an individual who intend to hold scrips for a longer duration and number of transactions is limited.This site is useful for those who are not worried about speed of platform and use limit orders.I can say with authority here that the site is definitely not suitable for day trading unless these ICICI personnel intends to change the operating platform.If you can "Fill It and Forget It"(referring to orders) type guy similar to Honda ad type then the site may be suitable for you. The brokerage charged is highest among all the available online platforms. Moreover they have grown their boots and one may not be satisfied with their performance.

(c) Reliance Money : It is a new player in the field and has to establish itself before any final verdict can be passed.However be wary of their hiding details. They are charging on the basis of a card system where one has to buy the credit initially and thereafter all trades are available at very reasonable rates. However I was not happy with the speed of the platform. Reliance money has a security token system where a key is provided to you and you have to enter that key data every time one logs in the online trading platform.

(d) Indiainfoline(5 paisa) :The site has to improve on its relationship with its customers and definitely has to provide a competitive brokerage to its customer. They never responded to a number of phone calls sent through our office.

(e) ShareKhan: Definitely a good site with good research but only hiccup is their high brokerage linked to turnover.

Remaining all other accounts of other companies are almost on equal footing with warying brokerage plans.. So if you are the one ready to jump to open an online account then consider that speed of internet is an important criterion for any platform to function.

Thus keeping all consideration in mind IndiaBulls perform the best as at one or the other stage I operated above trading platforms and finally settled for Indiabulls with Powerindiabull feature.


If you are a layman and wondering how to open an online account and operate it than my article on ONLINE TRADING published in numerous magazines is being pasted on the blog shortly,so visit next time and have a view on it and leave your comments

NOTE : This is my personal observation that India Bulls is the best and in no way I am promoting the site.Its only my way to speak for the good work being done by the site as I never had any problem in terms on speed,payment,delivery of the scrips and of course the customer relationship managers to name a few.Its just my way of saying "Keep up the good work INDIABULLS community". I am no where eulogizing the site and thus please select your trade platform with due diligence else you will be filling the pockets of your broker.

The brokerage rate can be also viewed pictorially and same will provide an ease of accessment as we are undertaking the brokerage rates comparison for SBI Cap, 5 Paisa or Indiainfoline, Sharekhan, Motilal Oswal, Angel broking, ICICI direct, Indiabulls, HDFC securities, UTI securities, Reliance money, Geojit and now a new player has come on the scene is vantage trade which can also be checked as it aggresively marketing its products

Financial Services Marketing Program

The business of Banking and Broking has changed significantly in the past few years in India. There are over 50,000 branches providing banking and broking services to customers. The focus of activities in these branches is on building effective relationships with customers and enhancing cross selling opportunities.

The Financial Services Marketing Program developed by IMS Proschool - a leading Financial Services education provider in India, is designed to impart the following skills:

i.Gain Skills to compare Financial Products
ii.Understand Customer Need for Financial Products
iii.Understand Customer Decision Making Process While choosing Financial Products
iv.Increasing Cross Selling Opportunities with exisiting customers


Who should do the Financial Services Marketing Program of IMS Proschool?

Candidates with following educational background interested in working for Banks and Securities Trading Institutions based in India:

i.Commerce Graduate looking to specialise in Marketing
ii.Graduates working in Banks and Brokerages
iii.Graduates working in other than Finance Sector and wishing to shift to Financial Services
iv.MBA's Looking for Jobs in Financial Services
IMS Proschool Programs:

You can opt for:

i.Distance Learning Program - Study Material will be provided online.
ii.Classroom Program – Currently available in Mumbai, Pune, Chennai, Bhopal, Trivandrum, Gandhinagar.
At the end to the course the candidates will have to appear for the certification exam.The examination comprises of multiple choice questions which will have to be answered based on a case provided.

Who can appear for the certification exam?

Only those candidates who have successfully completed the Financial Services Marketing Program with IMS Proschool can appear for the certification exam.

When is the examination conducted?

Exams are normally conducted four times in a year (June, Sep, Dec, Mar). Candidates must complete the education i.e. Financial Services Marketing Program and complete the Sales Workshop of IMS Proschool 45 days prior to the examination date for becoming eligible for the final Certification.

How to enrol for IMS Program?

i.Apply online at
ii.Download the Application Form from the website and send the duly filled Application Form to IMS Proschool Pvt Ltd, Maharashtra High School Complex, Principal N.M. Kale Marg, Gokhale Rd, Dadar (W), Mumbai 400 002. Ph 09372895050

Introduction of Derivatives

The aim of this module is to provide beginners as well as the dealers with both theoretical and applied knowledge pertaining to commodities trading. The module is beneficial for those who wish to pursue careers in brokerage firms dealing in commodity derivatives. This module has been developed jointly by NSE and NCDEX.

Why should one take this course?

•To understand the difference between commodity and financial derivatives.
•To know the usage of commodity futures.
•To understand the pricing mechanism of commodity futures.
•To learn about the NCDEX trading platform, clearing and settlement operations.
•To know the regulatory framework and taxation aspects of the commodities market.
Who will benefit from this course?

•Students
•Teachers
•Commodity Market Dealers
•Researchers
•Employees of BPO/IT Companies
•Anybody having interest in the Commodities Market
Test details

Duration: 120 minutes

No. of questions: 60

Maximum marks: 100, Passing marks: 50 (50%); There is negative marking for incorrect answers.

Certificate validity: For successful candidates, certificates are valid for 3 years from the test date.

Fees

1,800/- (Rupees One Thousand Eight Hundred Only)."

Course outline

•Introduction to Derivatives
Introduction to Derivatives; types, Products, participants and functions; Exchange–traded versus OTC derivatives.
•Application of Futures & Options
Types of instruments (future, options)-Basics and Payoffs; Pricing commodity derivatives; Hedging, Speculation and Arbitrage
•Commodity Derivatives
Difference between commodity and financial derivatives; Global and Indian commodities exchanges; Evolution of commodity market in India.
•NCDEX Platform
Structure of NCDEX; Exchange membership; Capital requirements; Commodities traded on NCDEX platform; Instruments available for trading; Pricing of commodity futures; Trading; Clearing, Settlement and Risk Management;Use of commodity futures in hedging, speculation and arbitrage.
•Regulatory Framework & Taxation aspect
Rules governing commodity derivatives exchanges; Intermediaries, Investor grievances and arbitration, Implications of sales tax.

Mutual Fund Products and Features

Mutual funds have become a much sought after investment product in recent years. This course demystifies the concept of mutual funds and helps create awareness and knowledge about the industry and its functioning.

Why should one take this course?

•To understand the concept of mutual funds.
•To know about the roles of different players viz., custodians, asset management companies, sponsor etc. in the mutual fund industry.
•To learn about the tax and regulatory issues related to mutual funds.
•To understand the fundamentals of net asset value (NAV) computation and various investment plans.
Who will benefit from this course?

•Students
•Investors
•Financial planners
•Analysts
•Equity researchers
•Anybody having interest in the Indian mutual fund industry
Test details

Duration: 120 minutes

No. of questions: 60

Maximum marks: 100, Passing marks: 50 (50%); There is no negative marking in this module.

Certificate validity: For successful candidates, certificates are valid for 5 years from the test date.

Fees

1,500/- (Rupees One Thousand Five Hundred Only).

Course outline

•Mutual Funds
Concept and structure of mutual funds in India; Role of custodian; Registrar and transfer agent; AMC; New fund offer's & procedure for investing in NFO; Investors rights and obligations.
•Mutual Fund Products and Features
Concept of open ended and close ended fund; Types of funds - equity, index, diversified large cap funds, midcap fund, sector fund and other equity schemes; Concept of entry and exit load; Expense ratio; Portfolio turnover; AUM; Analysis of cash level in portfolio.
•Gold ETFs
Introduction to exchange traded funds; Market making by authorized participants; creation units; Portfolio deposit and cash component
•Debt Funds
Salient features of debt fund; Concept of interest rate and credit risk; Pricing of debt instrument.
•Liquid Funds
Salient features of liquid funds; Floating rate scheme and portfolio churning in liquid funds.
•Taxation
Taxation of capital gains; Indexation benefit and FMP.
•Regulations
Role and objectives of AMFI; Different types of plans; Systematic Investment Plan (SIP); Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP); Dividend payout.

Markets and Financial Instruments

This is a basic level programme for those who wish to either begin a career in the financial markets in India or simply learn the fundamentals of capital markets. The course is structured to help understand the basic concepts relating to different avenues of investment, the primary and the secondary market, the derivatives market and financial statement analysis.

Why should one take this course?

•To get a basic understanding of the products, players and functioning of financial markets, particularly the capital market.
•To understand the terms and jargons used in the financial newspapers and periodicals.
Who will benefit from this course?

•Students
•Teachers
•Investors
•Employees of BPOs/IT Companies
•Employees of Brokers/Sub-Brokers
•Housewives
•Anybody having interest in the Indian securities market
Test details

Duration: 120 minutes

No. of questions: 60

Maximum marks: 100, Passing marks: 50 (50%); There is no negative marking in this module.

Certificate validity: For successful candidates, certificates are valid for 5 years from the test date.

Fees

1,500/- (Rupees One Thousand Five Hundred Only).

Course outline

•Markets and Financial Instruments
Types of Markets: Equity, Debt, Derivatives, Commodities; Meaning and features of private, public companies; Types of investment avenues.
•Primary Market
Initial Public Offer (IPO); Book Building through Online IPO; Eligibility to issue securities; Pricing of Issues; Fixed versus Book Building issues; Allotment of Shares; Basis of Allotment; Private Placement.
•Secondary Market
Role and functions of Securities and Exchange Board of India (SEBI); Depositories; Stock exchanges; Intermediaries in the Indian stock market; Listing; Membership; Trading; Clearing and settlement and risk management; Investor protection fund (IPF); and Do's and Don'ts for investors, Equity and debt investment.
•Derivatives
Types of derivatives; Commodity and commodity exchanges; Commodity versus financial derivatives.
•Financial Statement Analysis
Balance sheet; Profit & loss account; Stock market related ratios; Simple analysis before investing in the shares; understanding annual report; Director's report etc.

Crude oil & Rate hike shock for markets

Renewed optimism that central bankers across Europe will take steps to ease the sovereign debt crisis fuelled a relief rally in the global stock markets. The developed markets registered healthy gains while emerging markets ended the week on a flattish note. The US stock markets rallied for five consecutive days and were up 4.7% during the week. However, it would be interesting to see whether the current momentum continues in the next week or not. Investors are keenly eyeing the outcome of the Federal Open Market Committee (FOMC) meet scheduled on Tuesday. Further, existing home sales data for the month of August would also be released on Wednesday. The outcome of these events is likely to set the momentum for next week's trade.

Indian stock markets managed to stay afloat during the week notwithstanding another rate hike undertaken by the central bank. Positive global cues overweighed rate hike concerns with Indian shares registering gains for third consecutive week. Amongst the other markets, Germany was up 7.4% while UK was up 2.9% during the week. However, Singapore (down 1.3%) and Hong Kong (down 2.1%) closed the week in red.

Now, let's take a look at key economic developments during the week. In its mid-quarter review of the monetary policy, the Reserve Bank of India (RBI) has continued with its hawkish stance. By raising the repo and the reverse repo rate, the central bank has now hiked policy rates for the 12th time in last one and half years. The repo rate was raised by 0.25 percentage points to 8.25%, while the reverse repo rate will now be 7.25%. The primary reason for the same has been the persistently high inflation that has been prevailing for quite some time now, which has been well out of the comfort range of the central bank. The latest IIP (Index of Industrial Production) was also quite low at 3.3% and many companies are facing the pressure of rising interest rates and input costs, which have hurt profits. Thus, it would be interesting to see for how long the RBI continues with its monetary tightening measures.

To combat firm international fuel prices and slide of rupee against dollar, petrol prices have been raised to the extent of Rs 3.14 at the end user level. The ad hoc price increase may to an extent reduce under recovery losses for state oil retailers and subsidy burden for companies like Oil & Natural Gas Corporation (ONGC). However, such piecemeal measures are just crude shocks to consumers and no substitute to clear pricing and subsidy sharing formulae for the sector. Rise in crude oil prices will further stoke inflation which is already above the comfort zone.

As per a leading financial daily, power companies may default on their loans. Companies like Power Finance Corp, Rural Elect., Tata Power, and Reliance Power are reeling under low tariffs, scarcity of fuel and land acquisition problems. Their new plants are not operating at the targeted capacities. They are likely to default on loans worth Rs 1,350 bn. As a result, banks are exercising caution while sanctioning loans for power projects. As per the Reserve Bank of India (RBI), banks have an exposure of Rs 2,923 bn loans to this sector. Of this half the loans have not yet been utilized and fund flow to new projects has almost stopped.

Now let's take a look at key corporate events during the week. Infosys is the frontrunner to acquire the health care business of Thomson Reuters. The deal is estimated to be worth approximately US$ 700 m. The health care unit is a provider of data, analytics and performance benchmarking solutions and services to companies, government agencies and health care professionals. This acquisition is a part of Infosys' strategy to diversify beyond banking services. The IT company had earlier maintained that healthcare is one of the key focus areas going forward. This is because health care, as a part of revenue contribution, was just about 1.1% at the end of the quarter ended June 2011. This is far less compared to Wipro which had 11% and TCS which had 6% contribution from healthcare.

Power major NTPC is expected to raise generation capacity to 36,000 MW by the end of this fiscal with the commissioning of two more 660 MW units at Sipat power project. The first 660 MW plant has already been commissioned. The 1,980 MW Sipat power project is the company's first supercritical plant and is 2% more efficient as compared to other thermal plants. Further, the company is working on projects of about 40,000 MW at present. Projects with capacity of over 14,000 MW are under various stages of implementation. It must be noted that NTPC is targeting to become a 128,000 MW company by 2032 with 28% capacity from non-fossil sources. NTPC's share in the country's generation was 27.4% in 2010-11, with 17.75% of the national capacity. It has planned capex of Rs 264 bn for FY12. However, fuel linkages and execution will be the key.

State owned Steel Authority of India Ltd. (SAIL) is set to raise its production from its iron ore mines to about 38 m tonnes. The move is in tandem with the company's Rs 700 bn mega expansion plan wherein it will increase hot metal capacity from 13 m tonnes to 23 m tonnes by 2012-13. In order to meet the higher raw material requirement, SAIL is following a three-pronged strategy to double its iron ore output from its captive mines at an expected investment of about Rs 103 bn. First, the company will increase production from existing mines through de-bottlenecking and deploying high capacity heavy earth moving equipment. Second, the company will enhance the capacity of existing mines at Kiriburu, Meghahatuburu, Bolani and Gua. SAIL also plans to develop new mines at Chiria and Taldih.


Movers and shakers during the week
Company 9-Sep-11 16-Sep-11 Change 52-wk High/Low
Top gainers during the week (BSE-A Group)
GTL Ltd 53 63 19.8% 440/49
Tulip Telecom 145 157 8.1% 200/132
Madras Cement 94 101 7.9% 128/81
Financial Technologies 800 861 7.6% 1430/690
Indiabulls Financial Services 151 162 7.4% 240/138
Top losers during the week (BSE-A Group)
Pantaloon Ltd 301 259 -13.8% 521/233
Marico Ltd 161 141 -12.3% 169/114
Koutons Retail 24 21 -11.9% 306/19
Indian Overseas Bank 113 101 -10.9% 175/102
Jet Airways 302 272 -9.8% 910/256

Source: Equitymaster

The recent rate hike undertaken by RBI has raised concerns over the already struggling real estate sector. The industry is currently besieged with high input cost and slumping sales due to waning buyer interest. And thus the current hike may not bode well for the industry. With festive season approaching there was an expectation that absorption rates across key cities may witness an uptrend. However, increase in repo rate means that home loans are about to get costlier. This would deter sales and further excruciate the pain for the developers. Unless the RBI dilutes its hawkish stance thereby making credit cheaper we do not expect a meaningful traction as far as home sales volumes are concerned.

The Meaning of the Different Stock Trading Signals

Skilled investors sometimes base their decisions by reading the different signals that are given off by clearly defined market conditions. Some signals may indicate a favorable time to buy stocks while some may indicate a favorable time to sell. Because the value of particular companies can be watched daily, long-term investors do not consider signals to be that crucial. Day-traders, however, consider these signals to be very important because they have to act quickly in order to keep up with the stock market movements.

Full-time investors have the chance and the time to watch the stock market movements for some signals. Signals can be automated and integrated into trading software that allows the investors to choose which signals to be alerted about. These signals automatically appear on the screen. A lot of services charge hundreds of dollars every year for a complete package of software signal subscriptions. Aside from the trading software, the package also offers an access to up-to-the-minute charts for the latest information about the stock market.

A subscription to services that publish signals on either a daily or an hourly basis is one of the best options for investors who cannot watch the market movements closely. Market analysts are employed by these services to follow the indicators in order to arrive at a particular signal. The systems of these services are now completely automated. The signals are now being generated by software that examines the different market conditions. When relying on a third-party signal provider, investors will do better if they know how the signals are being generated. A large number of market indicators can actually cause a contradiction among the different indicators. There are even some indicators that send out conflicting signals depending on the time frame.

The accuracy of indicators is also reliant on the market conditions. An upswing in the market will cause trend indicators to send out buy signals but it will cause long-term oscillator indicators to send out sell signals because it will view the market as being overbought. Trend indicators are most accurate during trend conditions and oscillators are most accurate during transitions. The two types of indicators are almost always in variance with each other.

One way of overcoming these problems is to find a signal generator that uses at least three market indicators for verification purposes. Because they are verified by three different indicators, the signals are considered to be strong and accurate. Looking at signals from different time frames is also important. Upswings may be short-term corrections and they may result to a downward movement afterwards. A broad view of the different market conditions allows the investors to see the variations more clearly.

Signals, depending on the type of service subscribed to, can be delivered via emails, viewed on websites, or integrated into trading software. The latter causes the appearance of screen pop-ups for the particular signals being watched out for. These signals may be delivered either on a daily basis or a monthly basis. Some companies offer expensive services that charge up to several hundreds of dollars for every month. The more expensive services are obviously intended for professional traders and investors.

Individual investors need to weight the value of the different signal services. Although they can be great time savers, these services can also encourage laziness when it comes to market analysis. Aside from having the necessary tools which are needed to judge signal system effectiveness, knowledgeable traders also have the ability to make calculations so that they can stay on the top of their games.

The Truth about Stock Splits

The prospect that a certain stock may split to give the stockholders twice as many shares as they had before is one of the most alluring myths that surround the stock market. Although investors have more stocks after a split, the value of each share they receive is actually reduced. A company that decides to split its stocks will issue one new share for every single outstanding and will cut the value of each share in half. Even if the shares of the stockholders actually double, the total value of the stocks are still the same as before.

The reason why companies do stock splits can be explained by investor psychology. A stock with an excessively high price-per-share will cause the investors to feel that it is out of their reach. To make the shares more affordable to smaller investors, the company will opt for a stock split in order to reduce the price of the stocks. Small investors can actually buy a smaller number of pre-split shares for the same price but they sometimes opt to buy split shares due to the appeal of buying stocks for much lower prices.

There are a lot of ratios used in splitting stocks but the most commonly used are 2-for-1, 3-for-2, and 3-for-1. The reduction of the number of outstanding shares that will cause the stockholders to have fewer shares than before is called reverse splitting. Reverse stock splits are less common than stock splits. There are several reasons why companies do reverse stock splits. These may be due to an attempt to stave off possible de-listment on the stock exchange, an effort to push out minority stockholders from the company, an attempt to shed off possible consideration as a poor investment, or an effort to push through ideas of going private.

Advantages
A low price per share can result to greater liquidity since stocks with lower prices are easier to sell. This is true especially for the stocks which are priced in hundreds of dollars because small investors consider them to be out of their budget. The high bid/ask spread, which is the difference between the buying and selling prices, can also put off bigger investors.

A stock split is considered to be an indicator of a bullish market, which is a market condition wherein the prices of the stocks and the profits of the companies both increase. Even if there is a short-term rally around a stock that splits, the market tends to normalize after a short period of time. The possibility that the investors will expect the company to perform much better is one downside of stock splits. If the expectations are not met, the investors will tend to lose their confidence which will then cause a drop in the share prices.

The bottom line is that stock splits do not have any effects on the worth or the performance of a company. Although it may be nice for the investors to own more shares, they also have to face the fact that the value of their shares still remains the same.

Types of Stock Brokers

Stock brokers handle most of the buying and selling activities on the stock market. An average investor will hire the services of a broker to handle his trades. A broad range of brokerage services is available nowadays. Full-service brokers can give advice about which stocks to buy or which stocks to sell. They often have full research facilities that they use to analyze market trends and to predict market movements.

The services provided by full-service brokers do not come in cheap since they charge the highest commission rates in the industry. Hiring a full-service broker is optional and it depends on the number of trades level of confidence, and the knowledge of stock markets of the investors.

Some investors, with the hopes of saving on commission fees, hire discount brokers instead. Although these types of brokers ask for much lower commissions, they don’t offer advice or analysis like full-service brokers. Discount brokers are ideal for those investors who like to make their own trading decisions. Some investors use both types of brokers for strategic purposes.

Some brokers offer better rates by operating exclusively online. There are even some full-service and discount brokers who offer discounts for orders which are placed online. Online brokerage is considered to be the least expensive way of trading stocks.

Investors need to open an account. Every broker sets his own requirements for the maintenance of an account balance. This is usually between $500 to $1000. Before choosing a broker, investors have to look at the fine print first in order to know more about he involved fees because some brokers charge annual maintenance fees. There are even some brokers who charge fees every time the account balance falls below the minimum.

There are two basic types of brokerage accounts: a cash account and a margin account. In a cash account, an investor has to pay the full amount of the stock price that he wants to buy. In a margin account, however, an investor is given the chance to buy the stock “on margin” which means that the brokerage will carry some of the cost of the stock. The amount of the margin, which varies from broker to broker, has to be protected by the value of the client’s portfolio. Adding more funds or selling some stocks are the only two options of the investor in case his portfolio falls below the specified amount. The investors, through the margin accounts, are allowed to buy more stocks with less cash thereby realizing greater gains and losses. Inexperienced traders are not recommended to opt for margin accounts since they are a lot riskier than cash accounts.

Choosing a particular broker has to be based on the specific needs of the investor. If an investor wishes to receive advice about which stocks to buy or to sell and yet he is uncomfortable with making trades on the Internet, then he is suggested to hire a full-service broker. On the other hand, technology savvy investors with enough confidence and knowledge to make their own trading decisions are better off with discount brokers.

After deciding on which type of broker to hire, investors are advised to compare a few competitors in order to find out the significant differences in the costs. When choosing a broker, investors also have to consider the number of trades to be made, the amount of cash to be deposited, the type of margin accounts to be used, or the kind of services to be rendered

stock market Fundamental Analysis

Even if the raw data provided by financial statements contain some useful information, the value of a stock will be easier to understand if a variety of tools is applied to the financial data.

Earnings per Share
The overall earning is not, in itself, a useful indicator of the worth of a company’s stocks. Low earnings that are coupled with low outstanding shares can actually be more valuable than high earnings that are coupled with high outstanding shares. The earnings per share is considered to be a much more useful information than the earnings itself. Earnings per share (EPS) is calculated by dividing the net earnings by the outstanding shares. Although it is useful for comparing two companies, the earnings per share is not the deciding factor to be used when it comes to choosing stocks.

Price to Earning Ratio
The financial tool that shows the relationship between stocks prices and company earnings is called the price to earning ratio (P/E). It is calculated by dividing the price per share by the earnings per share. The P/E shows just how much the investors are willing to pay for a particular company’s earnings. There are various ways to read P/E’s. A high P/E can indicate either the company’s overpricing or the investors’ expectation that the company will continue to grow and generate profits. A low P/E, on the other hand, can indicate either the wariness of investors toward a company or the overlooking of that company. Further analysis is needed to determine the true value of a particular stock.

Price to Sales Ratio
There are other tools that investors can use to judge the worth of a company that has no earnings. The lack of earnings doesn’t necessarily indicate that a company is a bad investment. It could mean that a company is still new and it is still starting to generate business. The price to sales ratio (P/S) is a useful tool that is used to judge the worth of new companies. P/S is calculated by dividing the market cap, which is the stock price multiplied by the outstanding shares, by the total revenues. An alternate method to this is to divide the company’s current share price by its sales per share. P/S indicates the value that the market places on the sales. A lower P/S indicates a better value.

Price to Book Ratio
Due to the potential for future revenue, the value of a growing company is always more than the book value. The book value can be determined by subtracting the liabilities from the assets. The value that the market places on the book value of the company is called the price to book ratio (P/B). It is calculated by dividing the current price per share by the book value per share. A company with a low P/B has a good value and it is often sought after by long term investors who see its potential.

Dividend Yield
There are some investors who look for stocks that can maximize the dividend income. One tool that is used to determine the percentage return that a company pays in the form of dividends is the dividend yield. The dividend yield can be calculated by dividing the annual dividend per share by the price per share of the stocks. Older and well-established companies not only pay a higher percentage but they also possess a more consistent dividend history than younger companies.

stock market Fundamental Analysis

Fundamental analysis is one of the most useful tools that investors use when making decisions about which stocks they’re going to buy. It is a process of examining key ratios that show the current worth of a stock and the recent performance of a company.

Fundamental analysis is used to determine the amount of money a company can make and the kind of earnings an investor can expect. Future earnings may be subject to interpretation but good earning histories create confidence among investors. The stock prices may increase and the dividends may pay out.

Stock market analysts determine whether a company is meeting its expected growth by examining the earnings that are reported by the company on a regular basis. If the company doesn’t meet its expected growth, the prices of its stocks usually experience a downturn.

There are a lot of tools that are used to determine the earnings and the value of a company on the stock market. Most of these tools rely on the financial statements released by the company. Details about the value of a company which include competitive advantages and ownership ratios between the management and the outside investors can be revealed through further fundamental analyses.

Financial Statements
Public traded companies are required to publish regular financial statements. These statements are available either in printed forms or in online pages. These statements include an income investment, a balance sheet, an auditor’s report, and a cash flow statement. They also include a description of the planned activities and expected revenues for the coming year.

Auditor’s Report
One of the most important sections found in financial statements is the auditor’s report. The auditor, who is an independent Certified Public Accountant (CPA), is the one who examines the financial activities of the company in order to determine whether the financial statement is an accurate description of the earnings or not. A financial report is considered worthless without an independent auditor’s report because it might contain some misleading or inaccurate information. Although it is not a guarantee of accuracy, an auditor’s report provides credibility to the financial statement.

Balance Sheet
The balance sheet, which is another important section in financial statements, serves a “snapshot” of the company’s financial condition at a single point in time. It shows the relationship between the assets such as cash, property, and equipment; the liabilities such as debt; and the equities such as retained earnings and stocks.

Income Statement
The section in financial statements that shows the information regarding the company’s net income, revenue, and earnings per share over a certain period of time is called the income statement. The top line of the income statement shows the amount of income that is generated by sales, underneath which the costs incurred in doing business are deducted. The bottom line shows the company’s net income or loss and the company’s income per share.

Cash Flow
The cash flow statement shares some similarities with the income statement because both sections provide a picture of a company’s performance over time. Unlike the income statement, the cash flow statement doesn’t use accounting procedures like depreciation. It simply indicates how a company handles its income and its expenses. The cash flow statement shows the incoming and outgoing cash from the sales, the investments, and the financing of a company. It is used as a good indicator of how the management runs the company and how the company handles the creditors. It also shows from where a company receives its growth capital.

Lack of information about the company, Low liquidity, Potential fraud

Low-priced stocks of small companies that usually carry a value of less than $5 are called penny stocks. These type of stocks are traded on the Over-the-Counter-Bulletin-Board (OTCBB) and the Pink Sheets. Both of the mentioned trading venues do not have the same kind of minimum requirements of exchanges as those which are set by the Securities and Exchange Commission for the NASDAQ or the NYSE. Penny stocks are issued by those companies that are either starting businesses or approaching bankruptcy. A new issue of stocks is one way of injecting quick capital that can be used to save the business.

Lack of standards, lack of stability, and decrease of prices are some of the factors that cause penny stocks to be one of the riskiest investments around. Although successful companies experience a great payoff, a vast majority of penny stocks often end in bankruptcy. Here are some of the reasons why penny stocks are considered to be risky:

Lack of information about the company
Most companies have very little reportable history and those which are listed in the Pink Sheets or in the OTCBB aren’t required to issue financial statements.

Low liquidity
Finding potential buyers is difficult because penny stocks are infrequently traded. In order to interest an investor to buy the stock, the price of the penny stocks need to be lowered substantially.

Potential fraud.
Penny stocks, as a result of their unregulated nature, are often sold by con artists through spam emails or off-shore brokers.

Not all penny stocks are issued to gain money by fraud or to deal with bankruptcy. There are some penny stocks which are used to represent hard-working businesses that are struggling to meet the necessary requirements to get listed on NYSE of NASDAQ. Investing in such companies offers real growth potential because investors have the opportunity to get in at the ground floor and ride all the way to the top.

Finding companies with this growth potential is difficult. A lot of research is needed to get this information. Unless they willingly take the time to personally investigate a company, investors could be victimized by fraud. Nowadays, there are some companies that offer “inside information” about which companies sell penny stocks. Investors always have to be extra careful since there are other companies which only serve as fronts for pushing particular stocks on unsuspecting investors.

The two ways to play the penny stocks are to do research and to play craps. Since the stocks come with low costs, investors will not lose vast amounts of money in case the company goes under. Penny stocks are also considered to be interesting additions to any portfolio. It must be stressed, however, that only a small portion of any portfolio should consist of penny stocks because the odds are that most penny stocks will end up in a total loss.

Investors who are interested in buying penny stocks need to find a broker that will place orders for them. Although a lot of brokers will not cover penny stocks due to the difficulty in tracking them, there are some online brokers who specialize in penny stocks. Regulations require brokers to receive a written confirmation from their clients concerning the transactions. Brokers are also required to provide their clients with a document that outlines the risks of speculating with penny stocks.

The current market price of the stock and the compensation amount of the firm has to be disclosed by the broker. They also have to provide their clients with monthly statements that detail the market value of each penny stock in the account

How Stocks Are Priced or valued

Many people are still confused about the pricing of stocks and the movements of prices when they read through the list of stock prices in the newspapers. There is a wide variety of stock prices and there are many people who kept on wondering why some well-known companies are being traded for relatively low prices while some lesser known companies are being traded for excessively high prices.

Stock prices, to a certain extent, are determined by the confidence of an investor that is based on either a real or a perceived performance. The financial status of companies are reported on a quarterly basis when their cash flow, sales, and earnings are disclosed. The worth of a company is based on its financial status but it can be overrode or undermined by the speculation of the investors.

Rumors spreading in the stock market usually affects the fate of the stocks. For example, an ongoing rumor stating that a particular company is planning to make a strategic move will cause investors to come flocking just to buy stocks from that company. The principle of supply and demand applies in the stock market. A sudden upsurge in the interest of investors will cause the stock prices to rise while a fear among investors will cause the prices to plummet. The worth and the performance of a company are still considered to be the biggest factors in the determination of stock prices.

Stock prices can be found in the daily market summaries of newspapers or online sources. They provide information about the current prices and market movements around the clock. Stock brokers also provide quotes which can be accessed either via the Internet or via a telephone.

A stock quote table, which can be found in a newspaper or an Internet website, contains useful information that can help investors to make their decisions regarding the buying or selling of stocks. Reading a stock table requires a necessary skill for anyone who is interested in the activities of the stock market.

Latest Change 52 Weeks
symbol price net % time high low volume high low
BCE 31.150 -0.480 -1.52 16:57 31.750 31.110 3,643,000 33.000 27.150
BGM 17.060 -0.280 -1.61 15:54 17.300 17.040 207,400 26.850 17.110
IBM 79.820 -0.290 -0.36 16:01 80.680 79.560 4,999,200 99.100 71.850
MSFT 24.670 -0.310 -1.24 16:00 25.050 24.670 73,696,700 27.940 23.820

The first column of the stock quote table contains a 3 or 4-character long ticker symbol that indicates the name of the company. For example, BCE stands for Bell Canada Enterprises while MSFT stands for Microsoft. The list of ticker symbols can be searched through the Internet.

The latest price indicates the current price at the time the table was published. The latest price in the tables found in newspapers describe the closing price for the day. The prices in the Internet, however, are updated every few minutes.

Change is the difference between the previous day closing price and the current stock quote. High indicates the highest price while Low indicates the lowest price of the stocks sold as of the last trading day. Volume describes the number of shares that have been traded for the day. The 52-week High and Low shows the highest and lowest prices in the previous year.

Some tables contain additional columns to make room for other information such as the Bid Price, which is the price a buyer is willing to pay; the Ask Price, which is the price a seller is willing to sell; the Price/Earnings Ratio, which is the stock price divided by the earnings per share; the Market Cap, which is the outstanding shares multiplied by the current market price; and the Dividends Per Share, which is the current annual dividend that the company pays.

Stock Market notes

Stocks can be bought and sold by anybody who has money. Knowing the basics will help people understand how stock trading works despite the process’s own specialized vocabulary. People who have knowledge about stock trading are the ones who are most likely to be successful in the investment industry.

Most stock trading activities are done through an intermediary called a broker. Brokers, who take and execute orders from the investors, can also offer investment advices and analyses to their clients. Such brokers are called full-service brokers and they charge a relatively high commission. The types of brokers that do not offer investment advices to their clients are called discount brokers. Investors who wish to save more money usually hire discount brokers because they charge less commission.

Online trading and broker-assisted trading are two of the most commonly offered services by brokers. There are some brokers who use an Interactive Voice Response System for placing orders via telephones and a Wireless Trading System for making orders via web-enabled cellular phones or other handheld devices.

There are some brokers who use their own proprietary software for placing online orders while some give their website passwords for accessing order departments. Brokers allow their clients to track the stock market movements by offering a variety of charting options. The analysis software provided by brokers may be included in their services either for free or for an extra fee.

Types of Orders
The orders made when buying or selling stocks can be classified into different types. An instruction to buy or sell a stock at the current market price is called a “market order.” This order is usually executed near the quoted price at the time of the order was made. There may be a difference between the actual transaction and the quote if there is some inactive trading of stocks or rapid fluctuation of prices.

An expectation of stock price movements that leads to the interest of buying or selling stocks at a certain price above or below the current price initiates the placing of either a “stop order” or a “limit order.” A stop order instructs the broker to trade at a certain stock price, while a limit order instructs the broker to trade at a specified stock price or something better.

Stop orders, which help in limiting losses and protecting profits, become effective when the market hits the stop price. Because the stocks are traded at market price after they become active, brokers who are given stop orders are allowed to trade above or below the stop price. Limit orders, on the other hand, may not be placed at all even if the market reaches the limit price. The fast movement of the market may not provide enough time to execute the order before the price falls out of the limit price range.

For example, an investor buys a share of Bell Canada Enterprises (BCE) at $50 and put in a stop order of $45. If the BCE stock price falls to $45, the stop order will become effective and the stock will become available at market price. Conversely, if an investor buys BCE for $60 and put in a limit sell, then his stocks will be sold at a profit only when the price rises to that level. The investor can also buy BCE with a limit buy order for $45 to allow him to possibly buy the stock at a price that is less than the current market price. If the price doesn’t fall to the limit buy price, however, the investor cannot buy that stock.

All orders can be placed as either “good ‘til canceled” (GTC) or “day order.” A GTC order will remain in effect until it is canceled but a day order will remain in effect only until the end of the current trading day. Stocks are commonly traded in multiples of 100 that are called “round lots.” Trading other amounts of stocks, which is called an “odd lot,” is also possible. Trading software can handle either type of orders but odd lot orders are considered to be more difficult to fill than round lot orders.

Stock Market through Technical Analysis, Indicators and Patterns

An untrained eye, when glancing at stock market charts, will only see random movements from one day to the next. For trained analysts, these movements are patterns that they can use to predict the future movements of the stock prices. There are over a hundred different indicators and patterns that can be applied to technical analysis. There is no such thing as a single reliable indicator but investors can be quite successful when it comes to predicting price movements.

Patterns
The Cup and Handle is one of the most popular patterns in stock market price movements. The cup represents the movement of the prices that starts relatively high then dips quite low and comes back up. The prices level out for a period before making a breakout. This period, which indicates a sudden rise in price, is represented by the handle. Buying on the handle usually generates good profits.

The bearish pattern that indicates the substantial fall of prices after a dip and a rise is called Head and Shoulders. This pattern starts with a peak called the first shoulder that is followed by a dip and a higher peak called the head. It is followed again by a dip and a rise that is now called the second shoulder.

Indicators
Moving Average
The moving average is the most popular stock price movement indicator. It shows the average price over a period of time. The most common averages used in this indicator are 20, 30, 50, 100, and 200 days. For a 30-day moving average, the closing prices for each of the 30 days are added before they are divided by 30. Longer time spans are considered to be less affected by the daily fluctuation of prices. A moving average is plotted as a line on a graph of price changes. Prices that fall below the moving average have a tendency to keep on falling while those that rise above the moving average have a tendency to keep on rising.

Relative Strength Index
The relative strength index (RSI) is an indicator that uses a comparison between the number of days a stock finishes up and the number of days it finishes down. It is calculated for a certain time span that is usually between 9 and 15 days. The calculation of the RSI starts off by dividing the average number of up days by the average number of down days. The quotient is then added to one and their sum is divided by one hundred. The result is then subtracted from 100 because the RSI is expressed in a number that is between the 0 and 100. An overbought stock that is due for a fall in price can have an RSI of 70 or above. An RSI that is below 30 indicates a stock that may be oversold. RSI numbers are not absolute and they can vary depending on whether the market is bearish or bullish. An RSI that is charted over long periods of time has the tendency to show less extreme movements. A look at the historical charts over a period of a year or so is one way of comprehending how a stock price moves in relation to its RSI.

Money Flow Index
While the RSI is calculated by following stock prices, the money flow index (MFI) is determined by taking into account the number of traded shares and the prices of the stocks. Like the RSI, the MFI range is from 0 to 100. An MFI of 70 indicates selling while an MFI of 30 indicates buying. When charted over longer periods of time, the MFI can be a more accurate indicator.

Bollinger Bands
Bollinger bands are indicators that are plotted as a group of three lines. The upper and lower lines of the Bollinger bands are plotted according to the volatility of the market. A volatile market is represented by a wide space between the lines. The lines come closer together as the volatility lessens. The simple moving average between the two outer lines is represented by the middle line. A movement of prices closer to the lower band is a strong indication that the stock is oversold and that the price will increase soon. As prices rise to the higher line, the stock becomes more overbought that its prices will begin to fall. Investors use Bollinger bands to confirm the credibility of other indicators. Skilled technical analysts will always use a couple of indicators before making a decision of whether to trade a particular stock or not.

Comprehending the Stock Market through Technical Analysis

The art and science of examining stock chart data and predicting future stock market movements is called technical analysis. This style of analysis is used by investors who are often concerned about the nature and the value of the companies where they trade their stocks in. The holdings are usually short-term since the investors drop the stocks once they reach their projected profit.

The belief that stock prices move in predictable patterns is the basis for technical analysis. The factors that influence the movement of the price are supposedly reflected in the stock market with great efficiency. These factors include company performance, economic status, and natural disasters. The efficiency, when coupled with historical trends, produces movements that can be analyzed and applied to the future movements of the stock market.

Because the fundamental information about the potential growth of a company is not taken into account, technical analysis is not intended for long-term investments. Trades are entered and exited at precise times so technical analysts need to spend a lot of time watching the movements of the stock market. Investors can take advantage of both upswings and downswings in price by going either long or short. In the event that the market doesn’t move as expected, the losses can be limited by stop-loss orders.

Hundreds of stock patterns have been developed over time. Most of these patterns rely on the basic concepts of “support” and “resistance.” The level where downward prices are expected to rise from is called the support while the level where the upward prices are expected to reach before falling again is called the resistance. Once they hit the support or the resistance levels, the prices tend to bounce.


Charts
Technical analysis is heavily reliant on charts for tracking market movements. The most commonly used of these charts are the bar charts. Bar charts contain vertical bars that represent a particular time period. The top part shows the highest price for the period while the bottom part shows the lowest price. There are two small bars in the chart. The small bar in the right indicates the opening price while the small bar in the left indicates the closing price. A large price spread is indicated by long bars. The position of the side bars shows if a price increased or decreased and it also shows the spread between the opening and closing prices.

Candlestick charts are variations on the bar charts. Solid bodies are used by these charts in order to indicate the variation between the opening and closing prices. The lines or shadows that extend above and below the body show the highest and lowest prices. When it comes to the color of the candlestick bodies, black or red represents a closing price that is lower than the previous period while white or green represents a closing price that is higher. The various shapes formed by the candlesticks also describe certain movements in the stock market. A bullish stock, which opened near its low and closed near its high, is represented by a green body with short shadows while a bearish stock, which opened near its high and closed near its low, is represented by a red body with short shadows. There are over twenty different patterns that can be formed by candlesticks

differance between Pink Sheets and Stocks

Pink Sheets is an electronic quotation system for many Over-the-Counter (OTC) securities. The name of the system was derived from the color of the paper where the quotes were originally printed on. Nowadays, Pink Sheets publishes quotations on the Internet. Most of the listings on Pink Sheets are penny stocks.

Securities that are less than $5 in value are called penny stocks. Most of the companies listed in the Pink Sheets are those that cannot meet the requirements of other exchanges like NYSE and NASDAQ. Since the Pink Sheets has no listing requirements, companies opt for this kind of system in order to trade penny stocks. Companies with no financial histories can also be listed on the Pink Sheets.

Although the Pink Sheets is not a registered stock exchange, it can list companies that will otherwise be unable to raise capital through stock offerings. It is not regulated by the Securities and Exchange Commission (SEC). The Pink Sheets is only accessible by brokers who are licensed by the National Association of Security Dealers (NASD). The brokers are required to follow the regulations set by the NASD while the companies are required to follow the Federal and State security laws.

The stocks listed in the Pink Sheets carry more risks than the stocks which are listed on regulated exchanges like AMEX. A lack of financial data usually indicates that a company may be on the effort of preventing bankruptcy or on the attempt of staying afloat. Some companies just use the Pink Sheets as an intermediate to raise capital while still in the process of becoming listed on regular exchanges.

In order to get listed in the Pink Sheets, companies need to hire broker dealers that will quote the stocks. The only requirement is that the broker has to be a member of the National Association of Securities Dealers (NASD). Once they are listed, the companies remain in the Pink Sheets list as long as the stocks are quoted. It is also possible for a stock that no longer exists to stay quoted in the Pink Sheets.

The low cost is the main advantage of buying Pink Sheets securities. Investors who wish to get in on a new company from the beginning are able to pick up stocks for literally pennies. In the event that the company does well and grows, the small initial investment will then pay large dividends.

The main advantage of buying Pink Sheets securities is their low cost. Investors who hope to get in on a new company right at the beginning can pick up stock for literally pennies. In the event that the company does well and grows the small initial investment will pay large dividends.

There is also a very real risk that the company will simply vanish. It will just leave the valueless stock issues behind so investors who are interested in penny stocks listed on the Pink Sheets should be prepared to lose all. Because of that reason, Pink Sheets investments have to represent only a small portion of an overall investment portfolio.

The lack of liquidity in the Pink Sheets listings is another risk that investors need to deal with. Because the volume is generally low and the search for stock buyers is actually difficult in Pink Sheets, a lot of sellers tend to settle for even lower prices just to unload their shares.

diferance between Bull Markets and Bear Markets

There are two ways to describe the general conditions of the stock market: it can be a bull market or a bear market. A bear market indicates the continuous downward movement of the stock market. Conversely, a bull market indicates the constant upward movement of the stock market. A particular stock that seems to be increasing in value is described to be bullish while a stock that seems to be decreasing in value is described to be bearish.

The bull and bear terms do not refer to the short term fluctuations in the stock market. A bear market is the stock market wherein the prices of the key stocks have fallen by 20% or more over a period of at least two months. Prices, even during a bear market, may temporarily increase. Bull markets, being the opposite of bear markets, indicate a rise in the prices of the key stocks over a certain period of time.

The economical state of a country is usually reflected through the stock market conditions. The stock market of an economy with reasonable interest rates and low unemployment rates is considered to be bullish since it is doing just well. Bear markets, on the other hand, usually occur during a slowdown in an economy. The investors tend to lose their confidence and the companies begin to lay off their workers. An exaggerated bear market will eventually lead to a crash that is brought on by panic selling while an exaggerated bull market will actually result to a market bubble that is brought on by investor over-enthusiasm.

Even if most money can be made during bull markets, bear markets also present a lot of financial opportunities. Investors use their knowledge of the characteristics of each type of market as an investment strategy. It is expected that a bullish market will generate a huge number of investors who wish to buy some stocks. Because a bullish market could also mean that the economy is doing well, there will be a lot of people interested in buying stocks since they have the extra money to spend. This kind of situation will cause an increase in the prices of the stocks because there will be a shortage in the supply of stocks. During bear markets, it is expected that a lot of investors will have the desire to unload their stocks and put their money in fixed-return instruments like bonds due to the continuous decrease in the prices of the stocks. Supply tends to exceed demand as money is withdrawn from the stock market. This causes the prices of the stocks to lower even further.

It is easier to make money during bull markets. In a bull market, all dips are temporary and they are going to be corrected any time soon. Since the upward rising of the prices cannot go on forever, the investors need to sell their stocks when the market reaches its peak.

Bear markets are considered to be opportunities of picking up stocks at bargain prices. Approaching the end of a bear market will offer the greatest chance to generate some profit. Since the prices will most likely fall before they recover, the investors have to be prepared for some short-term loss. One investment strategy used during bear markets is short selling. It involves the selling of the stocks that they do not own in the anticipation of further decrease in prices. This strategy gives the investors a chance to buy the stocks for a price that is lower than their previous selling price.

During bear markets, fixed-return investments such as CAs and bonds can also be used to generate income. Defensive stocks, which include government-owned utilities that provide necessities despite the current economic state, are also safe to buy even during bear markets.

how do we Know About Stock Market

“Stock market” is a term used to describe the physical location where the buying and selling of stocks take place as well as the overall activity of the market within a particular country. The correct term to be used in pertaining to the physical location for trading stocks is “stock exchange.” Every country may have a couple of different stock exchanges that are usually traded on only one exchange although a lot of large corporations may be listed in several different locations.

The ubiquity of stock exchanges makes it possible to buy or sell stocks throughout the world. The only restriction to stock exchanges is time. Different exchanges may have differing opening hours based on their local times. The major stock exchanges in the world are the Tokyo Stock Exchange of Japan, the Bombay Stock Exchange of India, the London Stock Exchange of United Kingdom, the Frankfurt Stock Exchange of Germany, the SWX Swiss Exchange of Switzerland, the Shanghai Stock Exchange of China, and the New York Stock Exchange, the NASDAQ, and the AMEX of United States.

The economic health of a country is closely followed by stock markets. Bull markets occur when a particular nation experiences high economic production, low unemployment level, and low inflation rates. Bear markets, on the other hand, follow the down trends in the economy. Such indicators of economic downfall are increased unemployment and inflation. These causes the fall of stock prices.

Supply and demand, which are determined to a large extend by investor psychology, also influence the fluctuations in the prices of stocks. A rise in stocks may cause a lot of investors to jump into the bandwagon which later drives the price even faster. A falling price, on the other hand, can drive the same effect called short term fluctuations. After such runs, stock prices tend to normalize.

Aside from the stock exchange, other popular markets that offer many investment opportunities include the Foreign Exchange Market (FOREX), the Futures Market, and the Options Market. The FOREX is the biggest investment market in the world, in terms of trades and values. The traders in a FOREX buy one currency against another and profit from small changes in the value. Most FOREX trades are entered and exited in a 24-hour span so traders have to keep a close watch on the market in order to make profitable trades.

The futures market is a market of contracts where goods are bought and sold at specified prices and times. The desire of most buyers and sellers to lock in the prices of their goods for a future delivery despite the market conditions resulted to the existence of the futures market. The market conditions can make the actual futures contract to fluctuate considerably in value. Most of the investors in the futures market are mainly interested in the profit that can be realized in trading contracts and not in the actual goods.

Another alternative market is the options market. The options market is quite similar to the futures market because it also features a contract that gives the right, and not the obligation, to trade a stock at a certain price before the specified date. These can be traded on their own or purchased as an insurance against price fluctuations within a specified time frame.

The FOREX, the futures market, and the options market are all quite risky markets that require a considerable knowledge and experience to prevent any substantial loss. These also require a very close attention to the different market movements. As compared to the three, stocks are considered to be less risky because the movements of the market are usually gradual and although short term investment strategies are possible, a lot of people view stocks as long term investments.

Understanding the Importance of Stocks and stock market

A stock is a small share that represents a partial ownership of a company. Stocks are issued by companies in order to raise capitals and are bought by investors in order to acquire a portion of the company.

Even a small share of the company will give the investors the right to have a say in how the company is run. Although they gain a portion of the company’s profits, investors do not carry an obligation to the company in cases of defaults or lawsuits.


Investors buy stocks with the belief that the company will grow continuously to raise the value of their shares. Acquiring stocks from a new company is considered to be more risky than buying shares from a well-established company but the potential gain is much greater. People who invested in Microsoft shares gained a lot of profit due to the exponential rise of the company.

Only those companies which are listed on public exchanges like the New York Stock Exchange (NYSE) or the National Association of Securities Dealers Automated Quotation System (NASDAQ) are capable of stock trading.


An individual investor hires a broker to make transactions for him. A broker takes specific orders from the investor regarding the buying or the selling of stocks. These orders may include some specific instructions to trade at a price that the market will bear or at a price that the investor will prefer. The broker then tries to execute the investor’s orders by searching for either a buyer or a seller. The broker receives a commission on the sale.

Stocks have a lot of advantages over savings investments because they represent ownerships in a particular company. This gives the investor a certain right to participate in making decisions for the company. Some important company matters require voting and one stock is equivalent to a single vote.

Stocks, when compared with savings investments, both carry a higher risk of losing money and a higher potential of earning money. A good knowledge of the different stock markets and the various investment strategies can help investors to minimize their losses.