In the stock market it’s not impossible to watch a stock move up dramatically in a matter of hours or days. Investors and traders can make great money and fatten their wallets every time this happens.This seems great for every one that wants to try their fortune in the stock market, but the problem is that if you don’t know what stocks to look for and how to properly approach them you could end up wasting cash instead of making your profits grow. That’s why the most important aspect of stock trading is the knowledge FILTER you employ to make your buy and sell decisions. There are many “fantastic” stock systems and trading strategies out there, but you need to test them in order to discover which ones help you the most. That’s part of your homework as a stock trader. Test, test and test again. Complicated stock trading strategies that rely on a “boat load” of technical analysis indicators can make you slow, and being slow when trading stocks can be as dangerous as not knowing what to do in the first place.

The worst thing that can happen to a beginner trader is to get information overload. It’s better to go step by step, and test a practical stock trading strategy that can show you how to focus on concrete ways to make money while picking SOLID hot stock trading opportunities once at a time. In essence, You can be sure that the trading method you employ to approach the stock market and pick stocks can make a big difference in your results as a trader.

Fortunately some sites on the web can show you how to take advantage of stocks in a practical way every week by minimizing risks. One of those sites is Momentum Stock Pick at http://www.ChatHotStocks.com 

They focus on picking certain stocks that can generate excellent gains on the same day.

Visit them today and learn how to take advantage of the market by picking the hottest opportunities this season.

Fear of Missing Out

Every trend always has its doubters, but I often notice that many skeptics of a trend will slowly become converts due to the fear of missing out on profits or the pain of losses in betting against that trend. The fear of missing out can also be characterized as greed of a sorts, for an investor is not acting based on some desire to own the security – other than the fact that it is going up without him on board. This fear is often fueled during runaway booms like the technology bubble of the late-1990s, as investors heard their friends talking about newfound riches. The fear of missing out came into play for those who wanted to experience the same type of euphoria.

When you think about it, this is a very dangerous situation, as at this stage investors tend essentially to say, “Get me in at any price – I must participate in this hot trend!? The effect of the fear of missing out is a blindness to any potential downside risk, as it seems clear to the investor that there can only be gains ahead from such a “promising” and “obviously beneficial” trend. But there’s nothing obvious about it.

We remember the stories of the Internet and how it would revolutionize the way business was done. While the Internet has indeed had a significant impact on our lives, the hype and frenzy for these stocks ramped up supply of every possible technology stock that could be brought public and created a situation where the incredibly high expectations could not possibly be met in reality. It is expectation gaps like this that often create serious risks for those who have piled into a trend late, once it has been widely broadcast in the media to all investors.

a. Share. Describes the total share holding of a company divided into bits or slices to be purchased by institutions or individuals.

b. Securities. The unit shares you hold are well protected to the extent you invested by the regulatory authorities. Once a share is created, it cannot be destroyed, stolen, and can only be transferred.

c. Equity. Means the distribution and sales of shares are equitably done i.e. once a price is fixed; it remains the same for everybody irrespective of where you live unlike property investment whose prices are affected by location.

d. Stocks. Describes the total volume of shares held by the individual in company.         

e. Rally. Means simply that the stock market goes up from whatever point it stood at when the rally started.

f. Blue Chips. Describes solid, quality stocks on the stock exchange e.g. Nestle, First Bank, Cadbury, Nigerian Breweries, Zenith Bank. The term is derived from the blue chip used in gambling especially in poker, which has the highest value.

g. Correction. When the market has moved rapidly in one direction, then changes (usually not so rapidly) in the other direction.

h. Long pull. How high an investor thinks a stock price will go before they sell.

i. Pull back. When the price rise reaches its peak, slows and then stops and begin to decline or fall back, people begin to sell at this point.

j. Bottom out. When the price has gone as low as it can, investors begin to buy again.

k. Liquidity. When we talk about liquidity on a stock exchange, we are talking about how easily and quickly a company shares can be converted to cash. If it is very liquid, it means is easy to trade in the shares.

l. Bull trend. Upward move or trend. It means the market is going up and is doing well, as reflected in share prices.

n. Bullish. Investor who believes that the market prices are going to go up.

o. Bearish. Investor who believes that the market prices are going to go down.

p. Stag. Investor who wants to make profits from new issues of shares. He buys the shares before they are listed. Then sells them at a higher price soon after they are listed.

q. Automated Trading. Is when the buying and selling of shares is done on a computer? dealers enter buy and sell orders for shares into an electronic trading system on a computer. The computer automatically does a transaction with the best selling and buying prices.                                                                            r. Brokers Contract Note. The broker’s contract note is very important. It shows everything about the deal that the stockbroker has done for you. It tells you how much you have to pay the stockbroker for the shares he has bought for you. If you have sold shares it tells you how much you will receive for the sale of your shares.

s. Certificate of Stockholding. Shows how many shares you own. It is a very important document. You must keep it safe place.

t. Capital Market. Refers to the Stock market, it is a platform for raising money or capital from the investing public to meet company’s financial needs.

u. Money Market. Refers to Banks and other financial institutions that offer loans investment opportunities and capital for businesses.

Getting familiar with stock trading terms is an invaluable asset to any investor worth its salt. Don’t disregard it, it could make the difference in your investing career.

First, to swing trade a stock it must show signs or have a tendency to trend. Some stocks are sporadic in their movement and there is no underlying explanation as to why it moves as it does. Swing traders need a stock that trends or typical trends more than it moves sideways. This is necessary for you to be able to take slices out of the market with your trades.

Secondly, the stock must not be too volatile. Volatile stocks, while offering the potential of a good income if you happen to be on the right side of the trade, make it difficult to swing trade. Swing trading takes time and as a result if a stock moves too fast or too abruptly in any one direction, it does not give you time to plan your entry and exit. The best kind of stock is one that is widely and heavily traded.

Anyone can swing trade stock as long as they first make sure that it is one that tends to trend more than it moves sideways and that it does not move abruptly or erratically without explanation. This will put you on the path to becoming a profitable stock swing trader.

The financial media constantly reports about momentum stocks that are achieving tremendous gains in matter of hours. And even when you can see online traders making $2000 on a single day, it is also not unusual to watch beginner stock investors lose a great deal of cash because of a series of unwise decisions.

The problem is that if you don’t know how to choose among stocks & how to manage the trade, you could end up wasting dollars instead of making your profits grow.

Bogus stock trading software programs and complicated day trading systems that rely on a “boat load” of technical analysis indicators can confuse you and make you slow, and being slow when trading stocks can be as dangerous as not knowing what to do in the first place.

The worst thing that can happen to a beginner stock market trader is to get information overload. It’s better to go step by step, and test a practical trading strategy that can help you focus on simple ways to make money while picking SOLID stock trading opportunities once at a time.

Remember that people from many walks of life have made a fortune in the stock market . It all started when they chose to learn how to DO IT.

Four kinds of sentiments you must avoid as an investor if you want to make fabulous wealth from the  stock market.

1. Sentimental attachment2. Sentimental Rumor3. Sentimental feeling4. Sentimental hastiness

                    Sentimental attachment is when you have fallen in love with a particular stock to the point that you can no longer be objective in terms of current market facts that counts against one patronizing such stocks, listen dear investor you cannot afford to fall in love with any equity as a stock trader, it is absolutely dangerous to the health of your portfolio. Please avoid it like a rat avoids a cat.

 Sentimental rumor. Avoid at all cost, the dangerous habit of trading or buying stocks on the basis of unsubstantiated rumor, note rumors are good when they’re supported with solid fundamental facts. Sentimental rumor can be liken to the herd mentality… follow the direction that everybody is following… Don’t form the habit of trading or buying stocks because you see everyone buying a particular stock, please know the true facts behind the rush before you pitched your tent.

 Sentimental feeling. Avoid trading or buying stocks on the basis of what you feel about a particular stocks, My wife loves Close-up toothpaste with a passion but that cannot translate to making Unilever a sure-fire buy if the company does not have a strong fundamental credentials to encourage me to do so. Your feeling only counts if it is hinged on sound trading ethics or know-how.

 Sentimental hastinessThe hasty spirit makes one to act irrationally, when it comes to making quality decision. The fact that you bought a stock for 15 and it begins to make a loss does not mean that one should rush to sell. I bought both Lasaco and Cornerstone insurance for 3.15 and 4.28 respectively on the 11th of July, 2007, by September both had dipped to 2 and 3, I never panicked because I knew two things. One, that prices of stocks rises and falls according to the dictates of demand and supply. Secondly, I knew by available indices before me that the next sector that will experience a bullish session will definitely be the insurance sector on the basis of solid facts that were available to me, many investors panicked and sold, they recorded huge losses in the process, by the end of November the Federal Government had released the financial reserve of insurance companies back to them. I sold Lasaco 4.85 and cornerstone at 5.20 and both were still rallying up as at the time of writing this article in early January,  2008.

Stock trading realities supports that before you invest in any stock, you must first and above all things sit down and do a thorough analysis on all fronts before staking your money to a stock, this will aid you to be composed and confident. Your trading should be based on sound foolproof facts and not presumptions.

But generally, when you make your trading plan, you must decide where to stop out if the trade goes against you. Do you want to stop out of the stock at a small loss and abandon the trade, or average down by increasing your holdings at a lower price, keeping a loser stop in place even farther down? The best idea is to stop out at a small loss. There aren`t many times when averaging down works. You should limit the averaging down option to extremely low-risk plays with high chances of success. These should be stock trades in which you`ve determined that a price decrease to the level where you`d average down is not a sign of an impending drop but just a temporary move in the stocks range.

The best way to figure this out is by looking at support levels on charts. Averaging down does not mean you don`t have to set stops. It just means you`ll set them lower and give the stock more room to move around before you trade out of it. With appropriate stops in place, you will be practicing good money management. And good money management is the key to protecting your capital, keeping it intact for the stock trades that will create profits.

Once you`ve started to make profits on your stock trades, you need to decide when to exit the position. Your trading plan should tell you when it`s time to exit. Knowing when to exit is vital, because traders who hold on to their positions too long often find that their paper profits disappear. They often end up making no money, or even incurring a loss, on what should have been good stock trades.

To keep this from happening to you, it`s useful to think about how the risk-to-reward ratio changes as a stock you`re holding rises in price. The reward level decreases as the profits in your portfolio increase. There is less reward there because you`ve already collected most of it. The risk rises at the same time. As the price rises to a point where traders start to question how much more it can move, they start to take profits. If the risk is increasing while the reward is decreasing, at some point your risk-to-reward ratio will become unfavorable. You will already know that point is for each trade, since you will have calculated it before you made the trade, according to your trading plan.

Your plan may specify a particular number you`ve chosen as the exit point, or it may tell you to exit when the volume dries up, or to use trailing stops and hold the stock until a trailing stop is triggered. All of these are firm plans that tell you when to leave the position. Your exit plan also may have alternative exit points, and may tell you that if any of several possible things happen, you should exit. These are all good exit plans.

Last, in your stock trades, as long as you have an exit plan in place that is triggered by an unfavourable risk-to-reward ratio, you will never lose your profits. Instead, like all other successful traders you will take your profits at the point that is best for your personal trading style, in accordance with your carefully thought out trading plan.