The Stock Market Essay Research Paper The

The Stock Market Essay, Research Paper

The Stock Market

Have you of all time noticed how everyone thinks they know what is best for you?

Everyone stating you what to make when you are the lone 1 who knows what is the best

for you. You possibly inquiring what this is about, would you believe me if I told you it

is about the stock market. Well it is, you may hold thought that this had nil to make

with the stock market, but really it is everything about the stock market. Why trust

everybody else when you can put yourself? Develop your ain system of trading

and acquire started. This may raise another inquiry, & # 8221 ; How can I find the right stock and purchase

them with out the aid of a stock agent? & # 8221 ; In the undermentioned information I will take

you through the procedure of happening hot stock choices and turning them into enormous

net incomes. Finally you will even develop a trading system.

First of all Lashkar-e-Taibas get the basic stairss down before we move to the more advanced

stairss. The two chief ways to do money in the stock market is from dived terminals and

purchasing low and selling high. To do great hideous net incomes you will hold to riley on

purchasing low and selling high. This is really easy to state but really hard to make. With dived

terminals you will have a little per centum addition every one-fourth of the twelvemonth, this helps with

your net incomes but non much. To purchase low and sell high you foremost have to happen some stocks or

financess. With this information and your motive with stocks you can govern the universe!

O.K. possibly non the universe but decidedly your ain portfolio.

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Now that you have the chief constructs down we can travel on and seek to happen some

hot stocks. You ne’er want to purchase over bought stocks, because over bought stocks

agencies that they are over valued. If you bought a over valued stock opportunities are that you

bought high, and this may coerce you into selling low and take a loss. An easy manner to acquire a

unit of ammunition about feel for a stock to see if it is over or under valued is to look at its PE ratio. To

cipher a PE ratio you take the monetary value per portion and split it by the net incomes per portion

and this will give you the PE ratio. Most of the clip you don & # 8217 ; t even have to happen out the

p.e. ratio because It will be calculated before manus, so wholly you have to make is look at it.

Many analysts like PE ratios under 60 or so, but it depends on the industry PE ratio besides

( another figure that is pre calculated ) ( Frailey,50 ) . This is one of the most of import

figures of a stock. Try to avoid purchasing stocks with high PE ratios for long term retentions,

even if it & # 8217 ; s a good company. For illustration Cisco Systems is a antic company, it has

split nine times in the last 10 old ages, it has ne’er disappointed Wall Street with net incomes but

with a PE ratio of 125 this stock is over valued. I would purchase this stock at approximately 50

dollars a portion with a PE ratio of approximately 60. Even the best companies get over valued.

Buy stocks like Cisco on short term pull dorsums and sell them when they become over

valued.

It is of import to develop some type of trading system that will protect your

capital and widen your additions. I do non believe there is one trading system out at that place that

will use to every stock, so what you must make is modify other systems and develop your

ain ( & # 8220 ; cut and paste & # 8221 ; ) . The & # 8220 ; pyramid system & # 8221 ; is the most practical and utile trading

system in the universe. In this peculiar system you start off with approximately 10s or so single

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stocks that you think will make really good. There is no manner around it, some stock will travel up

and some go down, face it. In this peculiar system you will sell your stocks that diminution

by 10 per centum. Now that you have liquidated some of your stocks you must hold a topographic point

to set the money. You will so set that money into your stocks that are traveling up.

Typically the stocks that start to make good will go on to make so and the 1s that do bad will

besides continue ( Snell 4 ) . You now have started your pyramid system. Selling your stocks

is one of the most hard things to make and frequently merchandising systems do non keep the correct

replies to the inquiry of when to sell your stock. This is where the alteration comes

in to play. If you followed this system you would sell when your stock declined by 10s

per centum. This is a good clip to sell if something basically went incorrect with the

company, but if your stock was over sold it would hold been a bad clip to sell. For

illustration, if you bough

T into Digital Equipment merely earlier Compaq announced they were

traveling to purchase them out, you would hold lost approximately 10 per centum. If you followed the

trading system you would hold sold and accepted a loss of 10 per centum. If you had

realized that this peculiar stock was being over sold because this proclamation was truly

nil to worry about you would hold held on to the stock. Well as a consequence of being

over sold the stock shot up about 100 per centum in the following month, entirely ( Shimo 44 ) .

To happen these sold great companies you have to cognize what to look for in a stock.

I believe that good companies will purchase their ain stock, so I like to look at the per centum

of institutional stockholders of a company before I buy & # 8221 ; ( Sheimo 26 ) . When a company

announces a stock bargain back program it frequently gives the stock a encouragement because it attracts other

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purchasers every bit good as the employees of the company. A low PE ratio is ever nice to see

when looking for a stock to purchase because it can intend that this peculiar stock has more

room to the top than a stock with a high PE ratio. When a stock has good net incomes it

will typically execute good through out the positive earning proclamations. If you stay

with the stocks that have good net incomes it will take down your hazard of fring your capital and

increase your opportunities of spread outing your additions. If a stock has had a existent Nice

public presentation in the last few quarters there is a opportunity that the stock might divide. When a

stock splits 2-for-1 the monetary value is cut in half and the sum of portions you own will duplicate.

A stock split is about all the clip positive for stocks because this will frequently pull new

purchasers into the stock ( Sheimo 89 ) . When stocks get upgraded from securities firm houses with

mark monetary values to travel along with them you will frequently happen a crisp monetary value run up. Some

securities firm houses frequently project the company & # 8217 ; s net incomes for the following twelvemonth or so and this is a

nice figure to travel purchase when researching for new stocks. A 25 per centum of growing in a

company is a nice growing per centum to see in a old ages clip and it would do for a nice

nucleus keeping in any portfolio.

Now that you know what to look for in a stock lets learn about what is good to

avoid in a stock. I become some what nervous when covering with high PE ratio stocks

for long term retentions. Stay off from stocks with PE ratios in the ternary figures, it seems

like it can be really easy to acquire burned from these stocks particularly on the long term facet. I

attempt to avoid stocks without net incomes, but if there is profitableness in the close hereafter and

gross is strong I likely would non allow that stand in my manner of purchasing a stock.

& # 8220 ; Never buy a inexpensive stock merely because it is inexpensive & # 8221 ; ( Sheimo 75 ) , this is one error many

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get downing investors make. Just because you find a inexpensive stock does non intend that it is a

good value. When looking for penny stocks you must make more research that merely looking

at the monetary value, handle it as you would handle any other stock. & # 8220 ; Avoid heavy places in thinly traded

stocks & # 8221 ; ( Sheimo 103 ) . A thinly traded stock is considered to be a stock that has a volume of

10,000 or less a twenty-four hours. If you have stocks that are thinly traded there is a possibility that they

might non merchandise every twenty-four hours and this might do you to be forced to detain a sell and increase your

losingss in that peculiar stock. Be really careful when covering with penny stocks, they are

highly volatile particularly thinly traded stocks.

If you have a serious involvement in the stock market see merchandising your ain stocks and

salvage a small spot of money. Remember the most basic regulation purchase low and sell high. To efficaciously

usage this really simple regulation you must non panic, but you must pass eternal clip researching and

looking for the following large stock while its still little. Never forget the basic regulations of investment,

because those regulations are the regulations that make the difference between the also-rans and the victors.

Never follow a trading system to the point where you ne’er consider exclusions and particular

state of affairss. It is a good thought to research different trading systems to acquire a good feel of how to

trade stocks on your ain. Research a batch of different stocks and use the basic regulations of the

stock market.

Frailey, Fred. & # 8220 ; The King of Wired Investing. & # 8221 ; Kiplingers. April 2000: 50-51.

Sheimo, Michael. Stock Market Rules. New York: McGraw-Hill, 1999.

Snell, JR. & # 8220 ; How To Uncover and Trade Winning Stocks. & # 8221 ; Trader & # 8217 ; s Depot. Available:

9 April 2000