Why Stock Market Prices Rise and Fall By Roger Overanout
Have you ever wondered what make the stock market rise and fall? If you watch the news at all, you will have seen the stock market levels mentioned. You have probably also noticed that the prices rise and fall each day. Why stock market prices rise and fall is a complex question with a complex answer.
There are many factors that affect the price of stocks. Included are inflation, interest rates, domestic political unrest, war or terrorism, crime, fraud and oil or energy prices to name but a few.
All of these factors will drive the price of the stock market up or down. However regardless of these factors, the price of stocks is liquid and it is determined by how much buyers are prepared to spend and how much sellers will take for their stock.
Usually, to tame the rate of inflation, the federal government hikes interest rates. While this slows the inflation rate, it also raises the interest in small lending institution stocks (these are guaranteed by the government, thus VERY attractive here). This in turn moves investors away from equity stocks in lieu of the guarantee available with the small lenders. Risk here is lower, obviously.
This affects stock prices in several areas of the market. What happens is this: say a stock was selling at $20 per share before the interest rate went up from 5% to 6%. So the stock price is figured like this: 1/. 05= $20. After the hike, the price is now down to $16.67 per share or 1/. 06. This represents an almost 17% drop. Taken right across the market, this can adversely affect many other stocks as well and drive the market down temporarily.
A spike in oil prices can and will affect auto prices, food prices, gas prices and many others, thus effectively pushing inflation upwards. This presses the government to raise interest rates and we have the example above all over again.
War abroad can affect the market, too. A recent example is the war in Iraq, which has driven oil prices up to unprecedented levels. We have all seen the exorbitant gasoline prices that have been the result, but now we are seeing hikes in home lending, grocery prices and transportation costs also.
So as you can see, there are many scenarios that can unfold and affect how the stock market prices rise and fall. All these factors play out together in the rise and fall of the stock market. If you watch it closely, you can pick out the trends and accurately predict price hikes, interest rate increases or when inflation will occur again.
Another factor in how the stock market rises and falls is foreign currency rates. As a particular currency fluctuates, stock prices in companies based in that country will react accordingly. When the Japanese yen falls, so does interest in Japanese technology stocks. Conversely, if the US dollar falls to dangerous levels, our government simply prints some more paper money and places it in circulation. This, in my personal opinion, creates a false sense of security in the economy.
However you look at it, stock prices affect how we live every day. All aspects of our daily lives are affected. Grocery prices, gas prices and the cost of buying anything are driven up. So watch the stock market closely. It affects you whether you know it or not.
Easy to Read Stock Charts For the Chart-Impaired Executive Summary About Stock Market Charts By Chris A. Joseph
Unless you're a Wall Street pro or somebody with just a little too much spare time on your hands, you probably think the phrase "easy to read stock charts" is akin to "summarizing the IRS tax code in ten words or less" or "do-it-yourself brain surgery." All those numbers and graphs, and those squiggly lines that look like an EKG of a heart on crystal meth are enough to make the average investor or investor wannabe reach for the Valium.
The thing is, with more investors these days eschewing stock brokers and taking more of a hands-on approach when it comes to their stock portfolios, and with today's shaky market, knowing how to read a stock chart is vital when it comes to being a successful investor.
But nowadays, with folks working harder than ever just to try and keep their financial heads above water, who has the time or money to acquire the knowledge and expertise necessary to study the stock market?
The good news is that with the right tool at your fingertips, you can learn all you need to know about how to analyze the stock market and pick the stocks that will make money for you. And you can do it all in the comfort of your home or office.
The even better news is that the right tool is available to you right now, and it's only a mouse click away. Before you know it, when you hear the phrase "easy to read stock charts," you'll think of another phrase: "easy to make money."
Investing & Online Stock Trading - The Most Expensive Education Possible
Executive Summary About Stock Market Investments By John Atkinson
To date, in our newsletter we have mainly concentrated on trading stocks and Exchange Traded Funds. We understand that some of our members also trade derivatives such as options, warrants and CFD’s.
We consider these to be the domain of experienced traders only, particularly as they are leveraged products which work both ways – they have the potential to magnify losses as well as gains.
We suggest that traders should learn how to successfully trade stocks profitably for a few years first – to master their skills in analysis, money and risk management – before you consider trading leveraged products.
It was with great concern that we received the following from one CFD trader this week:
“Hi,
I have decided to stop trading for 6 months due to "blowing out" my CFD trading account through some poor position sizing and risk management. Nothing I couldn't afford to lose, but I can't afford to lose any more.
As such - I wish to remove all possible trading distractions and hence I request to cancel my subscription as per your one month notice policy. I liked the newsletter and was considering signing up for Boot Camp, but I am afraid I no longer have the funds to trade and really need to reset.
I can see now why CFD's are not much better than poker machines for those people who understand the odds against putting hundreds of dollars into a poker machine and don't play them. (Like myself)
CFD's seemed like a good way to trade on a small account ($5K), but the ease of trading, the commissions on trades (I spent $1000 on commissions when I totalled it all up last week - 20% of my account), the large share parcels on small stop/losses, slippage from gaps all contributed.
The major factor though was some false confidence that I thought I knew what the market was going to do next and so what I thought was trading was probably more punting. In addition, some seminars, trading books, newsletters and software packages added another $5K to the losing experience.
I have decided to step away from trading for 6 months (I have to – my wife won't give me any more of our holiday savings at the moment) - save some capital and re-launch with some education... I will keep an eye out on your web site for the next Boot Camp later in the year.
I will contact you in the future and perhaps re-launch my trading with one of your Camps.
Thanks and regards
John M
PS Thanks again for your interest which I do appreciate - you are no doubt extremely busy… to take the time to personally respond for a $30/mth subscription cancellation email has been one of the positives in my current trading career to date. I look forward to joining you again in the future.
PPS There may be an idea there for an article for your newsletter about the challenges for new traders, psychology and CFD's....
The stock market can provide the most expensive education possible.
Its times like these that traders have to make the decision to quit and walk away completely …….. or pull themselves away from physically trading, consider what they did, what lessons they learnt, then very importantly seek out the education to put themselves back on track .
As we have shown in our newsletter, through the work of Dr Brett Steenbarger, Brian McAboy and Catherine Taylor, the subject of trading psychology is a cornerstone to trading and investing success. Over the past year we have particularly come to appreciate the coaching work of Catherine in helping traders around the world understand themselves better, set goals and strive to achieve more.
Stock Options and Trading With Japanese Candlestick Charts - An Amazing Combination Executive Summary About Stock Market Chart By Doug Fisher
Trading stock options can be enticing for those new to the equity markets. Their relative low cost as compared to the price of the underlying stock is what makes them so appealing since the amount of money laid out can be enormous when purchasing stock rather than stock options. Some people even refer to the options market as the hidden penny stock market although there is no similarity between the two.
One powerful technique that can be used in tandem for the increased possibility of success is the use of stock options and trading with Japanese candlestick charts. Stock options lend themselves naturally to the swing trading style of investing. Swing trading simply means buying a stock or option and holding the position for anywhere from a few days to a couple of weeks or possibly a month or two. Swing trading options is not a long term investment strategy since options have expiration dates.
Japanese candlestick charts have been used since the eighteenth century by rice traders to predict rice prices with great success. Candlestick charts have become the most popular type of chart incorporated by traders into the financial markets, used widely in many different trading systems. Once a trader learns the basics and concepts of candlestick charts, the trader can use them to easily identify possible options trade candidates.
Support and resistance areas are very important to the options trader. Stocks follow patterns and usually trade within a wide range between established points of both support and resistance. Because stocks trade within established patterns, options traders have opportunities to capitalize on the movements between these areas of established support and resistance.
Using candlestick charts, a options trader can easily identify these important areas of support and resistance and quickly determine if individual stocks are suitable for an options trade. For example, if a stock recently fell to a strong support level, this could indicate to the options trader by utilizing the candlestick chart that a winning trade may be a possibility. However, the possibility of a winning trade is not guaranteed. A strong support area revealed by the candlestick chart only shows the options trader that the stock has visited this area of support before and has often bounced off the level rather than proceeding downward through the support level. Although chances are excellent that the stock will bounce and reverse direction at strong support, there is no guarantee that the stock will return to previous levels once the stock touches the strong support level.
Using stock options and trading with Japanese candlestick charts can help the options trader identify possible setups for profitable trades and help improve winning ratios. Candlestick charts have been used for centuries and are an important part of many trading systems among not only options traders, but day traders and forex traders as well.
Buy A Good Stock And Put It Away - Not Executive Summary About Buy Stock By Al Thomas
During market downturns you might call your broker and ask him, "What is happening to my account? It is losing so much money." The standard Wall Street answer is, "Don't worry, the market always comes back." It looks like we are in the beginning of a major bear market and no one knows how far down it will go or how long it will take to come back. This may not be any 1929 crash, but that one took 25 years to recover. Do you have that long? In any bull market everyone is happy as their stocks and mutual funds are making profits. That's how people retire. During the bear phases (and they come at least twice during any 10 year period) the market takes away all or most of the profits. Both technical and fundamental indicators are bearish. The credit crunch is not going away. Oil is closing in on $100/barrel, the U.S. dollar is sinking, consumers are slowing purchases, inflation Is higher than government statistics indicate and the Fed seems confused about what to do. None of those are bullish. Brokers have been saying since time began to 'Buy a good stock and put it away'. What is a good stock? That's easy - it's one that goes up and does not go down. The grandmother of all stocks is American Telephone and Telegraph, AT&T. In 1985 it was $5/share and rose to $58 in 2000. A great move. Then it took away huge amounts of profits with a fall to $20 in 2004 and has since doubled to $40. Where will it go from here - $58 or $20? There are literally thousands of stocks like this that have made great profits for investors and then taken back most of those gains. Unless there is an exit strategy in place the poor investor (pun intended) will remain that - poor. Buy a good stock and put it away. Take a look at the price fluctuation for the past 10 years of General Electric (GE), 60 to 20, now 40. General Motors (GM), 90 to 20, now 30. Coca Cola (KO), 87 to 40, no 60. And many more. These are considered "good" stocks. This also applies to all index funds. Some of these may make new highs, but if we are in a true long term bear market they will decline further. If you or your broker or financial planner does not have an exit strategy to protect your money you could lose 40% to 60% of what you have saved. The only "good" stock or mutual fund is one that does not go down. Is it one you own?
Stock Trading Online - The 3 Essential Tools Executive Summary About Stock Trading Online By Mark Crisp
Tool #1: A Computer
This is an obvious one. In order to trade stock online, one must have a computer. This computer should have the power to be fast and it should at least have Windows XP as an operating system.
Tool #2: The Internet
Another obvious one, right?
What may not be so obvious that the internet should have a broadband connection. Dial-up would take far too long and cause far too many problems.
Also, there should always be a back-up internet service available for stock trading. Even the most reliable internet servers go down sometimes. Being left without access to the internet could be very costly.
Just in case the computer isn’t working and/or both internet servers are down, every day trader should make sure he/she has access to a telephone. That way if he/she needs to exit a trade and doesn’t have internet access, he/she can call the brokerage firm to exit the trade.
Tool #3: Trading Brokerage
To trade stock online, everyone needs a brokerage that supports Day Trading. There are many different types of brokerage firms that charge many different fees and offer many different services.
Choose wisely with what you need and want in mind.
Also, look to choose a brokerage that offers good stock charting software and good trading software. You can purchase the software separately, and you may want to do so anyway, but having it all supplied by the brokerage firm is usually the most inexpensive way to go.
You also want to choose a brokerage that provides its clients with market data. Again, an online stock trader can get this information him/herself but its often easier and more cost effective to choose a brokerage that provides their clients with all the information.
With each of the essential tools for online stock trading there are many different options. A Day Trader needs to decide what he/she needs and wants out of each tool. Then the tools should be used their full extent.
Stock trading online is growing more and more every single day. People are realizing it’s the most convenient way to trade stocks. Anyone wishing to begin trading stocks online needs to get acquire 3 essential tools: a computer, the internet, and a trading brokerage.
Investing & Online Stock Trading - The Most Expensive Education Possible
Executive Summary About Stock Investing By John Atkinson
To date, in our newsletter we have mainly concentrated on trading stocks and Exchange Traded Funds. We understand that some of our members also trade derivatives such as options, warrants and CFD’s.
We consider these to be the domain of experienced traders only, particularly as they are leveraged products which work both ways – they have the potential to magnify losses as well as gains.
We suggest that traders should learn how to successfully trade stocks profitably for a few years first – to master their skills in analysis, money and risk management – before you consider trading leveraged products.
It was with great concern that we received the following from one CFD trader this week:
“Hi,
I have decided to stop trading for 6 months due to "blowing out" my CFD trading account through some poor position sizing and risk management. Nothing I couldn't afford to lose, but I can't afford to lose any more.
As such - I wish to remove all possible trading distractions and hence I request to cancel my subscription as per your one month notice policy. I liked the newsletter and was considering signing up for Boot Camp, but I am afraid I no longer have the funds to trade and really need to reset.
I can see now why CFD's are not much better than poker machines for those people who understand the odds against putting hundreds of dollars into a poker machine and don't play them. (Like myself)
CFD's seemed like a good way to trade on a small account ($5K), but the ease of trading, the commissions on trades (I spent $1000 on commissions when I totalled it all up last week - 20% of my account), the large share parcels on small stop/losses, slippage from gaps all contributed.
The major factor though was some false confidence that I thought I knew what the market was going to do next and so what I thought was trading was probably more punting. In addition, some seminars, trading books, newsletters and software packages added another $5K to the losing experience.
I have decided to step away from trading for 6 months (I have to – my wife won't give me any more of our holiday savings at the moment) - save some capital and re-launch with some education... I will keep an eye out on your web site for the next Boot Camp later in the year.
I will contact you in the future and perhaps re-launch my trading with one of your Camps.
Thanks and regards
John M
PS Thanks again for your interest which I do appreciate - you are no doubt extremely busy… to take the time to personally respond for a $30/mth subscription cancellation email has been one of the positives in my current trading career to date. I look forward to joining you again in the future.
PPS There may be an idea there for an article for your newsletter about the challenges for new traders, psychology and CFD's....
The stock market can provide the most expensive education possible.
Its times like these that traders have to make the decision to quit and walk away completely …….. or pull themselves away from physically trading, consider what they did, what lessons they learnt, then very importantly seek out the education to put themselves back on track .
As we have shown in our newsletter, through the work of Dr Brett Steenbarger, Brian McAboy and Catherine Taylor, the subject of trading psychology is a cornerstone to trading and investing success. Over the past year we have particularly come to appreciate the coaching work of Catherine in helping traders around the world understand themselves better, set goals and strive to achieve more.
Following up on John’s suggestion for an article about the “….. challenges for new traders, psychology and CFD's”, we invited Catherine to comment on John’s situation from her perspective. We thank her for her reply:
Dear John
Ouch! My heart hurt when I read your story. It reminded me of two famous quotes:
“Men are disturbed not by things that happen, but by their opinions of the things that happen.” Epictetus (55-135) and
“Failure is the opportunity to begin again more intelligently.” Henry Ford
It's painful to see someone withdraw from trading or any game due to some poor decisions and lack of knowledge.
The way I see it is if you could actually attend Boot Camp and stay with the newsletter, you could not only turn your trading around with time, but also your esteem, confidence and life in general.
The following is from Robert Kiyosaki, who literally slept in his car after his first business failed and before he wrote his best selling book ‘Rich Dad, Poor Dad’:
"Most people choose not to be rich. For 90% of the population, being rich is 'too much of a hassle.'
So they invent sayings that go, 'I'm not interested in money.' Or 'I don't have to worry, I'm still young.' Or 'When I make money, then I'll think about my future.' Or 'My husband/wife handles the finances.'
The problem with those statements is they rob the person who chooses to think such thoughts of two things: one is time, which is your most precious asset, and two is learning.
Just because you have no money, it should not be an excuse not to learn. But that is the choice we make daily, the choice of what we do with our time, our money and what we put in our heads. That is the power of choice. All of us have choice. I just choose to be rich, and I make that choice every day.
INVEST FIRST IN EDUCATION. In reality, the only asset you have is your mind, the most powerful tool we have dominion over."
I think you have to admit Robert has got a great point there. I have personally worked with Robert and I know he has an insatiable appetite for knowledge. Knowledge is fundamental to winning in any game. By allowing yourself the opportunity to attain more knowledge, you then have the opportunity of turning your game of trading around.
Success is the goal of any trader in the market with visions of increased income, ever increasing capital and a lifestyle to their making.
By definition, success is the condition or fact of achieving the desired objective. It’s purely about achieving your target, objective or intention. Success is an extremely personal state of being.
When you started out trading, you had a target that you wanted to reach, It was your personal goal. Okay, so on this occasion you have experienced the opposite to success, a ‘learning experience’ that unfortunately is more frequently labelled failure.
Congratulations! Why? Because you have discovered what didn’t work and therein lays a pot of gold. Your ‘learning experience’ is something of incredible value. Embrace it!
Failure is often the doorway to success – dependent upon what you do with it. Ceasing to trade is admirable and I really acknowledge your action of no longer trading and taking the time to reset at this point in time.
Total withdrawal does not support you nor get you any closer to fulfilling your original intention.
Most of us withdraw from an area after a learning experience because contact with the area that we didn’t achieve success in (be it trading, relationships, business or health goals to name a few) causes us pain and discomfort.
The more Present we are with something or someone, the closer we are to it. The more withdrawn or Absent, the further away we get. After a learning experience it is paramount we draw closer to the area, embrace it, get really Present – be there!
Why? So you can extract a wealth of wisdom, correct on and add to some of your existing knowledge.
Use your innate resilience to be Present and capitalise on what you have already spent in losses, commissions, courses and software plus the time, energy and attention that you have invested to date.
You have already started on laying a foundation and now that foundation just needs some work. Continue to invest in yourself and your education.
And finally, here’s another secret that all the successful people I have worked with have as part of their fundamental philosophy; take on the mindset of an apprentice.
Acknowledge that there is much to learn, much that you don’t know. Allow yourself to make mistakes – manage your risk and grant yourself the time necessary to work toward a level of mastery.
