Stock Market Position Sizing

Position sizing determines the amount of currency you wish to put into a stock trade. It is part of money management for an investor. Money management has many different types of calculations to help an investor determine how much money they are going to lose. Position sizing is the main aspect of money management.

Just because an investor has a stop loss in place, it does not mean that they have covered position sizing. Having a stop loss in place simply allows a trader's stock to be removed if a certain position is reached. However, with a stop loss the trader loses the highest amount of money. With position sizing, it allows the trader to determine how much units of stock they are capable of purchasing. This in turn, allows the trader to minimise the amount of money they can lose.

By determining the traders stop loss and their maximum loss on a stock, they can use these two figures to determine, without going over their maximum loss, the amount of shares they are able to buy. The calculation is as follows; the maximum loss is divided by the stop loss size. This gives the trader the amount of shares they are capable of buying.

The difference between the traders entry price and their stop loss value is what a stop loss size is. For example, if the trader entered the stock market for two dollars, with a stop loss value of one-dollar ten cents, their stop loss size is ninety cents. By using this formula, a trader can limit the amount of risk of over buying shares, which can exceed their maximum loss.

An example of this formula; with a trading float of $10,000, and a trader risking 3%, their maximum loss is $300. The market entry price is for example two dollars, with a stop loss value of one dollar ten cents, thus the stop size is ninety cents. To determine the amount of shares the trader can buy without exceeding their maximum loss, the maximum loss is divided by the stop size. Thus, $300 is divided by ninety cents, which allows the trader to buy 334 shares. The use of this formula is the confirm the security of the float.

If a trader wishes to incorporate their brokerage fee into the maximum loss, it is possible. The formula for this is to subtract the brokerage fee from the maximum loss. An example of this is, if the brokerage fee was $50 and the maximum loss was $300, the new maximum loss would $250. The $250 is then used in the above formula which decides the amount of shares the trader can purchase.

Random Stock Market Behavior

Gambling your Way to the Market
If you have the money and would like investing it in the stock market, you would do well by studying first the market. It is important for you to know the stock market behavior and the factors that would influence it. There are some who consider investing in the stock market as some sort of a gamble. That the stock market behavior is just too unpredictable and winning or losing in the stock market will depend on pure luck.

People who considers investing in the stock market as a gamble believes that the market cannot be predicted as to the course it would take at any given time. They think of the market as some sort of a rudderless boat floating by its lonesome self without any set of direction to take. You will be lucky if the tide sets the rudderless boat or stock market behavior in your direction but if not, you lose.

Indeed, because of their belief that investing in the stock market is some sort of a game of chance, there are stock market investors, who would even go to the extent of consulting their horoscope before doing their trade. Many Chinese stock market investors even have Feng Shui experts guiding them when to invest or trade in the market.

The Feng Shui Experience
A clear case of this situation wherein investors of a stock market believes that the stock market behavior is simply erratic, random and governed by luck and even by the positioning of stars and other unseen forces such as Feng Shui was demonstrated in Hong Kong when Financial Secretary Henry Tang presented Hong Kong's Budget for 2004/2005.

He made his presentation in a televised coverage. The Finance Secretary was dressed in a dark suit, white shirt and with a corresponding tie maroon red in color. While he was making his TV budget presentation, the TV screen bottom crawler which indicated real time Hang Seng Index performance, started dropping until it dropped to a low of 180.41 points.

Many Chinese stock market investors who have seen the precarious drop of the Hang Seng Index, which is Hong Kong stock market Index, blamed the entire stock market behavior to the colors of the Finance Secretary outfit during the time he made his TV budget presentation.

They pointed out that the colors of water represented by dark blue or black and metal which has white for its color and fire for red and maroon colors are simply against Feng Shui. This is what triggered the very bad behavior of the stock market when the Finance Secretary went on TV, they said.

Economist on the other hand would simply dismiss this behavior of the market as brought about by the color of the Finance Secretary's outfit due to bad Feng Shui. They reasoned that it was not Feng Shui that made the market behave badly. Rather, it was the belief of the investors in Feng Shui that made the market went down. Thus, in effect, it was human attitude which was fear that caused the market to behave badly.

To point out, they noted that while the Finance Secretary was on TV, many investors watching the proceedings were calling their brokers to sell shares rather than buy because they believe that the colors of the Secretary's outfit carries ominous and dire consequences to the economy because it contradicts Feng Shui, while all the while discussing the country's budget for the year. And because of instant communication through mobile phones, there was suddenly a deluge to sell that even while the secretary was still on TV, the Chinese belief in Feng Shui became evident with the heavy downward spiral of the stock market, all because of his color choice of tie, shirt and suit.

Market Behavior and Public Perception
This clearly shows that the market behavior is determined by the public's perception that will have anything to do with the economy. As many successful stock market traders would say, trading is not determined by gut feel but by how any news or information will affect your gut. In effect, they are saying that a market behavior will depend on the present environment and on the public's perception of the near future.

Seasoned traders debunk the idea that stock market behaves at random and there is really no basis for predicting its movements by using whatever forms of analysis. They reasoned out that just like its human conceivers, the market behavior will depend on the fears and greed of its maker in relation to material wealth and resources as affected by natural factors. History repeats itself, so does the stock market charts that continuously show similar patterns since the late 60s.

The Keys to Learning the Stock Market

If you have decided that this is the year that you will be learning the stock market then a good place to start that education is by learning about three different terms: the stock exchange, the economy, and mutual funds. First the stock exchange is the same thing as the stock market. It is basically the place where stocks can be bought and sold.

The economy is a term that refers to the economical system that is in place in a specific market. When talking about the stock exchange the economy that is referred to is generally going to be the United States’ national economy. However, in some cases, such as in the case of international stocks, a world wide economy or foreign economy may actually be the economy that it is being discussed. The U.S. economy is influenced by a number of factors including: spending trends, imports/export ratios, federal interest rates, the availability of raw materials, labor costs, and politics. The state of the economy then impacts the health and performance of the stock market by: determining how much money is available for investments, by establishing spending and trading trends, and by impacting companies’ abilities to operate and to make a profit.

The final term that will be discussed in this brief article is mutual funds. Mutual funds are basically a managed investment portfolio that pools together investors’ money to buy bonds and stocks that fit within the range of investments that the fund is interested in. In many cases mutual funds deal with BBB or better rated stocks and bonds, and they usually have an investment specialty. For example a mutual fund may only invest in companies that have a market capitalization of $5 billion or more. The advantage of buying a mutual fund is that you don’t have to buy a lot of different stocks and bonds by yourself, instead you can get all of the earning potentials of a variety stocks by purchasing shares in a single mutual fund. The drawback to buying a mutual fund is that they have fees and expenses that are used for covering the management costs of the fund, and these costs can eat away at your profits.

Will The Stock Market Crash in 2008?

It seems to me, as a person who follows these things, that the stock market is not really sure what to do at the moment. One day it goes up a hundred, the next day it is down a hundred. The fundamentals of the market are very strong however the credit crunch is hanging over it like a dark satanic cloud, so how will the stock markets of the world perform in 2008?

I am a very positive thinker and am also a risk taker. I strongly believe in the concept of risk and reward and am a willing investor of stocks and shares. I am currently investing into various areas of the world on a monthly basis. This strategy is known as pound cost averaging and is very popular in these turbulent times. When unit prices fall you are able to purchase more units for your monthly premium etc.

At the back of my mind is the realisation that a stock market crash could be imminent and for that reason I am keeping in reserve quite a large amount of money which I will invest if such an event takes place. I am somebody who likes to invest on the stock market in the aftermath of a dramatic fall as I believe that most of these sharp declines are as a result of an over-reaction and because of panic selling on the part of novice investors.

If there is more bad news on an economic front such as a deepening of the credit crunch or a series of profit warnings from some of the major companies on the index then share prices may well fall. A major terrorist atrocity may also lead to a stock market crash. These are situations which could well happen and is the reason why I am keeping some cash back.

As already stated I am a positive person and actually believe that the stock market will end 2008 around ten percent higher than where it began at the start of the year. The market, in my opinion, is strong and robust enough to with stand the current problems and historically does well in the years when Americans vote for a new President.

Types of Stock Traders in the Stock Market

Once you decide that you like to be a trader in the stock market, your first step is to decide which type of trader style you like to be.

Let's explore a few trading style now.

Firstly, we can classify trader based on the trading timeframe. Some people complete a trade in just a few hour, a few days or few weeks. I define a trade as a complete cycle of buy then sell or sell then buy, meaning that you can either have a profit or incur a loss in completing the trade.

Day traders are people who complete the cycle of buy & sell or sell & buy with a day. They start trading when the market opens and they will complete the trade before the market closes. These people do not hold the stock position over night. Advantages of day trading is to avoid over night interest charges if you are using a margin account. However, day trading is a very stressful job. They have to monitor the price movement from second to second full time in front of the PC. Day trader must make decision fast and shape, otherwise, the market will not tolerate and can penalize them for their wishy washyness.

Contra traders are people who complete the trading cycle within the contra period. The contra period varies in different exchanges and different stock brokers, typically it is 3 days now. So, the trader has slightly longer time to react compared to day traders. The advantages of contra trading is to avoid the capital outlay. The trader need to be very cautious of the market price movement as well and usually, they must be prepared to monitor the market in front of the PC as well. Due to the fact that no capital outlay is required, there is a tendency that many people like to open a large position size. This has hurt many contra traders when the market turns. The traders are forced to close their position when the contra period expireds and they can suffer a huge loss.

I classify day traders and contra traders as short term traders as well. They can complete the trading cycle within a week.

Position traders are another group of market participants who are prepared hold the position for days till weeks. They are not constrained by the day or contra period period as well. Therefore I will classify them as mid-term trader. Position trader like to ride the up trending or down trending market. "Ride the trend" & "Trend is your friend" are their motto. Many of them are not full time trader. They do not monitor the market in front of the PC all the time. Many position trader analyse the market based on daily charts.

In order to be successful in your trading business, it is important you select the trading style that suit you and I hope these short description give you an essence of the various trading styles. I am a position trader most of the time because I do not have the time to monitor the market every second. Also, day trading and contra trading are too stressful job for me to swallow as well.

Minimum Risk Stock Market Investing

More Americans than ever before are investing in the stock market. It's estimated that over half of American households own stock, which is in stark contrast to even a few decades ago, when the stocks were primarily traded by institutional investors and the wealthy. In the 1990s alone, the number of investors increased by over 50 percent.

Why the shift? According to a Congressional report, a number of factors caused more people to become investors, including the increasing popularity of mutual funds and the advent of the IRA and 401(k) retirement plans. Essentially, mutual funds present individuals with minimum risk stock market investing, while retirement plans enable households to accumulate wealth by placing their money in financial instruments that have a greater rate of return than traditional savings accounts. That same Congressional report asserts that, "The first lesson to be taken from the broadening of stock ownership is that Americans want access, control, and choice over their retirement and other saving options."

Access, control, and choice are all wonderful, but many individual investors still don't understand how to get a maximum return for a minimum risk or no risk at all. After all, reckless investment does not a fortune make.

The Securities and Exchange Commission (SEC) compares investment risk and return by noting that savings accounts, insured money market accounts, and certificates of deposit are federally insured and, therefore, safe. "But there's a tradeoff for security and ready availability," they say. "Your money earns a low interest rate compared with investments." The SEC also notes, "Over the past 60 years, the investment that has provided the highest average rate of return has been stocks," but stresses diversification. According to the SEC, "If you buy a mixture of different types of stocks, bonds, or mutual funds, your savings will not be wiped out if one of your investments fails." All well and good, but the fundamental question remains: how does the average individual who wants to invest in the stock market engage in profitable trading? The answer lies in techniques often used by institutional investors but that is almost unknown and certainly underutilized by private investors.

The two techniques can be characterized as a minimum-risk strategy that can be used in any market with any broker, and a no-risk strategy that is limited to certain stocks and brokers. When you use these techniques, which are outlined in reports available online, some of your profits will be modest, while others will be significant.

It's important to note that the reports that outline these techniques aren't those that promise "get rich quick" schemes, or that tout trading in the Forex (foreign currency exchange) or options markets. These markets are volatile, risky, and not for the inexperienced or the faint of heart. Rather, these strategies employ techniques that can generate a 50 percent annual return or more, but that center around minimum risk stock market investing. The bottom line is that most people seek a maximum return on their investments with a minimum risk or no risk at all. By utilizing techniques employed by institutional investors, individuals can achieve their financial goals.

How to Spot the Best Momentum Stocks

Momentum stocks are stocks with high returns over the past three to 12 months. Momentum investors seek out stocks with the potential to double or triple within just a few months. Momentum investors generally hold a stock for a few months and monitor their holdings daily. They tend to sell their stocks with a few months after acquiring it.

There are many stocks in the market that accelerate in price that go on to make 100% to 300% returns in less than year or even in a few months.

However, for the investors who are just starting, momentum investing can be a confusing and frustrating experience to find these stocks. Here are some keys to spot momentum stocks.

One of the things to spot momentum stocks is the relative strength of the stock compared to the overall market over a specific timeframe. Most momentum investors seek at a stock which has outperformed at least 90% of all stocks over the past 12 months. When major indices declines, a great momentum stock exhibit strength by holding or even exceeding their highs. When the major indices rally, momentum stocks typically lead the rally and make new highs outpacing the market.

Potential momentum stocks should show in their balance sheet that they are growing at an accelerated rate.

Another factor is the Earnings per Share growth. At least a 15% year-over-year earnings per share growth is needed to qualify a momentum stock. Stocks with accelerating rates of EPS growth over previous quarters are also considered.

In addition, a positive forecast by at least some analysts regarding the Company's earnings in necessary for identifying momentum stocks. Further, momentum investors also looks at whether the reported earnings exceeded the analysts forecasts compared to the last quarter.

A company can't grow its earnings faster than its Return on Equity, which is the Company's net income divided by the number of shares held by investors, without raising cash by borrowing or selling more shares. Many companies raise cash by issuing stock or borrowing, but both alternatives reduce earnings-per-share growth. For momentum investors, a potential stock should show an ROE of 17% or better.

The share price and trading volume of the stock are also factors to spot a momentum stock.

The only reason for stocks that trade at very low prices is that they are already out of favor with the market. Avoid stocks trading below US$5.

Momentum investors seek stocks that have high trading volumes, the number of shares traded daily on the average. Very low trading volumes indicate the markets lack of interest. Generally, momentum investors seek those with a minimum volume of 100,000 shares or at least see their average daily volume increases as the value of the stock rises.

Start keeping a list of potential momentum stocks and track their performance in the market. In time, you will be able to spot the stocks that go on to make 100% to 300% returns in less than year or even in a few months.

The Fundamentals of Succeeding in Stock Market

Most of us often wonder why despite the surfeit of information and assistance available round the clock such as Internet, newspapers, magazines and television, success at stock trading remains elusive. It is quite bizarre to see people losing money in stock market.

Thousands of people across the world spend millions of dollars on stock trading courses and stock analysis software and yet they fail to make money in stock trading.

What generally happens is that gullible people are first duped into believing that that they will master the art of making profits in stock trading just by joining tutorial classes. When they have shelled out, say, $1,000 as course fee, they are made to buy videos showing intricate charts and graphics that are beyond their comprehension. Those who try to invest according to the instructions will end up losing thousands of dollars. Small gains here and there only add up to frustration. The more they try to learn, the less they appear to know. The result will be they keep spending more and more and losing more and more.

If success in stock trading could be achieved just by buying the software, there would be no shortage of people minting millions of dollars and the streets of our cities would be jammed with chauffer driven limousines.

The truth, however, is that most stock traders do not understand even the ABC of stock trading and that is why they are not successful.

You must know that by the time you start trading in stocks, you have already built up a sufficient reservoir of general trading sense without actually being aware of it. For example, who does not know that you can make profit when you buy an item at lower price and sell it at a higher price? You do not have to enroll yourself in a pricey stock trading tutorial, buy costly books or videos to learn this elementary fact of business.

Strange as it may appear, most people do not have the confidence in their ability to put this elementary principle into practice. They do not understand that they do not need to know any thing more about making profits in stock trading than this basic principle of buying low and selling high.

The third requisite of being successful in stock trading is the attitude. Were you not told even when you were a toddler playing with your peers not to cry when you lost in your games? Do you need to be told in special coaching classes this very childhood lesson? The truth is that you already know a lot about successful trading but you are not just aware of it.

You have to take your profits and losses with a certain level of equanimity and objectivity. Losses do not occur only in stock trading, but in every business. Success and defeat occur in every area of life. You have to remain calm, detached and unemotional whether you earn and you lose. Excitement at gain may turn your head and you may not take the right decision next time. Loss may depress you, blur your vision and lead you to further losses.

Most of the traders learn how to analyze charts and understand the financial reports of the companies. They are happy when they place orders but they start losing their wits. Soon after the prices start will go against their predictions. They feel scared thinking that their analysis was wrong and they would lose money that they honestly think they cannot afford to lose.

This kind of attitude leads to the loss of focus. You start making losses. Your confidence in your ability to take right decisions starts faltering. Instead of looking inwards for the causes of your failure, you start questioning the system you are using even though it was working pretty well. How could the same charts and graphs that helped you to predict the future prices correctly have gone wrong now? You had taken lots of pains to test this system over several markets. [It was so solid, but now ......]

Stock Market - "Renting" Shares For Income

When we think of investing, there are two major areas we are familiar with in which to achieve capital growth and ultimate wealth creation.

REAL ESTATE and the STOCK MARKET

Most people feel more safe when Real Estate Investing, even though you can begin Investing in Shares with a lot less money. Besides being able to drive by and look at your investment property a major advantage is the rent you can receive as extra income.

But not too many people realize that you can also rent out your shares as an income strategy!

I'm using the term renting shares because most everyone understands the concept when talking about real estate. You buy a house and rent it out to a tenant who pays you money (rent) for the term of the lease.

Well you can do EXACTLY the same thing with shares you own.

You can rent your shares out to someone at an agreed price (rent) for an agreed time (lease) for extra income.

In this case the agreed rent is called the strike price, the rent received is called the premium, and the term of the lease is the time leading up till the expiry date.

I am of course talking about an income strategy using STOCK OPTIONS

How do Stock options work?

THE COVERED CALL

A Call Option is a contract that relates to a particular stock.

Call Options give the holder the right to buy the underlying shares at any time up until and including the expiry date of the option contract.

There are two parties involved in any option contract:

The Writer (person who sells the option)

The Taker (person who buys the option).

Options Traders are generally Takers. That is they buy Stock Options only to sell them for a profit.

When using the Covered Call strategy we are not trading options, we are selling, or writing them.

If we were to write Call options over a stock we would be covered if we had to sell our shares. Hence the name covered call.

The taker is not obligated to buy the shares, but as the writer, we ARE obligated to sell our shares if the option contract is exercised.

However, regardless of whether the taker decides to exercise their right to buy the stock or not, the premium we are initially paid as rent is ours to keep.

And if we do have to sell our shares to the taker, it means they would have gone up in value, so not only do we get to keep the premium as income, but the sale of our shares converts to cash, earning us capital growth as well.

So let's look at an example of how this works:

Let's say we own some XYZ shares that we paid $ 11.00 for and they are currently trading at $ 11.30

We write some Covered Calls with one month until expiry with a strike price of $ 11.50 and the premium received is 50c.

Remember we get to keep the 50c per share regardless of what happens. Money made while you sleep!

As long as the share price stays below $ 11.50 then the option will expire worthless in one month's time and we would still own the shares to do the covered call strategy again and again.

And if the share price was above $ 11.50 then we would have to sell our shares to the option holder.

BUT we still keep our 50c PLUS the 50c capital growth we have made on our initial purchase of $ 11.00.

So we have sold our shares but have made a profit of $ 1.00 and we can just buy the shares back again if we wish to do so!

Ready to do another Covered Call.

Basic Differences Between Forex and Stock Markets

The word forex is a short form of the word Foreign Exchange, which is the basis of the commercial transactions which take place between two countries with their own currencies. The forex market refers to the trading that takes place within this area and is different from the stock market. Established since the '70s, this market deals not just with one business or investment but the entire gamut of trading and selling of currencies.

While both the forex and the stock markets deal with money, the biggest difference between the two is the sheer volume of money transacted on a daily basis as well the span of operations. The forex market deals with nearly 2 trillions of dollars which in comparison to any stock market is much larger. The players in the forex market are also different, where the money transactions are done between governments, international banks and financial institutions of different countries.

The amount of money which is bought, sold or traded in a forex market can quickly be turned into liquid cash, or better still, it is actually made into hard cash. The speed with which such transactions take place in a forex market can be really fast for any investor, irrespective of the country of his origin.

The other difference between a stock and a forex market is that stock markets operate in shares and businesses which belong to a specific country; forex markets on the other hand operate globally and can include any and every country of the world. Its span of operations is far wider. The market encompasses nearly every country of the world and deal with trading their individual currencies which has nothing to do with any specific business or corporation.

While stock markets operate only on business working days and may remain closed on bank holidays and weekends, the forex market has to consider the several time zones across which it operates. Hence the forex market is open 24 hours 7 days a week to accommodate all the countries. While one market opens another closes. Because of the difference in time zones, one country may close its market but another in another part of the world has opened its own. Thus the trading in a forex market happens on a non-stop basis.

The stock market of any country operates with the prevailing currency of that country. For instance, Japan will work with the yen and the US stock market will work with dollars, Indian stock market with Indian Rupees, etc. The forex market, on the other hand, works with many countries and trades in many currencies. These are the major differences between the stock and the forex markets.

It is important to know the basics of this important financial market called the forex or foreign exchange market, if you also want to participate in it with your investments.

Secrets Of Online Trading And Stock Market Hours

Most people would liken stock trading with gambling. However, in truth, the two couldn't be more different. In fact, it isn't simply buying and shares as well. Developing a good trading strategy is the key to making it in the stock market. A stock market simulator, is an online game application that duplicates aspects of real-life stock markets, from trading strategies and information, down to the varying stock market hours of the different stock exchanges. Read on and know more about how you can learn and practice trading with an online stock game simulator.

Two types of online stock game applications are available online for you to practice your trading skills and strategies. Naturally, no real money is involved; play money is used, so you can practice it without the financial risk. The two types of simulators are: Financial and fantasy stock game simulators.

If you want to practice trading through a fictional portfolio based on real entries, scenarios and stock market hours, then the financial stock market simulator is the best one for you. Because this type of simulator downloads and processes real and actual numbers and information, most online trading websites that offer these free stock games use a delayed data feed, that sends the information well after the end of the stock market hours. This prevents any abuse of the simulator and the system by unscrupulous traders who want an edge before the start of the stock market hours of the next day.

Most online simulator systems ensure that the stock market information and data may not be used to do actual trading before, during and after stock market hours using their information. Safe, reliable and enjoyable, a financial stock market online simulator is a great way for you to practice actual stock trading scenarios and gain experience and a working strategy before you move up to the real thing.

Another type of simulator is the fantasy simulator. This type lets you practice stock trading through thoroughly hypothetical yet amusing settings. While it retains many essential features of the stock market like premium picks and options, trading tickers, regular market hours, other traders, among others. But unlike the financial simulator application, fantasy simulators feature imaginary stocks that, while representing real items, would never be actually traded in a real stock market trading setting.

Traded items in fantasy stock market simulators would include questions on how long books will last on selected bestseller lists, the box-office success of specific movies, antics of infamous celebrities, rankings and statistics of sports teams and events, and more. The value of a fantasy market simulator is in its application of principles and how these may work given a real setting.

The simulator uses the analogy to teach anyone with no background in trading understand how it works. Fantasy stock market simulators use these items because they are familiar to a lot of people, thus opening opportunities for learning online stock trading to more and more people. This is one way where you get to practice stock trading techniques and strategies while having fun.

Getting the hang of how shares are bought and sold, and how other variables like stock market hours affect your investments are all part of your learning experience. Learning the ropes with a stock market simulator is one of the best ways to get you started with trading stocks.

Free Stock Market Fantasy Simulation Game

I have known people that became millionaires just from buying and selling stocks but the whole thing seemed too complicated for me.

A Real Free Stock Simulation game has just been launched at a time when everyone is complaining about the stock market.

Is this really such a bad time to invest??

I have been playing with my Free Stock Market Game. They give you $100,000 virtual dollars to begin. I invested in a mortgage company. (I knew nothing about buying and selling stocks before this game). Now I see that this mortgage company has stocks that are down to about .15 and it got me really curious because this is A REAL TIME stock game. You are playing with fake money but all the information is based on actual real-time stock trading platform. It also provides portfolio updates and tracks ongoing individual progress on a full-motion leader board.

They start you off with $100,000 to buy your stocks with and each trade you make cost you $10. You have a $25,000 limit on each stock you can buy and each trade earns you 50 loyalty points. Posting on the message board there will also gain you 200 loyalty points. Presumably there will be a survivor store where you can spend your points in, but it is not up yet. The site is a lot of fun and can be an educational tool you can use to trade stocks for real if that is your choosing. Based on how your stocks do you are ranked against everyone else on the site, with the top 10 winning prizes for each game. A game usually runs approx. 2 months. There are prizes given out for many things with Daily and Weekly winners as well.

Not only will you save valuable time and money learning to play the stock market with this fun game, they give away real cash prizes, gift cards, and vacations!

I'm setting up my account with Etrade soon because the mortgage company stock just can't get any lower.

Have fun playing. It is so addicting!

The Stock Market For the Beginner

Many people think that being in the stock market is for professionals. In most part it is, but for the amateur they can do just as well if they follow a few simple guidelines. Here are 5 things to remember when trading stocks.

1. When you trade in the stock market you can't let your emotions make your decisions. I've seen people get emotional when their stock has made a major move downward. They panic and dump the shares as soon as possible, thinking that there' more to come. When a stock drops in value, you must see if the company is reporting negative information or if other traders are taking profits from a recent upswing in value. If there are no problems with the company then what you have is a buying opportunity for you to add to your position.

2. Before you invest in any stock you must do your research on that company and the sector that they are in. I like to refer to research as "doing your due diligence". Reading financial reports and balance sheets are a key to knowing if a companies fundamentals are solid. Once you can do that you need to learn how to read their chart. Following the chart will give you an idea if a dip or a spike in price will coming soon.

3. Avoiding "great stock tips" will always save you from getting caught up in the hype of stock. You need to ask yourself why this person is giving this information to you. Is it because they're investing in this and need other people to boost share price? If a person has "inside information" on a company, they wouldn't be allowed to tell you since it's illegal to do so.

4. When you have decided on a stock to invest in, you don't buy all of the shares at once. If you do and the price drops(which they do at times), you won't have any capitol to buy any more. What you need to do is buy incrementally. You need to figure how much total money you will invest into this stock. Divide that in half and that would be your first buy in. When a stock drops below your cost basis by more than 8%, you buy half of the remaining amount you have on the side. If the stock goes up from there you wait and see where it goes to in value. If it drops another 5% from your second buy in, you purchase the remaining shares.

5. Before you buy into a company you must have a exit strategy. Unfortunately there will be times when the stock that you see as a sound investment drops in price too much(or rises beyond 20%) you need to know how and when to get out. Yes, there are other forces at work that will cause a great stock to just drop. To name one, is when investors invest in what they call "shorting a stock". They buy stock for the purpose of going down in value(when you research a stock you can find out how much trading is going on this way. An exit strategy is needed to be in place before you buy into a stock.

I hope that these few tips are helpful to you. I know that they have helped me thought the rough spots.

A Stock Market Crash - What Causes It?

You can usually predict, well before the event, that a stock market crash is going to happen. There are certain events which happen prior to the crash, and which lead up to it. To begin with the market is quite weak, a situation which is known as a bear market. When this happens many people are eager to invest in shares, believing that the value of those shares is bound to rise and therefore make them a good profit. This interest in the market does indeed cause the share values to rise, and the market becomes a bull market, in other words an especially strong one.

Mutual funds are an especially popular type of investment at this point in the investment cycle. The market is quite stable at this stage, and there are good profits to be had from investment in this early part of the cycle.

More investors join in at this stable part of the investment cycle, as investors are encouraged to buy and to increase their profit in the stock market.

Companies release stocks onto the market during the bull market phase, and it is common for IPOs or Initial Public Offerings to be available in this period before a stock market crash. Companies do very well out of this situation, with the value of their stocks rising steeply, and great confidence from investors in the value of their stocks. More and more money is being invested by people who want to be the first to buy stocks in a particular company.

Those investors who bought shares in the beginning phase of the cycle are now keen to sell them, before they lose their money, knowing that the value of their shares will soon go down. Sometimes during a bull market there can also be various scandals and scams on a corporate level, because people become greedy. The market is becoming flooded with stocks, and yet people feel that the values of stocks will continue to rise.

Eventually the stock market reaches the point where people have invested so much it is 'overbought', and the only way to go is down. This is the beginning of the stock market crash. Stocks start to lose value, and when people become aware of this fact, they then want to sell, and before you know it everyone is selling rather than buying, and this brings about the stock market crash.

Sometimes there seems to be no rhyme or reason why the stock market plummets, only sentiment; that is that there is a bad feeling about something happening and panic can set in. The fundamentals of the economy or a particular company can look healthy, but for some reason people are fearing the worst.