Emotional Trading

The single most expensive stock market trades are those made with emotions, but, of course, you are not an emotional trader are you?

Before you bought that stock, mutual fund or Exchange Traded Fund (ETF) you did your research to be sure that what you were buying would return a good profit over the long haul. You bought it and over time you look at it less and less.

Ask yourself: when you plunked down your hard earned money did you have any idea where you would sell it or where you might exit the trade should the stock go down instead of up? And suppose it has gone up have you made any plans to protect those profits?

There were many geniuses in 1999 who bought a tech stock at $20 and saw it run to $200 only to come back down to $2. Those who had an exit strategy probably sold out as it turned over and dropped like a rock. They kept most of their profits as well as their original investment.

What kept those BuyNholders in? It was emotion. They fell in love with the stock because they “knew” it was worth more and would “come back up”. Investing is not an “I hope, I hope” business, but it is a business. Never become emotionally attached to anything you buy. If you were in the buggy whip business in 1900 and saw the automobile putting the horse out to pasture you easily knew it was time to sell out. That also applies to any investment you make in the stock market.

Once each month you should be checking to see if your various stocks are advancing as planned. Forget all those pretty research reports your broker sent you. Burn them. Now you must not care anything about that company. What you care about now is your money. As long as the stock price is advancing you may continue your love affair, but when it starts down it is time for a divorce. Time to leave before the damage gets worse.

This is where emotion becomes expensive. If you just bought it your ties are strong and you know if you sell you will have a loss. Never fall for that old broker’s adage that you don’t have a loss until you sell. Anyone who believes that will be eating cat food at retirement.

When you bought that new car you knew as soon as you drove it off the lot it would be worth 20% less than you paid for it. Twenty percent is a lot and more than most folks should be willing to risk when investing. Forget “the long haul” as you don’t want to take the 40% losses that many investors did in 2000.

Usually a good rule of thumb is 10%. When you drive that stock off the exchange floor your risk should be limited. You decide how much you are willing to lose if it goes down instead of up and as it goes up carry that risk percentage along to lock in your profit.

If you do sell never look back. Fagedaboudit! In 80% of those sales when you do look back six months later you will see you are way ahead in the money game.

Do not allow an emotional attachment to keep you in any stock or fund. It will drain you both mentally and financially.

Low Risk, High Profit Trading Strategies

Stocks - CC – PP (Stocks - Covered Call – Protective Put) Strategy

We all know that trading stocks involves stress and risk. At the same time it can also be highly profitable. Trading can give the most return on investments as compared to other investment strategies including real estate. For example, savings, money market accounts or CDs may give a return of 2 to 5% at best. You may expect a 10% rate through mutual funds. However, under the current economic conditions, such a yield may be hard to come by even with a long term investment. Also, you do not have control over your investments and you can not be sure if your financial consultant either. What then is a low risk and more profitable alternative?

The purpose of this article is to illustrate one such low risk, high profit trading strategy, which combines stocks and options.

Covered calls and protective puts are enabled in most of the trading accounts by major brokers. (Ameritrade, Scottrade, E-trade, etc)

Covered call is – you buy stocks and sell 1 call (contract) for every 100 stocks you buy/own.

Protective put is – buy 1 put for every 100 stocks you own. In this strategy we buy a put which expires at least 6 months later.

When the stock price goes up, call price goes up and put price goes down. Elapsed time will have negative impact on put price.

Here’s the Stocks - Covered Call – Protective Put Strategy

Look for an up-trending, optionable stock. For this example, let’s call it XYZ. Let’s assume XYZ stock is currently trading at $69 per share. Assume that currently we are in the first, second or third week of February. You buy 100 stocks of XYZ.

Next, you write a covered call on XYZ, at a strike price of 75, for March. This gives you an additional income, but you have an obligation of selling the stock, at $75. Say you get $150 from writing the covered call.

However, just because the stock is an up-trending one, and you have already made $150, you can not be 100% sure which direction the stock price might move. So, in this strategy, buy a put on XYZ for a strike price at 70 and expiration of 6 months+. In our case, buy the put for the month of August or later. Say this costs you $800. This gives you a right to sell the XYZ stock at a price of $70, even if it drops below 70 by August expiration. (For a real time example, as of this article date - Feb 2006, see JOYG with current price at ~55, and its option chain with strike price of 60. Its Oct 2006 put was available at ~6.5)

Scenarios:

Let’s consider some scenarios to illustrate how this can be a low risk, high profit strategy.

Scenario 1: By the March expiration date, if the XYZ stock price goes above $75, the stock will be called out. That means it will be sold from your account. Normally, stocks ‘in the money’ by $0.25 will be automatically exercised.

Since the stock price has gone up, your put price will decrease. Since the put is in the future, its delta is low. You might be able to sell it for around $600. Higher the stock price goes, put price will decrease. You can wait for a good time to sell before its expiration. The net profit for 100 XYZ stocks can be calculated as follows:

Stock price sold – stock price bought + premium received from covered call – put price bought + put price sold.

i.e. 7500 – 6900 + 150 – 800 + 600 = 550. That is a return of 7.3% PER MONTH. Which translates to 87.6% per year.

Scenario 2: Stock price goes above 69, but remains below 75 by the March expiration. Here the call will expire worthless, and you get to pocket the premium received from writing the covered call. You can write another call for April for the same underlying stock XYZ, for which you may get $150 - $200. You can continue writing the covered calls until the protective put expires or you get called out. Your overall return could be 30% to 70% per year.

Scenario 3: In most trades, if the stock price drops, you lose money, but not here!

Let’s say, XYZ falls in value to $65 by March expiration date. If you had just traded only the stock, your portfolio would have decreased in value by $400. But, in our case, since you have the protective put, you can still sell the stock at $70, no matter how low the price drops.

If it is in later months, say April or May, you will have generated some income by writing covered calls. If the stock price goes down, there are two alternatives we can choose. Wait till the covered call expires for the month, or buy back the covered call. Before the protective put expires, you can either exercise the put, or sell the stock at current price. The protective put price goes up when the stock price drops. So you can sell the stock at the current price of 65 and sell the protective put at around 950.

Depending on the months elapsed, since you can write covered call each month, you will have made $200 - $600.

So, net for this scenario would be:

Stock price sold – stock price bought + premium received from covered call from all months so far – put price bought + put price sold.

i.e. 6500 – 6900 – 800 + 950 + 300 = 50. This will be just a breakeven, despite the stock price has gone down. If the stock price goes further down, there may be little bit more loss, but the maximum risk is the premium paid for the protective put minus money received from covered calls [minus/plus difference between the stock price and put strike price].

So, even if the stock price goes down, you will find yourself with a small profit or no loss or a very insignificant loss. You have, overall, a very good opportunity of cutting down your risks.

This strategy, in most cases, gives a good profit, and in rest of the cases, a very low risk. Thus, this is a high profit, low risk strategy. Practice the details and paper trade the strategy.

For a current list of stocks which fit this strategy, visit BeingLIVE.com/Stocks.html

Disclaimer: This article is published solely for information purposes and is not to be construed as advice or a recommendation to buy or sell a security. Trading results may vary. No representations are being made that utilizing techniques mentioned in this article will result in or guarantee profits in trading. Past performance is no indication of future results.

Innovators: How To Turn Your Dreams Into Reality

Whether you have tried to sell your ideas in the past and failed or whether you have never tried beyond nurturing your ideas in your mind, please remember this--if you deeply believe in your ideas and if you have a vision of greatness for your ideas, one day, you will be able to turn your dreams into reality.

Remember Carl Carlson's 17-year efforts to make his copy machine (Xerox) a reality and Thomas Edison's 10,000 experiments to invent the light bulb. The powerful lesson from many great inventors and entrepreneurs in human history is--Never Give Up! Even if everybody keeps telling you to give up and to get a life beyond your dreams, you should remember that negative people and negative reinforcements are only barriers to transforming your new ideas and dreams into reality.

Many famous inventors and entrepreneurs refused to give up regardless of how many people laughed at them or how many times they failed. Many of them took a great deal of risks in their personal and professional lives to sell their ideas and inventions. In their endless efforts to sell ideas and inventions they passionately believed in, these innovators approached hundreds of companies, paid multiple brokers to show their ideas to manufacturers, explained their new ideas to scores of consultants, attended dozens of trade shows and seminars, and made hundreds of telephone calls.

But, they knew that one can never be sure of how long it will take to succeed. And so, they never gave up. They smiled when friends and relatives would ridicule them and say "how is that big idea coming along"? They were heart-broken when some companies said that their new ideas were not worth considering.

But, after the initial disappointment, they became more determined to prove that those companies were wrong, and so they worked even harder to sell their new ideas and to transform their dreams into reality. All the negative people and negative reinforcements could not destroy their spirit of endurance, perseverance and resilience. They remembered the famous quote "Most people succeeded just one step beyond their greatest failure."

They kept on trying and did not allow the rejections and negative reinforcements to kill their new ideas and their hopes and dreams. They took every obstacle as a challenge to overcome. They picked themselves up after every rejection and kept on working even harder.

They deeply believed that one day, the right opportunities will present themselves and will open the doors to their hopes and dreams. They sincerely felt that the right company, agency, investor or marketer would realize how their new ideas could be turned into successful products, services, business entities or national development programs.

In the end, their confidence, perseverance and hard work helped them turn their dreams into reality. They realized that they had been approaching all the wrong people or companies who failed to see the possibility in their new ideas. And then one day in a magical moment, the right person or company had the opportunity to see their ideas and instantly recognized the vision of greatness in their new ideas.

For many industries the best new ideas are not generated in-house, they come from outside, from innovators such as yourself. Although all companies engage in in-house product development, the smarter companies also search outside to augment their resources. Investors, marketers and idea commercialization companies also help innovators develop their new ideas for market introduction.

Many such companies and investors are now using a number of online intellectual property forums to locate suitable new ideas for purchase, licensing or joint-venture deals These include PatentcafePatentcafe.com (http://www.patentcafe.com), NewIdeaTrade.com (http://www.newideatrade.com), and Inventioncity.com (http://www.inventioncity.com).

Human civilization rests on coming up with new ideas and better ways of doing things. As stated by the bestselling author and entrepreneur Seth Godin, “this century is about ideas…we recognize that ideas are driving the economy, ideas are making people rich, and most important, ideas are changing the world.”

In today's knowledge-based economy, new ideas are our greatest asset that can generate immense new value and wealth. All around the world, there are buyers and sellers, demand and supply for new ideas. Value is no longer derived by creating things, but by generating and trading new ideas.

Additional information on how to sell innovations is available at http://www.newideatrade.com/new_ideas.htm.

For more information on how to patent your invention visit http://www.newideatrade.com/patents.htm.

I Just Want a Good Deal! OK! Now What Do I Do?

There are many factors at play to determine the best time to purchase a vehicle, whether new or used. These factors involve local, national, and local/national events that occur on a regular and irregular basis. Having said that, one would have to master the knowledge of economic and business trade cycles, and then attempt to apply that information to a specific vehicle within your specific purchase arena.

The real way to purchase a vehicle (and you can do this 365 days and nights a year) is by doing your homework and being prepared to buy rather than being sold. Is that possible? Absolutely, and by investing a few hours of time you will save hundreds, even thousands of dollars, and you will be empowered and you will know what you are doing.

There exists on the internet every tool you will ever need to make an intelligent vehicle purchase. There are sources that combine all the information that you will ever need in a simple and straightforward format that is easy to follow and simple to navigate. www.thebestdealofyourlife.com is as good as it gets, and supplies you with all the needed site information with links, simple fill in the blank forms, and a complete guide to take you through the buying/selling/trading process step by step.

The key to success in anything we do is knowledge, preparation, and application. Want to be a surgeon? K. P. A. Want to be a lawyer? K. P. A. Want to be an accountant? K. P. A. Regardless of what we do, buy a car, build a house, buy a lawnmower or bake a cake, what is required? Knowledge, preparation, and application.

I continually answer questions on a regular basis about making a car deal. How? What to do? When? Where do I get the information I need? What is this? What is that? And after having assisted thousands of customers in their purchases it is easy to understand why those questions are asked.

The car people purposely keep their customers in the dark as to the information they need to make a “good” deal, and always have. Now that the information is readily available (although there are very few places where one can go and get most of what they need, and only a handful where they can get everything they need) it is still difficult for the buyer to put it all together in an understandable and easily workable format that actually works in their favor.

So, what does one need to get a “good deal”, and what does it take to get a “great deal”? Knowledge. Preparation. Application. And I would add the willingness of one to actually invest the effort to get a good deal which requires doing their homework BEFORE visiting the car store. Everything is there, the difficult part is finding the information in one place, and information that actually works, is consumer friendly and simple to apply.

Six Ways to Use the Internet to Improve Your New & Used-Vehicle Shopping Experience to Buy or Lease;

With so much content and information available online today, the Internet is making it easier than ever for prospective buyers to shop for a used vehicle. The following tips may be helpful for shoppers in the market for a used vehicle and may help improve satisfaction with their used-vehicle purchase experience.

1. Visit a variety of Web sites. With an abundance of information available online for used-vehicle shoppers, it’s helpful to know where to find what you’re looking for. Independent sites are good places to find intuitive search tools that match shoppers with the right vehicle for their needs, as well as pricing and reliability information. Dealerships often maintain sites that provide their current vehicle inventories, while many manufacturer sites allow shoppers to search for certified pre-owned vehicles in their area.

2. Search for comparative used-vehicle pricing. The development of Web sites such as Kelley Blue Book (kbb.com), AutoTrader.com and Edmunds.com have made searching for used-vehicle pricing information easy. Using these sites to compare prices will give shoppers a general idea of their desired vehicle’s price range without leaving the comfort of their homes.

3. Consider online classified ads. Online classified ads sites such as AutoTrader.com and cars.com are a competitive and convenient tool to give shoppers more options when considering a used vehicle. These sites allow sellers to post used-vehicle listings along with several pictures that can be viewed easily by shoppers, based on their preferred zip code.

4. Purchase or ask for a Vehicle History Report. Vehicle History Reports (VHRs) are an inexpensive way to check the track record of any used vehicle. According to the 2006 Used Autoshopper.com Study, nearly one-third (32%) of automotive Internet users receive a free vehicle history report from the seller. If your dealer or private seller does not offer a VHR free of charge, one can be purchased online through sites such as CARFAX.com and AutoCheck.com.

5. Search for financing and compare interest rates online. When shoppers have financing arranged ahead of time, it often gives them greater negotiating power when dealing with the seller. On most sites, applying for financing is fairly easy, and the interest rates offered by many online lenders are comparable to or possibly better than those offered by dealers.

J.D. Power and Associates 2006 Used Autoshopper.com

6. Go to www.thebestdealofyourlife.com, read the first page and discover the truth, learn specific facts you need to make your best deal and check out the link page (button at the bottom of the page).

Online Forums Help Businesses Generate Additional Streams of Revenue

Small businesses and inventors often find it difficult to reach the global market because the traditional transfer of intellectual property is complicated, costly, fragmented, and slow. A number of online forums, including Patentcafe.com (http://www.patentcafe.com), NewIdeaTrade.com (http://www.newideatrade.com), and Inventioncity.com (http://www.inventioncity.com), now help businesses maximize their return on research and development investment. Leveraging the global reach of these forums will allow companies and individuals from around the world the ability to buy and sell ideas, inventions and patents as well as trademarks, copyrights and other intellectual property to the global market.

Smaller companies that are not able to devote substantial amounts of resources to research and development will now be able to locate and license inventions listed on these online forums. Even larger businesses will save the time and expense of developing new products and technologies on their own, by buying or licensing inventions listed on these trading networks.

By providing a global forum for businesses, innovators and investors to find each other, these forums break down traditional geographic, industrial, and marketing barriers, and simplify and speed up the process of transfer of intellectual property. Additional information on how to sell innovations is available at http://www.newideatrade.com/sell_ideas.htm.

How To Build A Good Mutual Fund Portfolio

Mutual funds are extremely popular. There must be a reason, right? But, like any other form of investment, mutal fund investing requires some information and resources.

Easy access to investing information and the availability of online trading has made life easier for do-it-yourself investors. The Internet has brought the "trading" desk to millions of households and it is now possible to buy and sell shares, options, warrants, interest rate securities and managed funds from your own home. All you need is a computer and an internet connection. In addition, you can do your own research on a particular company or fund manager as well as finding out what some stock brokers are recommending to their clients. Much of this information is free or available at a reasonable cost and you can save yourself hundreds, or even thousands of dollars in fees and commissions every year via the internet. Rather than go through a full service stockbroker or investment advisor, why not give it a try?

When building your own stock or mutual fund portfolio, here are some pitfalls you need to avoid!

While you can find a plethora of good information on mutual funds and stocks, you can also find very poor information. Each website claims to have the latest hot picks or the "top ten" stock buys and often they contradict each other. Who do you believe and what about the scams?

You will undoubtedly come across websites and chat rooms that give investment advice or tips about investments, but many of these are not qualified to do so. The information may be wrong or misleading and some websites even repeat incorrect rumors.

There is overwhelming evidence that you will not become rich by listening to the advice of others. As an investor you need raw information, not recommendations. You would not buy a car just by looking at it...nor should you buy a company's stock or a certain mutual fund without doing significant research. There is no point trying to take control of your finances if you are going to rely solely on a "tip" from a newspaper or a broker or an internet chat room. It is true that someone may know more about a particular company or stock than you, but they could easily be wrong - so do your own homework!

You need to be certain that you have sound reasons for investing in a particular company or mutual fund. Do they have an instantly recognizable name? Do you understand what they do? Do the products or services of the company stand a good chance of being in high demand in a 10, 20 or 30 year time frame? Does it have a management team that moves with the times and is innovative, yet keeps a firm grip on the company's finances? Most of this information is available in a company's Annual Report, but make sure that you read it with a degree of skepticism...most reports are written to promote the company.

Keep in-mind that the historical and present prices of a stock or mutual fund may hold some clues to the future price. In practice, most analysts use fundamental analysis for short and long term buy/sell decisions and use technical analysis to confirm the decision.

Internet websites are a great place to collect information about companies. Naturally, a company owned website will attempt to portray the company in the most sympathetic light. Depending on how serious you want to be about investing, it is advisable to either visit or subscribe to investment research websites. Research websites are valuable tools for any investor and provide company reviews, give general investing information, market updates, stock pickers, stock ratings, watch-lists, portfolio managers, charts, share indexes, newsletters, alerts and model portfolios.

So, how can you structure a stock portfolio to maximize your wealth, ensure your peace of mind, give you total control of your investments, be easy to manage and give satisfaction?

Here is a recommended strategy that has worked well for many do-it-yourself investors:

1. Subscribe to a well respected investment research website dedicated to analyzing financial information for investors. They are independent from companies they list, do not receive commissions or brokerage and rely solely on investor subscriptions for income. They have to give their subscribers quality information to maintain subscriber confidence.

2. Look for the model portfolios they have developed and study the methodology they have used to create and maintain each portfolio.

3. Read the research reports supplied for each stock and study the graphs supplied for price movements and trading volumes. Get a good feel for both the long term and the short term trends of the stock.

4. Test each portfolio within a designated test period i.e., one month, one quarter, one year etc. Depending on the website, you can set up each of the model portfolios in a free portfolio manager provided on the website with unlimited stocks. Set a starting date for a test period where you "buy" stocks listed in the model portfolio at the closing price for that day. Make sure you include brokerage as it is part of the cost base for the stock. The website should either maintain up-to-date or 20 minute delayed stock prices, so a running balance can be maintained for the profit/loss for each stock over the designated period.

5. Compare each portfolio's published results with the results that you have achieved in the portfolio manager. They should agree with each other when the same stocks are compared over the same time period. Your testing should develop a level of confidence in the model portfolio.

6. Determine the best model portfolio for you to use. You can do this using the last the last three months of stock price history or perform a trial evaluation for the next three months of future prices. You can use one of the existing model portfolios or create your own from the stocks selected.

7. Subscribe to an online share broker website and begin trading.

8. Monitor stocks daily and review the performance of your actual portfolio against the model quarterly.

You should take care to evaluate the methodology used by the research website to develop the model portfolios. These portfolios are designed by research firms to provide sensible medium-term portfolios that make it easy for investors and financial planners to replicate. You need to understand the research methodology and develop a level of confidence in it rather than just blindly accepting the published results of each portfolio. You do not need to become an expert in methodologies.

Building a share portfolio that meets your investment objectives will substantially build your wealth over a period of time. You can also save money in commissions and fees, have peace of mind, total control over your investment and gain a real sense of satisfaction. A good recource for information to consider when you begin to have success at investing can be found over at http://www.assetprotectionnv.com.

Finally, be carefull with your mutual fund investments. No fund will make guarantees so good research and a steady hand are critical. Good luck comes to those that are prepared.

Fast Facts: Trading Stocks in a Fast Moving Market

The U.S. Securities and Exchange Commission warns investors that buying and selling "hot" stocks that have the tendency to rise and fall quickly can be dangerous if unexpected delays occur. Without even realizing it, investors can find themselves losing money.

The U.S. Securities and Exchange Commission warns investors that buying and selling "hot" stocks that have the tendency to rise and fall quickly can be dangerous if unexpected delays occur. Without even realizing it, investors can find themselves losing money.

Just because you can access your account online, doesn’t necessarily mean that your trades are instantaneous. Limit your losses in these fast-moving high tech markets by:

·knowing what you are buying
·understanding the risks involved in your trade
·know the trading process for fast-moving markets

Guard against some of the most common problems investors encounter in fast-moving markets.

Market Orders vs. Limit Orders

When stocks drop or soar suddenly, being stuck in the process of trading can mean the difference between making a sizable profit, and losing a bundle. Delays can develop in fast-moving markets, slowing down executions and trade confirmations. What you thought you were selling at one price, may be end up selling for quite another. Avoid buying and selling at prices higher or lower than you expected by placing limit order instead of a market order. Limit orders are executed automatically when they reach a set upon price, unlike a market order which is filled at the price that second, not necessarily the price set at purchase time.

For example, when you place an order for a $10 stock, placing a limit order will ensure that you don’t end up paying $35. The same is true for selling. The stock will sell when it hits the target limit, eliminating sudden losses. The risk here is a loss of control to hold certain stock just a little longer in the hopes that it will continue to rise. Once it hits the selling target, it is sold.

Remember, Online Trading Isn’t Instantaneous

Trading online can feature its own dangers. Problems with modems, servers, or delayed broker-dealer hardware can all cause a delay or failure in an immediate stock trade. Know what trading alternatives your firm offers (telephone, fax, etc), in the event a technological problem interrupts your transaction.

Avoid Double Buying/Selling

Too often investors mistakenly think that their order did not go through and place another order. This can cause them to buy stock they did not want, or even sell stock they did not own in the first place. Be sure to check with your broker on what to do if you aren’t sure if your trade has gone through.

Choose the Best Broker

Buying and selling in a fast-paced market takes a broker who’s capable of handling transactions quickly. There are no Securities and Exchange Commission rules that require any trade to be executed in a specific amount of time. Finding a broker that doesn’t delay is up to you, the investor. Take your time and research brokers carefully in order to avoid losing important assets unexpectedly