Category: Traders’ Secrets

Traders’ Secrets is something that everyone would like to know, right?
How is it possible that some traders are successful all the time while others fail to make a profit all the time?
That is exactly what Traders’ Secrets will show you.
Traders-Paradise’s team reveal all trading and investing secrets to you, our visitors.

What will you find here?

How to find, buy, trade stocks, currencies, cryptos. You’ll find here what are the best strategies you can use, all with full explanation and examples.
Traders-Paradise gives you, our readers, this unique chance to uncover and fully understand everything and anything about trading and investing. The material presented here is originated from the experience of many executed trades, many mistakes made by traders and investors but written on the way that teaches you how to avoid these mistakes.

Moreover, here you’ll find some rare techniques and strategies that are successful forever, for any market condition. Also, how to trade with a little money and gain consistent returns. By following these posts you’ll e able to trade with greater success. You’ll increase your profits and your wealth, of course.

The main secret of Traders’ Secrets is that there shouldn’t be any secret for traders and investors. Rise up your trade by reading these posts, articles, and analyses!

You’ll enjoy every word written here. Moreover, after all, your trading and investing knowledge will be more extensive and effective.

Traders’ Secrets will arm you with those skills, so you’ll never have a losing trade again.

Math Guide for Forex Trading

Behind Forex trading lies simple mathematical operations easy to learn.

Okay, math has never been your excellent skill but this math guide for Forex trading will make you clear. The truth is that you are afraid of math and this will help you.

Anyway, let’s see how simple it can be. There are some mathematical formulas that every trader has to know if he wants to be successful in the Forex market.
These math concepts are very simple and easy to learn even if you think that math is difficult.

Change in currency pairs value is estimated in pips. The minimum pip you can see is the fourth digit after the decimal place. The exception to this rule is Yen pairs. The minimum pip there you can see in the second digit after the decimal place.

Let’s use the hypothetical values in this math guide for Forex trading

For example, if the EUR/USD currency pair increases from 1.2530 to 1.32560. It is an increase of 30 pips for this currency pair. In Yen pairs, if the USD/JPY pair rises from 85.20 to 85.40, that is an increase of 20 pips for this pair.

The value of a pip is different for different currency pairs.

Let’s use the forex math formula to calculate the pip value of a currency pair:

Value of a pip is calculated

1 pip/exchange rate x trade size

We are going to use the EUR/USD currency pair with imaginary values.

One Pip = 0.0001
Base Currency: EUR
Exchange Rate: 1.3500
Trade Size: 1 lot meaning 100,000 units of currency
Pip Value = 0.0001 / 1.3500 x 100,000 = 7,407 EUR

How it works on the example on the USD/JPY currency pair

One Pip = 0.01
Base Currency: USD
Exchange Rate: 85.50
Trade Size: 100,000 units of currency which is 1 lot
Pip Value = 0.01 / 85.50 x 100,000 = 11.468 USD

Or let’s see this example GBP/CHF

One Pip = 0.0001
Base Currency: GBP
Exchange Rate: 1.3840
Trade Size: 100,000 ( 1 lot)
Pip Value = 0.0001 / 1.3840 x 100,000 = 7.22 GBP

Let’s talk about probability and numbers to see what lies behind the successful forex trading. Let’s find if a math talent necessary for good trading. We are focused on short-term forex strategies.

So, this math guide for Forex trading led us to the margin and leverage.

In Forex trading, leverage provides you to control a larger position. You will use a smaller part of your own funds and the rest you will borrow from your broker.
Margin is the deposit demanded by your broker. He or she will ask you for a margin/deposit to allow you to open a position.
Leverage is calculated by math formula:

Trade Size/Account Size = Leverage

In this math guide for Forex, here is a realistic example to illustrate this.

For example, you want to enter the position with a value of $200,000. But you have $ 4,000 on your trading account. Your goal is to control $200,000 with the $4,000 you actually have.

$200,000/$2,000 = 50

Your leverage in our example is expressed as 50:1.

What will happen if you instead of $4,000 have $10,000?

You will control $200,000 with the $10,000.

$200,000/$10,000 = 20

Your average will be 20:1.

Brokers can offer from 50:1 leverage for forex trading up to 500:1. But think twice before you accept any offer. It is true that leverage may increase returns but also increase losses.

Position Sizing

This is one of the most serious and frequent estimations that you have to make if you want to be a forex trader. Actually, before you decide to enter any trade, you have to calculate the position size.

We suggest you use one of the simplest calculations. It is a fixed fractional calculation strategy. The best is to risk 1-2% per trade, 1% is better and here is why. Take it as the rule for the fixed fractional risk.

So, you have to decide how much you can afford to risk a per-trade. When you make this decision you have to decide where to place the stop-loss.

Take a look where the most current swings are. Find support and resistance points. When you settle a level where you want to place stop-loss, you have to measure the distance in pips between this level and the entry you plan. Write down that number.

Then, discover the value of each pip. And you can calculate your position size.

Math is in this formula.

current account size x risk per trade/distance between entry and stop x value of the pip

Let’s say your current account size is $20,000 and the fixed fractional risk per trade is 2%. The distance between entry and stop is 100 pips

And the value of each pip is $20

$ 20,000 x 0,2 / 100 x 20 = 0.80 lots

This is just an example and you will find different situations but the principle is the same.

13th December 2019
How to Find Big Opportunities in Investing

Everyone would like to know how to find big opportunities in investing. That’s the point, right? One of the best ways is to notify where traders are overreacting to the news.

By Guy Avtalyon

To find big opportunities in investing, other traders’ extreme fears will help you. For example, traders reacted to news that brokers were cutting their fees. But did you notice a massive rise in their stock price? During the past few weeks, online brokerage stock took hits.

Let’s go step by step. When Charles Schwab announced it would cut all commissions for all trading, E-Trade, Interactive Brokers and TD Ameritrade fell. This news sent brokerage stocks lower because the traders overreacted.

In that period, for example, TD Ameritrade (AMTD) dropped from $48 to $33. The other brokerages experienced a decline in stock price too. Interactive Brokers (IBKR) fell from nearly $54 to almost $45, Charles Schwab Corp. (SCHW) dropped from $43 to $35, etc.

The traders responded to news that brokers are cutting their fees. They had fears about brokerage future without that income and started to sell. But the point is to overcome the fears and recognize the opportunity. When you recognize the bottom in some stocks you actually can see great returns. And let’s take a look at our example again.

What happened with these stocks a bit more after?

Charles Schwab moved from $35 to $42, TD Ameritrade moved from $33 to $39, Interactive Brokers stock rose from $45 to $48, etc. How did this happen? There are no tricks. When some stock becomes oversold and gets stretched in one direction too quickly, too far, you will notice bounce back. That is exactly the time when you have to buy the stock. So, you are profiting while others are feeling fears.

It is simple to recognize when the stock dropped on extreme fears. How to find those big opportunities in investing?

Key technical pivot points

Bollinger Bands

Let’s say you noticed that traders picked a moving average of 20 with two regular deviations up and under that average. When a stock reaches or enters the lower zone, you can be sure the stock is oversold.

RSI and W%R

Use RSI to confirm the indicators that are higher. The oversold condition will appear when RSI goes to or below its 30-line, also when W%R (Williams’ %R) comes to or up the -80-line the stock is considered to be oversold.

MACD

Moving Average Convergence-Divergence is helpful and simple. It helps to confirm the info we get from previously mentioned indicators. MACD is calculated by subtracting the 26-period EMA from the 12-period EMA (Exponential Moving Average).

How to identify investment opportunities?

You will need a bit of magic to find big opportunities in investing.

These four indicators must be matched with one another if you want this to work. They have to be aligned. And moreover, you don’t want to rely on one indicator. You must have all four.
So, what we had with brokerages in October this year? Just to be said, we can use other examples, but this is fresh. We saw the stock dropped due to the fees-pricing fight. Though, we saw the precise time of extreme fear and, at the same time opportunity.

When you see the stock dropped to its lower Bollinger Band, it is a sign that the stock is oversold. Use historical data for that stock and you will find that whenever the lower Bollinger Band is reached or entered the stock turned and bounced back higher from that point.

Use RSI to find big opportunities in investing

But you have to check RSI also. Find the confirmation on what Bollinger tells you. If the RSI is a below-set line the stock is oversold. That the confirmation of Bollinger Band’s story. Check this info in historical data to have a sense of how the stock was performing in case it had lower RSI and if the stock moved to its lower Band.
If you see the stock bounced back higher quickly that is the confirmation and you should buy.

And as we mentioned before MACD and Williams’ %R have to confirm the described condition to be sure you can trade with 85% of success.

Examples of how to find big opportunities in investing

The list is really endless. Big investments may come fro different fields, different companies. For example, some small but developing company can be a better choice than a famous brand.
In case you don’t believe this, let’s see what stats tell us. Small companies are the spine of any national economy. That’s the fact. Small companies employ many people, actually the majority. So, it is easy to conclude that the can be a big opportunity to invest in.
Just keep in mind before you invest in one of them to examine its potential for growth, financial strength. When you go through this process try to find out how passionate management is about business, sometimes that will tell how serious they are about future growth and the company’s future. Especially if you want to invest in some startup.

Big opportunities in investing can be detected in up to 85% of cases.
Put all these indicators together with extreme traders’ fears based on news, and you will see how to find big opportunities in investing.

7th November 2019
Sterling is good, the US dollar is trading almost flat

EUR/USD is by far the most important and liquid pair

The dollar index closed yesterday’s trading session in the red zone. The Fed cut its main interest rate range by 25 basis points. The central banks of Canada and Japan held the essential marks of monetary policy at the same level. The release of important economic reports is expected.

Sterling stays good this week and it is possible to have another run at 1.3000 against the US dollar.

The EUR/USD pair is sitting moderately higher on the day at around 1.1160 levels. It is similar to where it was traded on Thursday during the European morning.

Prev Open: 1.11528
Open: 1.11517
Day’s range: 1.11487 – 1.11688
52 wk range: 1.0884 – 1.1623

While buyers are looking to place more upside control with near-term resistance, closer to 1.1179, the important level to look out for will be the 200-day MA 1.1196 and also the offers holding near 1.1200.

Traders are currently 51% net-short GBPUSD.

But wait for the US jobs report later at 1230 GMT.

Buyers are keeping near-term control since the FOMC meeting concluded but unless they can break the resistance levels above, sellers will look to drive the price back lower in the future sessions.

For now, large expiries are seen resting at 1.1150 and 1.1200 so that may factor into keeping the price within a more stingy range before they roll off later today.

The dollar was lower this morning but now losses are seen.

Sterling is good, majors have stabilized. Investors are waiting to see the publication of the US labor market report for October. That could have an important influence on the rate of adjustment of the Fed’s monetary policy. Current economic statements from the United States have been combined. Experts expect a decline in key indicators of the labor market. Presently, the local support and resistance levels on the EUR/USD currency pair are 1.11400 and 1.11750. We suggest opening positions from these marks.

1st November 2019
UGAZ And DGAZ Stocks – How To Trade Them

(Updated October 2021)

UGAZ and DGAZ are ETNs tracking natural gas prices.
Energy exchange-traded products (ETPs) might be a good trading opportunity as much as energy ETFs.

UGAZ and DGAZ stock closely watch the US Natural Gas Fund (UNG) and UNG tracks the price movements in natural gas.

Let’s make a distinction between those two.

The main purpose of UGAZ (VelocityShares 3x Long Natural Gas) is to increase the daily performance of UNG by three times. That’s 300%. To make this clear, if UNG price grows 1%, UGAZ will display a daily increase of 3%. The best time to trade UGAZ is when you have a bullish sentiment on UNG.

The main aim of DGAZ (VelocityShares 3x Inverse Natural Gas) is to generate profits from the losses in the UNG fund. DGAZ will increase the losses by three times inversely. Meaning, if UNG price drops by 1%, DGAZ could bring you a gain of 3%. So, the best time to think about DGAZ is when you have a bearish sentiment on the UNG fund.
As you can see, both UGAZ and DGAZ have 3:1 leverage. That can notably boost your potential profit.

Trading UGAZ and DGAZ

If you want to trade them, it’s vital to watch the UNG fund. UNG fund is the basis of ETF that runs both of them. This can be a complex fund but you can go short in the long term and consider both UGAZ and DGAZ. Natural gas is a highly volatile commodity and UNG is not straight associated with natural gas in the physical sense. So, UNG isn’t a clever investment if you keep in mind it fell by more than 90% after its start. Also, it doesn’t pay dividends. Instead, UNG uses future contracts and OTC exchanges to find and copy the natural gas price. It doesn’t hold stocks. So, we can say that UNG isn’t a good investment by itself. There is where UGAZ and DGAZ come to the scene. If you don’t care for dividends and just want to keep the position for a short-time the long-term volatility of FUNG will not affect your investment.

As we said, UGAZ increases the UNG gains, while DGAZ goes up when UNG falls in price. But keep for the short-term, as long-term holding is never recommended.

UGAZ and DGAZ trading opportunities

These products can be risky. Well, you have to follow the news as ETNs give 3-time leverage in a single day. As we said, when the natural gas price rises by 1%, UGAZ will rise by 3%, and DGAZ will fall by 3%. To repeat, if you want to hold UGAZ or DGAZ the percentage performance will oppose your expectations.
A lot of circumstances may influence these products. For example, politics, global economy, supply and demand, weather, interest rates, and many others.
The way to trade USO or UNG is to trade options. That will allow you to achieve better risk-reward levels. The profit potential could be tremendous.

Bottom line

If you look at the historical data you will find peaks over winter, for example, but also, sometimes the price can make a sharp move down.
Why does this happen? The natural gas price depends on weather forecasts. So, you have to watch that. If you see the meteorologists are expecting a warm winter you can be sure the demand will be lower. So, pay more attention to DGAZ.
The other factor that may influence the gas price is the change in natural gas supply. So, you have to keep attention on weekly natural gas storage reports.
Both will give you the future course of the natural gas price. And, to add more pain, remember, UNG isn’t always successful while mimicking the gas prices. You have to be ready for the UNG price failure.
UGAZ is a tactical trading tool. It provides 3-time exposure to its reference index, the S&P GSCI Natural Gas Excess Return Index. This ETN is not designed like a buy and holds an investment. The return can differ hugely from its initial exposure.
It consists of complex effects and extreme concentration on quick period natural gas prospects.
DGAZ is the inverse product, it is intended to be a tactical trading tool, not a buy-and-hold investment. It is for a one-day holding period.

30th October 2019
Real Return On Investment

Return on Investment or ROI, measures the profitability of an investment, for every amount you put in, what profit can you expect.

Return on investment is a measure practiced to estimate the efficiency of your investment. Also, you can use it to compare the efficiency of different investments. ROI seeks to measure the volume of return on investment in comparison to the costs. So, to calculate ROI, you have to divide the return of your investment by the cost. The result will be displayed in a percentage or a ratio.

How to Calculate Return On Investment

ROI formula is:

ROI = (Current value of investment – the cost of investment)/cost of investment

Compounding interest sounds like alchemy for many new investors, but ROI is true magic. Particularly when your money rises each year.
Let’s say you invest $2,000 at 5% interest. You’ll have $3,500 in interest after 15 years. Your initial capital would be grown by $1,500 of interest. But if you invest at a 5% annual compound interest, you will have about $4,158.

But where is the magic?
The magic comes now. What if you can earn a higher rate of return?

What if you invest at 8% or 10%? This can be really important because it is your money and you would like to watch it grow.

True magic lies in math.

Let’s say you have an investment goal and also, you know how long you want to hold your investment. For example, you would like to sell some of your stocks after 2 years. Assume you invested $2,000 in the stock. And you did that. You sold your stock for, let’s say, $3,000. Great! You made $1,000 in profit. That is 50% of return which is amazing if you want to calculate it quick and dirty, and incorrectly. But, you need to factor in your liabilities and annual inflation rate to calculate the real return on investment. Okay, you have to pay a capital gain taxes, for example, it is $150, so you ended at $2,850 which is still good. Yes, your return will not be 50% it is 42.5% after you pay capital gain taxes. Oh, wait! Where is the inflation? Yes, you have to calculate the inflation over those two years. Let’s say the inflation rate is 2.5%.

$2,850/(1.025×1.025) = $2,713

Your real value return will be 35.65%. It is less than 50% of return what you may be expected but it’s still good.
It was a bit complicated but correct, which is the most important. And it is for two years. Do your own math for longer periods.

Several things you have to keep in mind.

A good return on stocks has to surpass inflation, taxes, and fees. Only in that way, you’ll be able to build your wealth.
Use ROI to compare investments even if they’re not related. It isn’t the same if you are buying blue-chip stock or small-cap. In short, everything is different. But, if you compare only ROI may provide you a clear insight into where you want to direct.

ROI can be used in combination with the rate of return, which takes into account the time frame, which we did. You can use a net present value or NPV, which we did to calculate the real rate of return.
The usual return on investment for the majority of investors is about 2-3%. It isn’t great. But if you keep your money in a bank account you will have a negative return, after you factor and pay all taxes and inflation.

A good return on investment is 10-12% per year

You can beat the market. That is everyone’s goal, right?
But if you expect to earn 15% or 20% – it’s not going to happen. Or it will happen very rare. Don’t believe in false promises, they are counting on your lack of experience. If you build your financial security on bad premises you will end in a risky field. You may lose all your capital. If you have a more conservative approach to investments you will have a less stressful experience. Investing should give you certainty.

Bottom line

ROI is a popular measure due to its simplicity and versatility. Typically, use ROI as a simple measure of your investment’s profitability. Use the ROI on a stock investment. The calculation isn’t difficult. It is easy to understand. If your investment’s ROI is net positive, it is good. Avoid negative ROI, it is a signal of a net loss.

29th October 2019
When to Sell Option Call?

If the trade is going in your favor or for the trade that is going against you – don’t wait until expiration to see what happens. Sell before.

Fresh traders, particularly those with a little amount on the account, like to buy options. But do they understand all the rules? The vast of them somehow skip selling prior to the expiration date. The truth is that the call option could be sold at any time. Call options give you the right to buy some assets, you already know that. To know when to sell the option call, pay attention to several situations.

Let’s say you own calls and you decide to let them expire worthlessly. That’s okay. Your decision. But if you forgot and the stock closes on the expiration date the options will automatically be exercised whenever it is “in-the-money” when the market closes.

And it will be a problem when the next day comes. The next day, the day after the expiration date, the margin call will come. Where is the problem? When you buy an option call, you are buying the right to buy a stock. Did you know that? If you are new in the options trading it is likely you didn’t. And what happens? When margin call comes you have to pay for shares and you’ll be forced to sell your call options. So, it is better for you to sell your options calls before the expiration date.

So, you have to close your trade before the expiration date.

When you opened your position your aim was to make a profit, right? So, don’t wait for options to get too close to the expiration date because they will lose the value. As the expiry date is closer, the value is going down. To make a profit it is better to sell your options and close the trade. Of course, you may take a loss too but if you wait longer and as you are approaching the expiration date, the chances to avoid loss are almost zero.

Avoid margin call

Lett’s say you bought one call option. How to know when to sell option call? Don’t forget that one option controls 100 shares of stock. And let’s say the strike price is $30. If the stock closes at $30,03 your options will be automatically exercised and you’ll be the owner of 100 shares of stock. Further, your broker will send you a margin call if you don’t have a sufficient amount on your account to pay that stock. And what you have to do? You will be forced to sell the stock to close out your trade. More often, you will sell it below the exercise price. But it isn’t necessary to be your case. You can avoid this unpleasant situation. Just close out your open position before the expiration day. Before the market closes, of course.

For a strike price, you can calculate the cost to buy a call option and the cost to use it. You can find plenty of websites with options quotes. All you have to do is to type a stock’s ticker symbol and get a quote. You will see a column with months arranged and with the options expiring that particular month. Remember, you can trade the option until the third Friday of the expiration month.

Calculate options for a strike price

Find your wanted strike price in the “strike” column. Strike prices are ordered from cheaper than the stock price to higher than the stock price. Suppose the stock’s price is $50 and the strike prices ranging from $20 to $70 in a $2 increase. And you want to calculate an option with a $60 strike price. And suppose you want to buy a call option with a $2 “ask” price.

To calculate the whole price to buy one option contract you have to multiply the ask price by 100. In our example, it is $2 x 100 which is $200. No, it doesn’t amount to buying the stock, this amount of money you have to pay for the right to buy the stock.

Let’s go further. The next thing to do is to multiply the strike price by 100. That is an added amount you have to pay to use the option.

$60 x 100 = $6,000

This means you can buy 100 shares of stock for $6,000 before the expiration date.

Use volatility forecast

In general, volatility is extremely important when buying or selling options. Since “returning towards the mean” is especially noticeable on volatility, you can somehow easily forecast the volatility as it goes above a certain point or less than a certain point – it will, most likely, return towards the average volatility.

You can check the VIX to measure market volatility. Learn here how to do it.

Bottom line

Don’t buy call options with the aim to own the stock when the options expire. Your goal has to be to buy a call option and profit when the stock price grows. If call options expire in the money, you will end up paying a bigger amount to buy the stock. Much bigger than what you would have paid if you had bought the stock. If you want to hold the stock, buy it. Don’t play games with options.

And finally, one important note when it comes to questioning when to sell option call.

The European-style options expire on the third Thursday of the month. The American options expire on the third Friday. Don’t forget about this time difference. This could result in huge financial losses for you.

Forecast volatility, that’s a key ingredient in profiting from option trading.

27th October 2019
Is PEG Ratio Really Useful?

The PEG ratio is one of the most popular metrics. It is so easy to calculate it. It never takes more than 10 secs even if you are not good at math.

But, what do you think, is this extremely simple metric, this PEG ratio really useful?

Let’s see. Let’s examine it a bit more on some examples.

First of all, the PEG ratio or the price/earnings to growth ratio is a stock valuation measure. Investors use it to evaluate a company’s performance and investment risk. It is a measure, so it can be calculated.

When the PEG ratio value is 1 we can say there is an excellent bond between the company’s market value and its expected earnings growth. If the PEG ratio is higher than 1, the stock is overvalued. But when the PEG ratio is lower than 1, the stock is undervalued.

The formula for PEG ratio is:

PE Ratio (Price/Earnings) / Expected Growth Rate = PEG Ratio

Assume we are examining two stocks with different characteristics

Stock A company:

price – $20/share
earnings – $4/share
expected EPS growth – 5%

Stock B company:

price – $40/share
earnings – $4/share
expected EPS growth = 20%

For stock A company

P/E ratio = $20/$4 = 5
PEG ratio = 5/5 = 1

For stock B company

P/E ratio = $40/$4 = 10
PEG ratio = 10/20 = 0.5

If we study the P/E ratio for valuation plans, we will discover that the stock B company has an advantage because it has a P/E ratio that is 50% less than that stock A company has. But if you find that company A is going to improve its earnings 5 times faster than company B, you may modify your opinion. If you use the price to earnings growth, you will see that the stock A company trades at a lower PEG ratio than stock B company. So, what can we conclude? Company A stock may give a better value.

But is that really true?

Well, there are some weaknesses connected to the PEG ratio. Earnings growth is not an isolated thing in the market minds. To get a whole picture of the stock value you have to take care of many factors such as cash flow, dividends, revenue growth, etc.

Further, when it comes to “growth” in the phrase “price/earnings to growth ratio” you will be faced with one problem when you are trying to value a company. You actually don’t know the rate of earnings growth. In the best case, you can guess or rely on Wall Street analysts. Having thin in mind, your PEG will be as good as your data is.

Well, something is good with the PEG ratio. It is very useful for smaller companies but for large companies (for example Disney or Ford) where the growth isn’t so important to total returns, it can cheat.

So, is the PEG ratio really useful?

You have to keep in mind that it isn’t a mathematical result. The method is as good as its inputs. The future growth rate could be the main problem in this PEG formula. When you or any analyst make forecasts about the future it can be wrong.

To make it clear, it is easy to calculate the PEG ratio for companies with weak growth. But, mature companies with excellent earnings and great dividends, have a slow growth rate. So, such companies will never have a PEG ratio of 1 or less. Right?

It is almost the same for companies with fast growth.

For instance, a company growing in a surplus of 30% per year will be incapable to maintain such a growth rate. Can you see how the PEG ratio is as good as its inputs? A huge amount of failures in the future earnings growth rises from a too optimistic or too pessimistic viewpoint for the company or industry. Getting an exact PEG ratio depends on what factors you use in the calculation. You may find that the PEG ratio is incorrect if you use historical growth rates. This one especially can lead to mistakes when future growth varies from the past.

Bottom line

Traders-Paradise wants to give some spotlight on the pros and cons of using the PEG ratio. As the answer to a question Is PEG ratio really useful, we can say: the PEG ratio is useful but only when you use it to improve a more precise discounted cash flow analysis or relative valuation.

23rd October 2019
How To Know If a Stock is Worth Buying

How to recognize if a stock is worth investing in?
What causes a stock to be good or bad?
What things to consider?

By Guy Avtalyon

How to know if a stock is worth buying? Let’s assume you are new in this field and how you can decide what stock to buy. For some investors, it is a tricky part. To be honest, it is hard for everyone. The risk is involved, the volatility of stock or market, the investment goal. Everything is on the table. But if you follow some rules connected to the estimation you can figure out how to know if the stock is worth buying. Yes, many people will tell you stock investing is like a wheel of fortune. And they are wrong. Investing is like solving the problem. Everyone has its own way, own style, but the goal is the same: solving a problem.

Prudent investors must enter the stock investing as if they have to solve a problem. Step by step.

Buying stock isn’t like buying a new sofa and when you find it isn’t for your room you can take it back. When you buy stocks, you have to be convinced they will hold their value, increase in value, and you will gain profit when you sell or deliver to you notable dividends over time. The main point is to know when a stock is worth buying.

Look at the price

When you have to decide if some stock is worth buying the first thing you will find is its price. You have to figure out how much the ownership of shares in some companies will cost you.

The amount of money you have in your hands will determine how many shares you can buy but the most important is to know historical data about particular stock prices. If you find the stock has steadily increased over time you will know that you can expect a good value in the future.

Pay attention to revenue growth

Share prices will grow if a company is growing. A company is growing when rising its revenue. Increasing revenue will show you if the company is strong. We can say it is a major indicator often called top line. The important part is not looking at revenue isolated. You have to observe all rise and drops in each quarter and year. And here is the tricky part. The positive trendline is good for the stock price but the revenue may be dropping or be flat and it is important to understand why that is.

You should check the company’s current holdings, projections for future operations and stability. If you hear or read some news, no matter if they are local or even rumors that the company is doing bad, it is better to step back. You wouldn’t like to hold stocks with so much stress. Your money is involved and you could lose everything invested. So, check the company’s revenue, it is easy since almost all companies have their official websites where you can find all this info.

But keep one thing in mind. If it is a temporary situation and historical data shows its stock was good in price that can be good for you to buy a stock at a low price and wait for it to rebound over time.

Some stocks may temporarily drop in price and it can be a good deal to buy them now because they have the potential to recover.

What is the company’s earnings per share

This info is important and you can easily count it. Just divide the leftover amount at the end of each quarter by the number of shares the company has sold, and you get the earnings per share. For example, if a company made $100 million in profits in the prior year and has 52 million shares, the earnings per share is $1.92. As an investor, you should pay attention to this since the higher earnings per share (EPS) shows you that the company is in good shape. And the tricky part again arises. Some companies can manipulate with EPS. The process is simple. They do it by buying back their shares. In that way, they are boosting EPS but not increasing profits.

Use the technical and fundamental analysis to know if a stock is worth buying

You will have some idea about stock’s quality if you check the prices over the past 200 days, for example. And you will see the trends. Trends are repeating.

Analysts think that by observing the movement over a determined period, you can define the baseline, the point where the stock should recover. Here the advice, don’t buy the stock at its highs, wait to come close to the baseline or to hit it. Some may ask how is good stock if hits the baseline. Well, when the stock hits the peak it is expensive, the price is increased, and the stock has no more space to run so the only possible scenario is to go down. If you buy a stock at its peak you will lose your money. So, it isn’t a good time to buy a stock.

Also, perform fundamental analysis. That will show the current and projected financial aspect. Use that info to discover now’s value. Use the company’s statement and balance sheet to determine the business strength. It isn’t a 100% indicator, but it is enough good sign of what you can expect from the company in the foreseeable future.

How to know if a stock is worth buying

One thing is sure and you must have that in mind when you are trying to know if a stock is worth buying.

A company can’t manage every single thing that might affect the business. The general economy can influence the health of a company and its stock play. For example, consumer prices, the changes to interest rates can affect how a company is doing. That is not in connection with its own business. But, the stable economy produces companies’ wealth and share increases come with that. And opposite, share prices can stumble during times of economic uncertainty.

You will find many analysts that issue reports and tips about individual stocks. These tips appear with “buy” or “sell” ratings. But analysts often disagree, so it isn’t recommended to depend on one report. Always compare several to know if a stock is worth buying.

22nd October 2019
How to profit from The Stock Market Plunging?

By Guy Avtalyon

The stock market is plunging but will it crash or not is still unknown. It isn’t easy to predict the stock market crash because it occurs suddenly. The point is to be prepared for such a scenario and here are several ways on how to do so.

I don’t want to frighten you, but we have to talk about the stock market plunging.

The volatility of the markets is back again. Actually, the market is plunging. That is the data from the first six days in October. The S&P 500 has dropped a total of 83 points. Now it is almost 115 points lower than in September. Having this in mind, the trade war and the inverted yield curve, also, let us know how not to speak about a recession.

The stock market is plunging

These gaps are standard. For the last 70 years, there were 37 corrections in the S&P 500. If our counting is good that is almost every second year. And mentioned drops were about 10%. Now, we have 5% and such were more common in history.

This is the price we have to pay for long-term wealth making. So, you must understand that long-term investors have an advantage against the short-term since they would infrequently experience continuing damage from stock market corrections. Time and patience, wait for a bull market rally. It will nullify the correction in the stock market. Anyway, the point of long-term investing is to buy and hold. Hold on to your stocks, that is the key to winning in the long run.

I warned you how difficult this year can be. But when investors’ fears overwhelm the market and the stock market is plunging, there is still something you can do.

Is a safe-haven stock right move?

Yes, you can thrive during the stock market correction if you buy safe-haven stocks. For example, buy gold. The gold is a store of value, so it is a safe-haven asset.

The truth is that you will not gain a lot of profit by holding gold for a long time. It is a physical commodity, there is no dividends. So think about buying a stake of shares in some companies that produce the jewelry or anything of gold instead. Also, a good choice is to buy shares of mining. This is also a suitable alternative when the stock market is plunging and getting lower.

Stocks with low volatility

Companies that provide constant profits, pay a dividend, and have low volatility can be very beneficial when the course in the market turns. Some of them will give you yield much bigger than the yield of a 10-year Treasury bond, for example. Find some company with the old fashioned model of business. Yes, it can be boring but in the long run, it is excellent. The point is to survive the market plunging.

Basic goods and utilities as a safe investment

Buying stocks of some companies that produce cleanser or hygiene is an excellent choice. People will always need to be clean and they will buy these products no matter how deep the crisis is. Also, stocks of energy companies. They are not low-cost but they are eternal. Even more, these defensive basic-need stock can grow in a volatile market.

What to do when the stock market is plunging?

Many things in the markets depend on risk tolerance. Your investment portfolio is based on risk tolerance. The main problem with the stock market plunging and when it crashes is that they are coming suddenly, no one can be sure that the crash will come and when, or the market will recover. Market crashes happen quickly, there is no warning. The problem with investors’ risk tolerance is that is very hard to adjust it depending on circumstances, especially during the bear market. You’ll be emotional, panicked, you will be encompassed by fears. To avoid all of these, take care of your portfolio structure. You should hold liquid assets, such as cash, bonds. When the market crash occurs you need a through-out scenario to avoid losses. Liquide commodities will provide you that.

Being an investor means you have to put your feelings away. You have to make your decisions separate from them.
Investing is magnificent. But life is also.

During the bear markets, even trivial corrections can be remarkably dangerous. But at the same time, bear markets will offer you great moments. The point is to know what you want and where are looking for. But Warren Buffett thinks about bear markets as buying opportunities. The trick is that in such market periods the stock prices of large companies are going down. When that moment occurs watch in your favorite stocks. The time will do the rest. You should buy it when others are selling.

15th October 2019
Getting Started Investing is the Hardest Part

Getting started investing can be very easy and smooth since you need a little money to start. Investing is better than savings accounts because it can shorten the period of earning.

By Gorica Gligorijevic

Getting started investing isn’t a big deal, it shouldn’t fright you. Honestly, it’s so easy.

You know what, when I was just a little girl (my grandma used to sing this) my parents gave a lot of effort to teach me how to save money. Grandparents would like to give me money for some holidays with advice to keep it for rainy days. I had my savings account. From time to time, they would put some money there but most of the time they insisted I have to put. And I did it. Not frequently, I have to admit, but still. With time that habit got strong roots. Every month I’d put 10% of my earnings on my savings account. I am still doing the same. That first savings account is my 10%-account.

No matter how big or small portion is. 10% would every time end there.

I can only speak from personal experience but I am sure that other people could easily find themselves in the same situation.

I am not going to give you advice because I know that is almost impossible to put anything on your savings when you are living paycheck to paycheck. Yes, the amount of money that the majority have available to spend every month is insufficient to put something aside. Despite the old saying about money: If you save me today, I’ll save you tomorrow.

But we all know how important is to have something aside. And it is possible. Let me show you how.

How getting started investing

Okay, do you know the rule “pay yourself first”? Yes, starting this is hard. But do you understand the meaning of this rule? Of course, you do but why not tell it again. This means you have to put on your savings every month some amount of money. It doesn’t matter how much it is. A few dollars, or other currency you have. Just when you get your salary, put aside several coins. Every month. And you will see, that amount will grow with time. Try this. I am not going to tell you how should you spend this money. You may have enough for exotic travel, or to buy a car, or after some time you may have enough for house buying deposit. Just start.

No, I will never tell you to live below your means.

Sacrificing isn’t a good way to save anything except life. If you try this method, living below your means, you will be unhappy and you will always have the feeling that something was taken from you. It can be a trigger for something more serious. But, anyway, try not to purchase the famous brands, too expensive things. Do it occasionally if it makes you happy. But don’t let it be your goal. Life is a lot more than brands.

Create a budget

What you can do is to make a budget frame. It is a smart idea to write down the amount of money you have every month. You can do that in some excel spreadsheet, or just in some memo. Also, there is a lot of money management apps you can use. OK, that’s the first step. The next is to subtract all the costs you have, for example, taxes, debts, loans if you have (don’t worry, we all have), etc. What you have in your hands after these deductions is your net income. This is the amount you have to use as a base for creating your budget. So, track your spending to be able to make some adjustments if it is necessary and possible, of course. You should review your budget from time to time to be sure you are on a good track.

Getting started investing

Do you know that your money can work for you? Yes. Let’s assume that after one year of saving you have enough for exotic travel. Why do you need to make it right now? Go somewhere else and save e.g. $1.000 on your trip. That amount is more than enough for getting started off investing. You can do that with less money, here you will find how. You can choose to invest in some mutual funds (it is probably the best for starting), or stocks, or real estate. By investing you will generate a greater return than your money sleeping in your savings account. If you invest in something you will let your money work for you. The whole process may be done with your banker’s help. Your bank has financial advisors, investment advisors, they will tell you where to invest. Or you can engage some brokers.

What are the advantages of investing

One of the main advantages of investment is that you can have your money work for you to earn more. Let’s say this way. You don’t need to work more to earn more. Your investment will that for you. Investing could bring you a higher living standard, for example.

Further, you can apply investment plans for saving and growing money. The best part of investing is that you can be a long-term investor and money earned from investments can be spent to cover future expenses, for example, for your retirement, or buying a house, new car, your children’s higher education costs, or just you want to have more.

It is important for you to understand that investing isn’t gambling.

You can make a profit on investment due to research and careful choice of a suitable investment vehicle. It isn’t betting. The truth is that you can make losses in the market. That’s the reason to make less risky investments. Never mind if they have lower returns. Stay on them until you find yourselves capable to play riskier. That time may never come. You can stay in safe investments for your whole life. It is OK.

In that way, you will protect your property in the long run.

So, you can see that getting started investing isn’t always the hardest part. It can be very easy and smooth. You just need a little money to start. At least if you have some targeted amount you have to save in some period, investing will short that period. You’ll be able to gain it sooner. Sounds good, don’t you think?

10th October 2019