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The value of investments is falling – What to do?

This can be a big issue, try not to panic, and follow these steps to protect your capital invested.

by Gorica Gligorijevic

The value of investments is falling and you are worried. Don’t be, it’s normal from time to time but also, you may profit from it. Let me explain this.

In stock investing, you have to respect a few general facts. You may face the value of investments fall, as first. What you have to do? To find the reason behind. When you determine the reason you will have a powerful weapon in your hands: you will be able to decide should you sell or hold your stocks. Moreover, you’ll be able to buy a new stock of shares. Well, you can see it isn’t the end of the world. Just think about other opportunities and try not to panic.

Put your emotions aside and turn on your brain. Your investments are not your sweetheart.

So, when (notice there is nor “IF”) the value of investments falls, don’t jump immediately to sell them. Yes, the news comes, but just stay cool because it can be temporary. Do you know how many investors lost their fortune reacting impulsively?

It is painful to watch at stocks are falling in price, that’s true. But take a closer look at historical data of stock you hold. Maybe you can notice some patterns. When and why their value has had fallen before?

When the value of investments is falling, identify the pattern

Yes, it is very important to identify the pattern.

Past performances don’t guarantee the future behave but at some point, you will figure out the causality. Most stocks respond to market movements in a logical pattern. And you’ll be ready for the next move.

Besides, just looking at the charts can make you more nervous. You must have more information. You must have a clear picture of how the whole industry is performing. Industry in which your beneficial company is working, of course. You are holding its stocks and you have to know something about the sector it is working on. What is about the overall market appearance, what is happening there? Is the market volatile maybe? Moreover, did you read at least one quarterly report from the company whose stocks you hold?

The value of investments is falling don’t get panicked

Okay, let’s talk about this a bit more. Let’s assume you have all the info. So, what would you do with this?

The key is to recognize what forces the value of your investments to fall. If you cannot identify the reason behind, you should exit your position.

Sometimes the gap in the market can cause the value of investments to fall. Or it can happen due to the market’s weakness. If you find this case, you should stay in a position. It isn’t rocket science, it is just market: supply and demand relationship. If you are on the market it is reasonable to have a diversified portfolio, right? This is very important, especially in today’s market. A diversified portfolio will produce a positive return to you. But more importantly, it will allow you to have a return higher than the inflation rate is. So, if you are a long-term investor, just stay cool when the value of investments is falling. Your investment horizon is what is really important.

Temporary drops shouldn’t concern you.

The question is, what is the main goal of any investing strategy? To gain returns bigger than the overall market for some level of risk. It is always a good concept to check how the performance of your stock is in comparison to the overall market.

But what if the value of investments is falling suddenly and it different from past performances? The company is still good as it was when you bought your stock! Think! Maybe the reason for the value of investments falling is exactly there. The company is too good and maybe many investors are willing to buy a stake of its shares. If you are not among them, leave your position and invest in some other company.

29th August 2019
The German market is overflowed by fears of a slowdown

2 min read

by Gorica Gligorijevic

German fears of stock markets’ slowdown rose causes the fear, that the whole country may slip into a recession. The day before the US announced its decision to delay part of tariffs on Chinese imports.

The trigger in the German’s markets was news that the country’s economy declined 0.1% in the second quarter of this year in comparison with the prior quarter. According to some analysts, the fears are caused due to global trade conflicts coupled with difficulties in the auto industry. The decline of 0.1% was just a trigger to show them.

“Data showing that the German economy contracted in the second quarter reignited fears of a global recession, dampening demand for riskier assets such as equities,” said Fiona Cincotta, market analyst at City Index

Many European markets are down.

Germany’s DAX was down 1.5% at 11,575. The CAC 40 in France dropped 1.4% to 5,288. The FTSE 100 index of leading British shares was 1% below at 7,181.

The US Wall Street was ready for similar drops at the bell end with Dow futures and the wider S&P 500 futures falling 0.9%.

Tuesday was one of the better days in the markets. The US Office of the U.S. Trade Representative announced that the US will delay the tariffs on some of China’s products like consumers goods. But some sorts of fish or baby seats are entirely removed. The new trade policy will be on scene until December 15.

European shares stabilized on Thursday

But prior there was a brutal sell-off. It was fired by overall fears of a recession. The investors were expecting central banks would relax monetary policy and calm nervous markets.

The pan-European STOXX 600 index dropped at 0828 GMT hitting the point very close to six-month lows.

The trading volumes in Italy, Austria and Greece were closed for a holiday. Almost all European markets moved to the negative area.

London’s FTSE 100. underperformed its European rivals, burdened down by oil main and some stocks that traded out of dividend right.

In profits news, strong numbers from beer maker Carlsberg In Denmark (CARLb.CO) and shipping group A.P. Moller-Maersk (MAERSKb.CO) pushed stocks of these Danish companies to more high-priced.

Drillisch and United Internet slipped below after the German telecom company lessened its profit outlook.

Here is a short summary of EU markets:

UK FTSE 100 -1.7% hits two month low
German DAX -2.3% hits a four-month low
French CAC -2.2% hits one week low
Italy MIB -2.8% hits two month low
Spain IBEX -2.2% hits two month low

The German DAX again broke the 200-day moving average, the last low was in June. It stopped at the 50% retracement of the rally in December. DAX primarily have to survive on that level. If don’t, the market may be very violent. But if Angela Merkel announces a 180 on deficit spending, the investors on the German stock market will have hope.

15th August 2019
Don’t buy stocks on a dip

Many say the strategy is to “buy a dip”, but can it really lead to success? There are so many opposing opinions.

By Guy Avtalyon

Don’t buy stocks on the dip says UBS Group AG. It is a Swiss multinational investment bank. While analysts at Goldman Sachs Securities Division advised: “Buy bitcoin on the dip” for stocks it is a straight way to a loss.

“Buy the dip” was a good plan for the bull market, but analysts at UBS addressed to stock investors:

“A world where leading indicators are accelerating is generally one where a correction in equities is an opportunity for investors and ‘buying the dip’ gets rewarded. In contrast, today’s backdrop with PMIs (purchasing managers indexes) in the low 50s and rates arguing for further declines often results in buying the dip being a losing proposition,” addressed strategists Francois Trahan and Samuel Blackman, in a Tuesday.

This announcement is quite strange because dip buyers are still making a profit.

The Dow Jones Industrial Average DJIA, +1.44% increased more above 370 points Tuesday. This increment came after the U.S. said it would pause imposing tariffs on some imports from China.

The S&P 500 SPX, +1.48% climbed 1.5%. The Dow is depressed 2.2% for the month, and the S&P 500 is 1.8% below in comparison to the previous month.

Trahan and Blackman have a different interpretation of the current market conditions.

What is buying on a dip

It is a losing proposition.

They said the historical records covering the last nine economic cycles, reveals that buy-the-dip works the best when leading economic indicators, like PMIs (private mortgage insurance), are accelerating.

The analysts said that buying-the-dip had a virtually excellent history. They call it the “risk-on” period. However, it is followed by the “risk-off” period. When PMIs fell under 50, labeled the “risk-aversion” period, dip-buying has poor benefits, they said.

Don’t buy stocks on a dip the analysts said

They said that defining the period of the cycle is just one piece of a three-item checklist. They also explained the perfect risk-reward scenario. It happens when the “risk-on” period is followed by interest rates, that carries an increase in the price/earnings ratio, so the earnings opportunity is promising.

Today, the potential dip buyers are 0-for-3, they explained. In other words, we are witnesses of the “risk-off” period, but the companies earnings opportunity has declined.

They also estimated interest rates.

They were looking at yields with an 18-month lag.

Their conclusion is: “the path laid by interest rates 18 months prior to today shows that there is now tightening in the pipeline, and it’s more likely we experience multiple contractions than expansion in the months ahead.”

Multiple expansion points the readiness of investors to pay more for a dollar of earnings. And they pointed out that the risk/reward for buying the dip “extremely poor”.

As you can see, analysts from Investment bank Goldman Sachs has advised investors to capitalize on the new dip and buy bitcoin.

The bank stated that its short-term target for bitcoin is $13,971. It also suggested to investors to buy Bitcoin on any dips in the current situation. But, don’t buy stocks on the dip, says UBS Group AG.

There is a difference.

15th August 2019
Procter & Gamble shares jump over analysts estimates

3 min read

Procter & Gamble shares recovered Tuesday. Its earnings exceeded expectations after removing out the influence of the charge. So, this company is looking for fiscal 2020 with more optimism. Procter & Gamble shares have risen nearly 44% over the past year.

The company reported earnings per share $1.10 and expected revenue at $17.09 billion.

Wall Street expectations were different, analysts predicted P&G earnings per share at $1.05 and expected revenue at $16.86 billion.

P&G reported a fiscal net loss in the fourth quarter of $5.24 billion. It is $2.12 per share. Also, they reported the net income of $1.89 billion, or 72 cents per share, for the previous year.

Procter & Gamble problems

The main cause of the loss for the quarter ended June 30 was the one-time cost to write down the value of Gillette. The company $8 billion write-downs of its Gillette brand.

Keep out details, P&G gained $1.10 per share, defeating the $1.05 per share which was the experts’ expectations.

Net sales grew 4% to $17.09 billion, beating predictions of $16.86 billion.

The sales volume of the Gillette brand dropped during the quarter. The same had happened to Braun and the Art of Shaving brands.

Organic sales increased

But its organic sales had a positive result because of the price rises, it increased by 7% over the quarter. Expanded sales in developed countries helped too, Tide and Ariel are very popular in those days.

G&B health-care and beauty products, line SK-II and Olay, also performed well.

The organic sales of Pepto-Bismol and Crest toothpaste jumped up to 10%. Also, the other health care products like Vicks and ZzzQuil increased in the sale.

And, what is interesting, its laundry and dishwasher brands reported sales increase of 10% in the quarter.

The forecasts

The company stated it awaits fiscal 2020 revenue growth by range 3% to 4%. This adds a small negative influence from foreign currency. Wall Street was predicting fiscal 2020 revenue of $69.76 billion, up 3.5% from this year.

Also, Wall Street prediction is earnings per share to rise by 4% to 9%.

“Our guidance range brackets current market growth with a bias toward continued share growth, while still expecting a strong competitive response,” CFO Jon Moeller told analysts on the call, reported CNBC.

The company stated that its current forecast for commodities, foreign currency, transportation, etc. is supposed to end in a “modest net benefit” to earnings growth in fiscal 2020.

Experts were predicting that the company’s adjusted earnings next fiscal year would rise by 5.1% to $4.75 per share.

The beginning and the future

Procter & Gamble was founded as a family business in 1837. It was kind of the family uniting after they married two sisters Olivia and Elizabeth Norris. Both William Procter and James Gamble were immigrants.

Candlemaker Procter, born in England, and soapmaker Gamble, born in Ireland. Of course, the company with their last names was selling candles and soaps at the beginning.

Fun fact: They were sponsors of radio shows all around the US. That’s how the phrase “soap operas” was born. From Ohio all over the world.

Today it is one of the biggest companies on the globe.

How did they come to this?

They operated very smartly, they bought various brands all over the world. Gillette, Old Spice, Max Factor, Crest, Pampers, Ariel, Tide. That is a smart diversification.

This company is employing more than 120,000 people all over the world and own more than 80 brands.

Should you buy their stock? OMG, for sure!

31st July 2019
Stock Market Corrections – All You Need to Know

What is a stock market correction and how to deal with it?

By Guy Avtalyon

A stock market corrections are regularly interpreted as a drop in stock prices of 10% or higher from their most recent peak. If prices drop by 20% or more, we call it a bear market.

Prices bounce, excitement hides logic, signals arrive and disappear. The reasons for treating equities as a poor barometer for the economy are many. Right now, that might be for the best. Stock market corrections occur, normal, about every 8 to 12 months, and last about 54 days.

A 5% to 10% correction is vital for this stock market, warns Jefferies strategist.

What happens when the market declines, why it does so, and how long a drop may last?

For example, news that the S&P 500 has fallen more than 3% in one day can cause uncertainty even for the most experienced investor. Such falls can be scary because it’s impossible to predict how difficult or long-lasting losses will be. And even if you believe the market will finally rebound, it’s hard to follow the value of your investments shorten in front of your eyes.

But, a stock market drop doesn’t mean it’s time to panic.

Since 1926, there have been 20 stock market corrections during bull markets, meaning 20 times the market declined 10% but did not subsequently fall into the bear market territory.

You have to know, the stock market’s condition is always rising and falling. Occasionally, the market will experience short-term gains, but after will come drops. And again, and again, the same scenario. The gains in value are usually due to mass psychology because investors are driven by the expectation of recognized gains. When more investors buy into the trend, the price increases. Once the price is high enough, buying slows, and some investors begin to sell to lock in their gains. This decrease in price, following a short-term increase, is a market correction.

Stock market corrections are followed by…

Market corrections are usually followed once an increase in market prices has come and gone. A correction in a stock’s price following an upswing is characteristic of a stock’s true market value. It may not indicate a loss in value because it shows a market’s return to balance.

Market corrections are a significant part of technical analysis. Many investors will use indicators to try to determine when the correction will begin and end in order to buy when prices are lower.

Why the stock market crashes?

The market drives for many reasons. It can be because the economy is weakening or because of investors’ perceptions and emotions. The fear of loss, for example, is one of those reasons.

The market dips because investors are more motivated to sell than to buy. That’s a simple law of supply and demand. However, it doesn’t explain why investors are selling.

Investors are looking in the future. They try to determine if their investments will increase in value. Investors watch for signs, news, rumors, and all about how the market will move.

While the reasons for a one-day drop may change, a longer-term decline is usually caused by one or several of the other reasons:

A slowing or reducing economy

This is a “fundamental” reason for the market to sink. If the economy is slowing or entering a recession, or investors are expecting it to slow, companies will earn less. Hence, investors bid down their stocks.

Fear

In the stock market, the opposite of greed is fear. If investors think the market is going to drop, they’ll stop buying stocks, and sellers will going lower with their prices to find buyers.

The absence of “animal spirits”

This an old maxim. It refers to the waves of investor emotion and risk-taking through a bull market. As they see the chance for profits, people enter the market, pushing stock prices up. When this animal spirit dries up? When the fear is on the scene.

Outside and big events

This mixed category includes everything that might frighten the market: wars, attacks, oil-supply shocks and other events that are not completely economic.

And what happens today? Are we approaching a point where we will see how much gravy is left in this stock market?

Are the stock market corrections really vital for today’s stock market?

There are several signs of a stock market correction. Last year was the most volatile year in the stock market since the recession. The volatility can increase stock market crises. But, volatility is just one reason the biggest hedge fund managers and respected economists are predicting a 2019 crash.

Another reason is the rising interest rates.

Increasing interest rates is a strategy to control the rise of inflation. How does it work? Increasing the cost of credit and making saving more attractive hits a balance between spending and saving.

Though, this approach can be dangerous. Lower buyer spending has a negative influence on the revenue of the businesses.

Decreasing revenue causes slips spending across both the consumer and business aspects. At the same time, higher interest rates make it harder for financially weak companies to meet their debt obligations.

A wild flow can lead to economic depreciation, dropping stock prices, and stock market crashes. It’s not surprising that interest rate hikes have preceded over 10 economic recessions in the past 40 years.

Experts predictions

Rising volatility and interest rates are affecting investors and economists to warn of an approaching stock market crash.

According to hedge fund manager Paul Tudor Jones, “We have the strongest economy in 40 years, at full employment. The mood is euphoric. But it is unsustainable and comes with costs such as bubbles in stocks and credit.”

Scott Minerd, Chairman of Investments and Global Chief Investment Officer of Guggenheim Partners has forecast a 40% retracement, while economist Ted Bauman believes the market could fall by 70%. Finally, the CIA’s Financial Threat and Asymmetric Warfare Advisor Jim Rickards has claimed that a 70% drop is the best-case scenario.

How traders can take advantage of stock market corrections

Honestly, along with great volatility can come great rewards. The right financial tools give traders the chance to profit no matter if markets are rising or falling.

Advanced traders can switch any potential market crash into a profit. They know how to hedge their existing investments until the market turns. In such periods they implement short trades. Despite, the volatile markets can produce higher trading risks. So proper risk management and volatility protection are essential.

How to deal with a stock market corrections

Most traders lose money when trying to move their money around to join the ups and avoid the downs.

Most people lack the discipline to stick to a winning investing playbook in correcting markets. Also, they tend to transact at the wrong times causing even bigger losses

In the past 5 years, the Dow Jones Industrial Average has almost doubled without any important pullback. For each of those years, a notable number of analysts have called for a correction or even a recession. These forecasts pushed investors to pull out of the market too early and lose the important gains.

If you are going to invest in the market, it is best to understand that stock market corrections are going to occur. Often, it is best to ride out your mix of investments that have more potential for less risk.

Resist the urge to trade and profit from them. Remember, never catch a falling knife.

26th February 2019
Wild ride: Dow Jones Rise 250 Points
2 min read

Stocks rose on Friday amid increasing hopes for a U.S.-China trade deal as equities were on pace to post another solid weekly gain.

According to CNBC, The Dow Jones Industrial Average jumped 250 points as J.P. Morgan Chase and Caterpillar outperformed. The S&P 500 gained 0.76 percent, led by financials and tech. The Nasdaq Composite advanced 0.4 percent.

The 30-stock Dow and Nasdaq were both on pace to post their eighth consecutive weekly gain. The S&P 500, meanwhile, was on track for its seventh weekly gain in eight. The indexes were all up more than 1 percent entering Friday’s session.

Here are the hottest things to know about stocks
- The Dow Jones Industrial Average, S&P 500 and Nasdaq posted their fourth straight day of gains.
- The Dow has added more than 1,000 points from Friday to Wednesday.
- Big gainers on Wednesday included Chipotle Mexican Grill, Fossil Group and Nektar Therapeutics.
- The Consumer Price Index rose 0.5% in January, the strongest monthly increase since January 2017.
- The 10-year Treasury note hit 2.91%, a four-year high.
Stocks ended with sharp gains on Wednesday, February 14, after falling earlier in the session following reading on U.S. consumer inflation.

The Dow Jones jumped

The Dow Jones Industrial Average jumped 253 points or 1.03%. The S&P 500 rose 1.34% and the Nasdaq was up 1.86% as technology shares outperformed.

The leading gainers on the Dow Wednesday were Nike Inc. (NKE – Get Report), Cisco Systems Inc. (CSCO – Get Report) and JPMorgan Chase & Co. (JPM – Get Report). They rose 3%, 2% and 2.3%, respectively.

Daniel Deming, managing director at KKM Financial said: “I am a bit surprised the market has been able to maintain this upward trajectory at the level that it has… We had a little hiccup last week, but that was quickly priced out of the market. That tells me there is still money trying to seek a higher return, or at least take on more risk.”

What did cause this Dow Jones jump

Chinese President Xi Jinping said trade talks between the U.S. and China will continue next week in Washington. This comes after a U.S. trade delegation which was led by Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer visited Beijing this week.

China and the U.S. are trying to hit a deal before a March deadline. If they don’t reach a deal by then, additional U.S. tariffs on Chinese goods could take effect. President Donald Trump, still, is considering pushing back the deadline by 60 days to give negotiators more time to reach a deal.

Core inflation in the US in January rose 0.3%.

Wall Street will be looking to the data to help it gain signs about the pace and trajectory of interest rate hikes from the Federal Reserve.

“This is a strong number. What’s going to be interesting is how financial markets react,” said Luke Bartholomew, investment strategist at Aberdeen Standard Investments.

“There’s a risk that this could pour fuel on the fire of last week’s market selloff.”

Bartholomew added that the “Fed is now very likely to follow through on its plan to raise rates again in March.”

The 10-year Treasury note yield rose to 2.91% on Wednesday, a four-year high.

The Cboe’s Volatility Index often referred to as the “fear gauge,” fell back below 20.

U.S. retail sales in January fell 0.3%, but economists had expected a gain of 0.2%. It looks like a not good hint.

The Friday moves come after the Dow and S&P 500 fell on much weaker-than-forecast retail sales numbers.

On the data front Friday, industrial production for January fell 0.6 percent. Economists, however, expected an increase of 0.3 percent. They failed once more.

Consumer sentiment data are scheduled for release later on Friday.

risk disclosure
15th February 2019
Shorting Stock – Explanation

Shorting a stock looks very simple. But, this isn’t a strategy for beginners.

By Guy Avtalyon

Shorting a stock is when a trader borrows stocks and quickly sells them. She or he does that in the hope that can buy them back later at a lower price and return them to the broker or lender. Of course, the trader pockets the difference in the stock price. Shorting is riskier than simply buying stocks. A trader that practice shorting is taking a short position, while investors that are buying and holding stocks have so-called a long position.

In other words, when some trader starts short selling, he or she borrows stocks from an existing stockholder through the brokerage. Than sells borrowed shares at the current market price and takes the cash.

What is shorting stocks?

Generally speaking, when you invest in stocks, you expect to profit from a company’s great times and increasing profits.

But this is a whole different type of traders, called shorts. They do just the contrary. They search the Internet for news about car industry recalls, for example, and look for ways to cash when the stock of such a company is falling.

It’s possible to make money when prices are going down. Of course, if you are willing to accept the risks which are big. One of the strategies to profit on a downward-trending stock is selling short. The hope behind shorting a stock is that its price will decrease or the company will go bankrupt. Of course, it can lead to total ruin for the stock owners.

Shorting a stock means you are profiting if the stock price drops inside the timeframe from your entering the deal and turning back the stock. But if stock price increases, you’ll take a loss. You can short almost every asset, stocks, ETFs, and REITs, but never mutual funds.

What short-seller do?

The short seller is a trader who is buying the stock back but at a much lower price. However, the short seller must promise to return the borrowed stock at some period in the future. Otherwise, the true owner or broker will never borrow the trader a stock.
Borrowed shares have no dividends until the short seller turns them back. Even more, he has to compensate for missing payments to the lender from his own pocket. So, when short-selling it is very important to have accurate information.

When you want to close your short position, you have the obligation to buy the same number of shares at the current price and return them to the lender. Your profit or your loss comes from the difference between the price you sold the stock and the price you bought them for.
The stock for short selling can come from the broker’s inventory, a client of the firm, or from another brokerage company. When the shares are sold, the profits are added to your account.

How to shorting a stock

That involves some important steps. One of them is a short-term strategy.

Selling short is essentially created for a quick profit in stocks that you expect to decrease in value.
The main risk of shorting a stock is a possibility for the price to increase, and as a result, you’ll have a losing trade and losses. The possible stock price valuing is theoretically unlimited. Therefore, you are maybe exposed to great losses in a short position.
Also, shorting stocks involves margin. Hence, a short-seller can be subject to a margin call if the stock price moves up. A margin call requires a short seller to deposit additional money into the account to fill the initial margin balance.
Also, there are some restrictions on who can sell short, which stocks can be shorted, etc. You must be familiar with the regulation if want to short a stock. For example, some limitations are put on stocks wit low price.

Who can short stocks?

First of all, it isn’t for amateurs.

Unlimited losses and a margin account can be exceptionally dangerous for an amateur trader. Especially you don’t completely understand the risk you’ll face whenever you enter a short position without protection.
Due to the possible large losses that short selling generates, brokerages lower this strategy to margin accounts. In case you use a cash account without margin, you’ll not be allowed to short selling.
If you’re not a short seller and don’t like your stocks to be borrowed, the best option is to open a cash account. That will hold away short-sellers to borrow your stocks without your personal permission.
This is usually good practice, anyway.

Is timing important for shorting a stock?

In short, yes. The most important for shorting a stock is to know which one or more could be overvalued, also when it may drop, and when it may rise in value.
Shorting a stock is possible because the stock can be overvalued. For example, the housing bubble in 2008. Firstly, we had an enormous increase in housing costs. So, when the bubble popped we had a correction in the stock market. Remember, stocks can be overvalued or undervalued. In shorting is important to know which one is overvalued.

How long to stay in a short position?

You can enter and exit a short position on the same day. Or you may hold on the position for several days or weeks depending on the strategy and how the stock is performing. Timing is especially important to short selling. But the possible influence of tax practice is important also. So, we have to say, this is a strategy that requires practice and study.

Tools for shorting the stock

Shorting a stock is a strategy that demands to identify winners and losers.
For example, you may choose to go long a carmaker because you expect it’s possible to take market share. But, at the same time, you can go short to another carmaker that might sink.
Shorting is useful to hedge the current long position. For example, you hold stocks of the company and you expect it to decline in the next few months. But you don’t want to sell that stock. So, you could hedge the long position by shorting that stock while expecting it to decrease. When the stock turn to grow again all you need is to close the short position.

But you must be very careful.

Shorting a stock appears as very simple. But, keep in mind, this isn’t a strategy for beginners. Only the advanced traders who recognize the potential problems should think about shorting.

A valuable tool is the “short ratio”, you can see it specified for each individual stock. The short ratio commonly means how many days the stock needs to cover all the short positions. However, there is another benefit to that figure. It reveals the number of shares that are currently shorted by traders in comparison to the number of shares that are available overall.
How to get this number?
Multiply the current short ratio by the 30-day average daily volume of stocks.
Just use it as a quick measure of investors’ sentiment towards a stock. For example, a high short ratio usually shows the belief that stock is falling. There are some exceptions, but understanding those exceptions is the key to victorious short selling.
Stay tuned!

7th February 2019
Leverage Trading Stocks – The More Leveraged the Better

3 min read

Leverage trading stocks is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital.

However, you need to understand leverage trading to help fully immerse yourself in the stock market.
The idea behind leverage trading stocks is to increase your potential payout on a play. However, it doesn’t always work out the way you want, and it can prove dangerous for your portfolio and trading account, especially when you’re new to the stock market.

Leverage is the ability to trade a large position with only a small amount of trading capital. We are sure you already find the articles that suggest that trading using leverage is risky. Also, you can find that new trader should only trade cash-based markets, like individual stock markets, and avoid trading highly leveraged markets.
Well, we disagree with this in full. Trading using leverage is no riskier than non-leveraged trading. Also, for certain types of trading, the more leverage that is used, there is the lower the risk.

What Is Leverage Trading Stocks?

In the stock market, leverage trading stocks are using borrowed shares from your broker to increase your position size in a play. So you can potentially make more money on the other side. Options trading, futures contracts, and buying on margin are all examples of leverage trading. But buying on margin is maybe the riskiest.

When you buy on margin, you’re essentially financing your position in the stock.

Actually, it’s just like buying new furniture. For example: Say you want a new kitchen and you talk the salesperson down to $25,000. You don’t have $25K in cash, so you put $2,000 down and finance $23,000 over five years. Every month, you pay the lender your furniture note. That includes the principal, which is the amount financed, and the interest, which is money paid to the lender in exchange for financing you.

People do this every day with i.g. cars and other physical kinds of stuff.

Well, it doesn’t sound so dangerous.

But even a furniture purchase can leave you in financial trouble.

Let’s say you put $2,000 down on your new kitchen and drive it off the lot. A few days later, you lost it in a fire accident. The insurance company pays the kitchen’s market value, which has already depreciated below what you paid for it. In other words, you have to keep paying off your kitchen note even though you don’t have a kitchen.
That’s what usually goes wrong with leverage trading.

How Does Leverage Trading Stocks Work?

Leverage trading stocks work by allowing you to borrow shares in stock from your broker.

For one example:

Let’s say you have $2,000 to invest. This amount could be invested in 20 shares of Microsoft stock. But in order to increase leverage, you could invest the $2,000 in five options contracts. You would have 1000 shares instead of just 20.

Instead of investing in options contracts, you can buy a certain number of shares. Leverage is always expressed as a ratio, such as 2:1. In that case, you could double your position size by borrowing twice what you actually buy.

When you exit your position, you’re responsible for paying back the broker for the shares you borrowed. Whatever you have left is your profit, minus your own initial investment in the shares.

2:1 leverage example

2:1 leverage means you can borrow twice the amount of your investment from your broker.

For example, you want to invest $50,000 in stock, but you only have $25,000 in your trading account. Using leverage, you could buy on margin at 2:1, giving you $50,000 to invest.

It doesn’t come free, of course. You have to make an initial deposit or down payment to your broker for the privilege of buying on margin.

But what happens to your investment?

Let’s say you bought $50,000 worth of stock at $50 per share. The stock climbs to $55, and you sell.

At that point, you have to return the borrowed shares or money to your broker. The brokerage firm extended $25,000, so you owe that back, plus any interest required. The rest you keep as profit.

If the stock price drops, though, you’ll still have to pay back your broker. Plus, you’ll have to cover any losses your broker incurred during the trade. And your own, too.

The Leverage is Incorrectly Considered Risky

Leverage can be highly risky because it can boost the potential profit. But also the loss that trade can make. For example, you make a trade with $1,000 of trading capital but has the potential to lose $10,000 of trading capital.

This is based on the theory that if a trader has $1,000 of trading capital, they should not be able to lose more than $1,000. Therefore should only be able to trade $1,000. Leverage allows the same $1,000 of trading capital to trade perhaps $5,000 worth of stock, which would all be at risk.

Well, this is theoretically correct. But it is the way that an inexperienced trader looks at leverage, and it is, therefore, the wrong way.

Leverage Is a High-Risk Strategy

There are no secrets, investing risk increases with reward. The higher the potential payout, the higher your risk for great losses. This is especially true when you’re trading with leverage because you’re playing with the house’s money.

Brokerage firms require margin account holders to maintain a certain minimum balance. Your cash and owned securities serve as collateral for whatever you’ve borrowed. It reduces the risk for the broker. Though, it increases your risk, because if you borrow too much on a losing position, your account can get wiped out instantly.

The Real Truth About Leverage Trading Stocks

Leverage is actually a very efficient use of trading capital. The professional traders value it because it allows them to trade large positions. Such as more contracts, or shares, etc. And with less trading capital. Leverage does not modify the potential profit or loss that trade can make. Contrary, it reduces the amount of trading capital that must be used, thereby releasing trading capital for other trades.

For example, you want to buy 1000 shares of stock at $20 per share. That would require maybe $5,000 of trading capital. So, the rest of your initial leaving the remaining $15,000 available for other trades.

This is the way that a professional trader looks at leverage. Therefore, this is the correct way.

The bottom line

Leverage trading can be a slippery slope.

On the other hand, the more leverage the better. Professional traders will choose highly leveraged markets over non-leveraged markets every time. Telling new traders to avoid trading using leverage is essentially telling them to trade like an amateur instead of a professional. Every time that pros trade a stock, they always use the highest leverage they can. They would never trade a stock without using leverage.

The next time that you are making a stock trade, consider using a leveraged market instead.

risk disclosure

29th January 2019
Online stock brokers for beginners

2 min read

It is easier than ever to find good online stock brokers. The benefits are numerous. You can learn and invest in the comfort of your own home. The research team at Traders Paradise made some research. We tried to find the options on the market that are good for you. So, we wanted to find the best online stock brokers for beginners and super investors alike. We had to deep into the financial world with stock experts.

And we hope that this research will help anyone get started.

The popularity of index fund investing and robo-advisors is rising. It may seem the trading of individual stocks is lost. But, it isn’t the truth.

Millions of investors continue to trade individual stocks and other securities. Because online stock trading sites make investing easier it’s important to do so using the best online stock trading sites.

Investors should know the best online stock brokers to trade with. They have the right to know. Some online stock brokers are known for their award-winning customer service. But the others are known for low-priced stock trades or powerful trading tools. Traders Paradise-Finance wants to highlight some of the best brokers available today. Actually, we want to give you some tips for choosing a broker.

Criteria for the best online stock brokers

The best online stock brokers offer low fees, great customer service, and smart research tools.

Discount brokers charge as little as $4.95 for online trades. Compare that to the $100+ that many full-service brokers charge. It seems like a no-brainer choice to choose the discount broker. But, you must know how to pick the right one.

Trading online is a self-directed practice, and you need the right broker backing you up.

But it is a stormy time for online stock brokers.

Between significant cuts in commissions and a few major acquisitions, the competition is fierce.

YOU SHOULD READ Stocks Online for Free – How to Invest

So, let’s like this, there is no one best online stock broker. But each one has different strengths and weaknesses. Our aim is to spotlight them and help you find the best one for your investing style.

Every trader should care about cost. A few of the fees we analyzed include:

Cost per transaction:

Commissions are typically an investor’s biggest cost base. For example, in 2016, a usually unassisted transaction fee averaged about $8. But early 2017 brokers decrease their commission. Fidelity, E*Trade, and TD Ameritrade, also did that. Now, you can trade for as low as $4.95. No matter what the price, though, for us, transparency is key. We wanted to see affordable pricing structures.

Account minimums:

Seeing your wealth shrink due to a tough market or bad strategy isn’t fun. It’s worse if you’re also getting dinged by your broker’s minimum account balance requirement.

Charges for data and tools:

The best online stock trading sites have quality market data like real-time quotes, educational resources, and stock-screening tools built right into their platforms. But some, we have to say, like Fidelity and TD Ameritrade, stand out for also providing top-shelf resources. And it is totally free of charge.

Extra costs:

Executing a trade over the phone, for example, can increase an $8 commission fee to $25 or more. Some platforms offer free education on sophisticated strategies but require an upgraded platform with an annual fee. Besides cost, we valued educational material, reports and tools, and the usability of the platform itself.

After Traders Paradise conducted this research, the following to be our top picks:

The best for cheap trading is Ally Invest. But beginners would like E*Trade. Speaking about the platform the best has TD Ameritrade. Best research and tools have Fidelity.

Why use a discount broker

A discount broker costs you much less money per trade. You won’t have the steep commissions that full-service brokers charge. What this means is more cash in your pocket and the opportunity to make more trades.

The main reason is cost.
But here we will break down who would do better with a full-service broker and who could get by with a discount broker.
Because cheaper isn’t always better.

Let’s see in this way.

Do you have a large number of large investments?
Or you not have the desire nor the know-how to handle your portfolio?
Can you afford high commission fees?
Maybe you not have time to manage your portfolio effectively?

If your answers are “yes” to each of these questions, a full-service broker might be the best option for you.
But, if you want to save money on each trade made or like to be in control of your investments, the discount broker will suites you better.

Because you don’t want to be pressured to take other investments and you want to make frequent trades.
The other things to consider when you have to choose your online stock brokers are:

Minimum deposit/balance:

Some brokers require a minimum deposit to open the account. Others don’t have a minimum. Yet others require a minimum average balance over the life of the account. Determine what you can afford to keep in the account if choosing accounts with a minimum requirement higher than $0.

Customer service:

Take a trial run on any broker’s website that you are considering. Check out the support they have readily available on their website. But you should also email and call them with questions. See how long it takes to get an answer.
A discount stock broker can save you a lot of money and save your portfolio. But they aren’t for everyone. Here are a couple of other choices you may want to consider:

Robo-Advisors: If you are familiar with a completely “hands-off” approach, robo-advisors can save you even more money. The automated system uses an algorithm to invest your money for you. After you input your risk thresholds and investment goals, the computer does the rest.

YOU SHOULD READ Automatic Trading – What Is It

Peer Lending: This is those who want to stay away from stocks and bonds for now. If you are one of them, consider peer-to-peer lending. You decide how much money you want to invest and what type of risk you want to take. The minimum investment is often about $25. You can break your investment up into as many loans as you want. This helps diversify your portfolio.

Full-Service stockbroker: If you have a lot of money to invest or need that in-person advice, a full-service stockbroker is for you. You’ll find them at your larger brokerage houses, but keep in mind that their commissions are higher than discount brokers. In the most common situations, you will have to pay $100 – $200 per trade versus $4 – $7 per trade.

The bottom line

Using a discount broker is a great way to trade and keep your profits. Choose your broker wisely by paying attention to hidden fees and understanding account minimums. A discount broker is a great way for beginning and experienced investors alike to invest in their future.

To find which online brokers suits you the best, you should read Traders Paradise’s WALL OF FAME.

Risk Disclosure (read carefully!)

25th January 2019
Stocks Online for Free – How to Invest
Why invest in stocks online for free, where to find broker, is it really free? Read this post to the end.

By Guy Avtalyon

Technology is making it easier than ever to invest in stocks online for free. However, some places still are charging outrageous fees and commissions to buy stocks and ETFs online when it’s possible to invest in stocks online for free.

Some of the firms that advertise “get started with just $5” can charge you huge fees as a percentage of what you invest. Truth is, we saw some really dishonest financial advisors charging thousands!

We can offer this: everything held equal, the less you pay in fees, the better your returns.

Where to find stocks online for free

Gratefully, we live in the 21st century, and there’s never been a better time to be a small investor.

For 95% of people, that’s fine. For those who want to buy individual stocks, there are still places that allow you to buy stocks online for free.

You have only a few ways to buy stocks online for free.
Thanks to developing technology investing is cheaper. More and more companies are lowering their fees and commissions.
It is possible that they will continue with costs reducing in the coming years due to competition. So, it’s reasonable to expect the cost will drop more.

Fees don’t have to stop you from making wise and lucrative investments.

And now, in today’s mobile world, investing is becoming easier and cheaper than ever. Buying and selling stock investments is not as easy as watching TV series but don’t worry it is not rocket science either.

Today you can enter your stock trades from stockbrokers websites for stock trading apps. It’s very convenient. Just read reviews of the best trading apps and you can find the best selection for you.

Some of them you can find on Traders Paradise’s Wall of fame, like E-trade, TD Ameritrade or Fidelity.

We can suggest you these 3 the best stock trading apps for beginners.
- TD Ameritrade
It is the best for ETF trades. You’ve probably discovered Exchange Traded Funds (ETFs) and you want to cut fees, but you want to maintain a well-diversified portfolio.

ETFs maintain a tax-advantaged structure. They usually offer lower fees than comparable mutual funds. But, most brokerages charge you to buy and sell ETFs. Well, this broker, TD Ameritrade, don’t do so.

TD Ameritrade offers over 100 commission-free ETFs from industry giants iShares, Vanguard, and even more. Because of the diversity of no-load ETF funds, TD Ameritrade is, in Traders Paradise’s opinion, top broker for the people who want to consider tax-loss harvesting on their own.

Moreover, TD Ameritrade also has no minimum and no maintenance fee IRAs.

TD Ameritrade’s mobile app also offers research, information, and portfolio analysis that makes free investing that easier. But we have to say, TD Ameritrade charges for some ETFs, mutual funds, and equity trades. Our suggestion is, filter for no-load ETFs before you buy.

TD Ameritrade has about 4,120 no-fee funds.
- E-trade
This broker offers thousands of mutual funds with no transaction costs.

Mutual funds are the old-school ETF similar principle from the diversification angle. Like ETFs, they hold many individual investments. Hence, investors get some level of diversification in a single fund.

Unlike ETFs, they are priced, they aren’t traded with a commission but with a transaction fee charged by the broker. That’s because they are bought and sold at the end of each trading day.

That fee can be pretty big, sometimes almost $50. But many brokers have a list of no-transaction-fee funds.

Of those that do, E-Trade put up the best showing, with about 4,440 and 4,350, respectively. This is why this broker tops our list of best mutual fund providers. That means you can buy funds on those lists with no charge. Though as with ETFs, investors in these funds will pay expense ratios.
- Fidelity
It is the best for Free ETF Trades & No Minimum IRA. Fidelity allows you to invest for free. This is surprising for most people because most people don’t connect Fidelity with “free”. But, Fidelity offers a range of commission-free ETFs. That allows the majority of investors to build a balanced portfolio.

Fidelity IRAs have no minimum to open, and no account maintenance fees. Let’s say, you could deposit just $5, and invest it for free. That makes this a much better deal compared to some other companies. Furthermore, Fidelity just announced that it now has two 0.00% expense ratio funds. And yes, they are free.

So, you can not only invest commission-free, but these funds don’t charge any management fees. This is truly free investing. But to make it a prime app, it has to have a great app, and Fidelity has it. Fidelity has a great app, so that makes them the top broker.

Fidelity’s app is the easiest to use out of all of the investing apps we’ve tested. All their features work brilliantly together, and they have tones of them. Plus, they are the all-in-one option. With them, you have a full service investing broker. And that is more than just free.

Why invest in stocks online for free

Investing in stocks is supposed to be about building wealth. Well, paying trading commissions can slow your progress..Small fees on stock trades might not seem like a big deal. Most online brokers charge $10 or less for each transaction. But keep in mind that’s per transaction. If you are just starting out as an investor, or if you have only small amounts to invest, even a small fee can take a big bite out of your profits.

But now, you know how you can invest in stocks online for free.
24th January 2019