Investing in the Forex Stock Market

Forex or FX is an abbreviation for foreign exchange. It involves investing in the stock market between two national currencies. Traders exchange currencies that they want to hold or decrease in value for currencies that they anticipate to rise. The FX is the biggest financial market. It is three times larger than any other stock market and future markets as well. It overshadows the New York Stock Exchange and the Wall Street. Several national governments, large corporations, and banks exchange foreign currencies with hopes to make a profit on major market movements. There are several factors someone should consider in Forex stock market investing.

The Forex stock market have no central location for investing. Small trades are carried out by brokerage firms during Forex investing. All currencies that are traded are exchanged by banks. The FX is open six days a week and 24 hours a day. Although the currency trading is done globally, the majority of the trading occurs in London. Tokyo and New York trails closely behind London when it comes to trading. There are several currencies traded in the FX market with most common currencies being the Euro, the Japanese Yen, the United Kingdom pound sterling, the US dollar, and the Swiss Franc.

There are tips investors should consider before investing in the Forex market. The most important tip is to learn about the Forex with regular research. There must be patience in order to develop a strong strategy. Beginners should not try to trade on the same level as more experienced trades. Investors should create a schedule for trading. Traders should not try to mock other traders. Keep a strategy system and avoid jumping from one strategy to another. Emotional tradings should never be done.

The Forex stock market is subject to fluctuate greatly during world events such as natural disasters and bad economic times. The best thing than investor can do is become educated about the risks involved. The opportunity for loss is sometimes greater than the gain. Individuals will do better when they are educated, they have planned for risks, and have enough money saved in case of losses during trading.

Stock Market Trends

An intelligent investor books profits by following the trends in the market. One who does not have the elementary knowledge about the share market thinks that downward movement of the prices means loss for the investor. A knowledgeable investor is able to make profits in any situation of the market. One takes advantage of both the movements of the market-upward and downward. One catches the movement in the prices at the right time and derives profits.

Stock Market Trends are divided into to Primary Stock Market Trends, Secondary Stock Market Trends and Secular Stock Market Trends. Further classification of the Primary Trends is, Bull Market. In this phase of the market, investor’s confidence is at the optimum, they are on the buying spree anticipating higher financial gains. Exactly reverse is the position in the Bear Market. The investors fear recurring losses. The overall price reduction in the market index is 20% or more. Most investors hurry to sell off.
The duration of the Bear Market is difficult to predict.

Secondary Stock Market Trends are for shorter duration and the fluctuations are small. The time of this trend may be for a few weeks to a few months. These trends can be due to correction in the market. Such corrections may be due to adverse economic/political conditions or natural calamities. The fall in the share prices is generaly10%, but it should not exceed 20%. Bear Market Rally refers to increase in the prices of shares but the limitations is within the range of 10 to 20percent.

Secular Stock Market Trends are also known as Super Cycles. Several Primary Trends contribute to the making of this trend. The prolonged period of this trend may last from 5 to 25 years at a stretch. This is further classified into Secular Bull Market which are long Bull Markets within which are included the periods of short Bear Markets that will not have much impact to reduce the benefits of the preceding Bull Markets. The Bull Markets to follow make up for the losses incurred in the Bear Markets. Secular Bear Markets are having within them small Bull Markets that cannot nullify the losses suffered during long and large Bear Markets.

The Share Market Trends should not be confused with the day to day ups and downs of the market and the volatility. This situation occurs in the market due to a variety of reasons, some of which are beyond the scope of research. Nobody has ever been able to fathom why such things happen in the market. These developments are used to book profits by the intelligent investors. Broader trends are related to the economic health of the country.

The question of market trends has assumed importance in the wake of the deepest economic downtown the world economy is facing since the Great Depression. Doubts have been raised whether markets precisely reflect the state of the economy, as the indexes continue to slide notwithstanding the government efforts to arrest the downward trend. Some experts also opine that the market is responding to the steps taken by the government, it is trying to look forward and going sideways now. Restoring the flow of credit is the important factor to stability and ultimate recovery. The banking system is also in for a positive change, which will ultimately influence the market trends.

Why do the prices of shares go up and down? In reality the answer is simple. Companies earn money or lose money, the price of the share is, what the investor will pay for it. This is simple arithmetic. However, many other factors influence the price simultaneously, like the bank interest rates. If the interest rates are high, the company has to pay more and the profitability is affected, trends begin to play their role on shares and the investor will try to follow the trends.

The investor, who succeeds in locating the trends well in time, earns profits.

How to Invest in Common Stocks in the Stock Market

The Stock Market

Investing in the stock market is a risky business. However, there are many areas in which one can invest in and either reduce or increase one risk. Usually, the higher the risk, the higher the reward. The areas of investments are options, mutual funds, common stocks, preferred stocks, governments bonds, etc. Government bonds and mutual funds are the list risky. However, the returns on these investment instruments are very low. Returns usually range from about 3% to 5%. The area in which I am specialized in is common stock and the focus of this article is about investing in common stock. Investing in common stock has a higher risk than government bonds and mutual funds. However, if you do your homework properly and thoroughly you will reduce the risk significantly and the rewards are usually great.

Getting Prepared to Invest in the Stock Market

Before you can invest in the stock market, you will need to open an account with a reputable stock brokerage company. It is preferable to use a bank that has a brokerage division. The reason for this is for you to have easy access to your money. That means, you can transfer money from your brokerage account to your bank account instantly. Otherwise, money has to be mailed to you when you do a withdrawal from your brokerage account.

Next, you need to sign up to have online access to your account. After this is done, you will need to have real time access to the stock market. Most reputable brokerage companies will provide this service to you depends on your deposit. The more money you deposit, the more services you will get for free. Note – you do not need the 15 minutes delay real time stock prices. This is no good to you. You need real time stock prices. Once this is set-up, you are ready to rock and roll.

Common Stock Selection

The Next thing you need to do is to find the stocks that you want to invest in. This part is time consuming. What I did for finding my stocks is as follow: at the end of every business day, I looked at the stock market of interest and look at all the best performing stocks for the day. In doing so, you will get a stock code which is necessary for buying, selling, and researching stocks, etc.

The next thing you want to do is to research each stock that you are interested in. You want to look at financial statements and balance sheet for 5 years. Financial statements will tell you if the company is making money or losing money. Also, a financial statement shows you a company sales trend and expense trend. Therefore, you can determine if a company is growing or not. The balance sheet will tell you if the company has money and assets or if it is in debt. If a company’s liabilities is 25% of all its asset, that is a financial sound company. However, if a company’s liabilities is 75% of its assets, that company is in serious financial debt and will be a very risky investment. To be successful in the stock market, you will need to be knowledgeable about financial statements and balance sheets.

Next, you want to research what a company do as a business. Also, you want to know who are the stock’s holders of a company, who is the CEO(chief executive officer), who is on the board of directors, does the company pays dividend, etc. Also, you want to check all the news headlines about a company for about 5 years. After all this is done and you are satisfied with the company, you put this company in your portfolio. You do the same procedure for each company that you are interested in. Note – you have to diversify your portfolio. Invest in companies that are in different kind of businesses. For example, invest in companies that are in various business segments – mining, manufacturing, services, etc. Once you have a number of companies in your portfolio, you are ready to do business.

Monitor Stock Price

The trick of making money in the stock market is to buy low and sell high. Therefore, timing is very important in the stock market. All stocks have a pattern. There are peaks and valleys in every stock. Certain news, will drive stocks prices down or up. These are the waves that you have to look for. Therefore, you buy on the low and sell on the high. To monitor a stock price, you will have to create a stock chart. Your brokerage company may provide this service. look for stock chart. You may also find stocks charts on Yahoo Finance.com, StockCharts.com, and other similar websites. Once you find the service, all you have to do is to enter the stock code. Next, you will have to select a time frame. You can select the maximum time frame and see what the stock have been doing for a number of years. Next you can select 5 years and see what the stock have been doing for the last 5 years. You can play around with the stock chart to get a feel of the stock. At the end, you want to figure out the stock low and high price. Being able to analyze a stock chart is a very important aspect of investing in the stock market. Acquiring this skill and becoming very good at it is very important for making money in the stock market.

Buying and Selling Stocks

Once you have done all your research, and you are satisfied that you are in a good position to buy, you go ahead and buy.That means that you go online and put in a bid to buy a certain amount of stocks at a certain price. Once your bid goes through, you are now a part owner of a company. All the information about your purchase will be available to you online. Note – the brokerage company will charge you a commission for buying and selling stocks for you. Also, the key to making money in the stock market is to buy stocks in large volume. You do not have to buy all the stocks on one purchase. You can buy in segments. That means, if you want to buy 2000 shares, you can purchase 500 shares on 4 different occasions – buying leverage.

Now you have bought some stocks, you have to keep on monitoring the stock price. Sometimes, the stock price may drop further from where you purchase. Do not panic, as long as you bought in the low range, you will be good. It is very difficult to buy at the exact lowest price and sell at the exact highest price because you will never know for sure what that will be. Stocks have a tendency to hit new lows and new highs. You will have to trust your instincts based on whatever is going on in the news.

The good thing about common stocks is that you can sell them at anytime as long as the price is right to you. So therefore, if your stock hit it lows and it highs on the same day. You can purchase and sell the stock on the same day. I have done that on numerous occasions as a Day Trader. However, this does not happen all the time. Sometimes, you may have to hold the stock for a while before you can sell. The key to the stock market is that you have to monitor the business news all the time. Certain news, will cause the stock prices to either drop or rise and you have to be ready to act. Now, you have the basic knowledge to start investing in the stock market.