Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2

Fundamental analysis.

Fundamentals analysis says the best way to predict the future trends of a stock is to understand the financial figures of the underlying company. The fundamental analyst would calculate a theoretical value of the company using cash flow analysis, recent dividends and earnings, future dividends and earnings projections plus a host of other economic numbers. If the current stock price is lower than the calculated value, a trader who uses fundamental analysis would buy this stock.

This writer has the opinion that fundamental analysis is difficult to master for it to be useful as a forecasting tool. Understanding and analyzing balance sheets and profit and loss accounts is not enough. You will need to analyze the micro and macroeconomic picture as well. Often you will need to be have the same knowledge equivalent to senior-management of a company you want to analyze ? minus the leadership and management skills.

Take the example of Google's free 2 GB e-mail service. How much does it cost them? Probably about $2 yearly for each customer. Assuming 100 million internet users sign up, the advertising revenues from this segment alone would provide a tidy profit. It is the analyst job to provide a good educated-guess of this number. More importantly, this new signings will provide a customer base to challenge Yahoo and Microsoft. With Google's dominance in the search engine market, the data mining of such a huge pool of internet users will provide them with an edge in deciding future strategies over its two nearest rivals. Try translating this to what can Google earn in the next two quarters.

One of the better tools is the Z-Score, developed by Edward Altman, a financial economist and professor at New York University's Stern School of Business, in 1968 to predict corporate bankruptcies within a two-year period. This formula has a 70-plus percent accuracy rate

Technical analysis.

The "price action discounts everything" premise is central to charting, also known as technical analysis. Technical analysis uses graphic representations for prices and makes uses of various quantitative techniques to forecast price trends.

A technician makes profits in any market by having positions in line with the price trend. When the trend is up, then buy. Conversely, when the trend is down, then look to sell. Technical analysis is not an exact science, but it is easy to learn and effective.

Technical analysis is a good starting point for beginners. The foundation should include classical technical analysis, Japanese candlesticks, trendlines, RSI, MACD, ADX, stochastics and moving averages. Learners can complete these core topics within three to six months. With constant practice, you should be able to independently analyze and identify the current trends in the stock market.

Most users of stock charts may only focus on daily charts. However, if users pay equal attention to weekly as well as monthly charts, the picture is intuitively more complete. This is equivalent to understanding how the short, medium and long-term investors are viewing the markets, after all three main types of investors form the market. A handful of stock charting software has this feature of showing say, the relative strength index for the daily, weekly and monthly values on a single screen.

One last point - no single method in technical analysis is sufficient for real-world investing. For example, even if you master Elliott Wave Theory or Gann techniques, by itself it would bring more heartache and disappointment. Often, you will need knowledge from other disciplines and sources to improve your overall investing skills.

Some tips for successful investing in stock markets.

1. Investing is a business. The rules of running a profitable business are the same as investing in stock markets.

2. Learn to spot your own mistakes fast. When a mistake is made, exit your position and live to fight any day. The faster you realize your own mistake and the faster you react will reduce your losses, hence increasing your chances of winning in the long run. A useful method is using a 10% stop loss exit strategy. If you are long, and your stock price goes down by 10%, exit. If this same stock reverses and starts to surge, take this as your mistake of not identifying a more accurate (lower) entry point.

3. Understand yourself inside out. What makes you happy, sad, excited, depressed, ecstatic - the whole spectrum of human emotions are merely states of the mind. This is easier said than done but you have to keep improving your own control mechanisms.

4. Learn the methods of successful fund managers ? diversification, emotional detachment and having realistic expectations. Investing is a marathon not a sprint.

5. Money management skills. Whether the amount is $10,000 or $10 billion, the same rules apply. There are plenty of sources of information on this subject from the internet.

6. Learn technical analysis.

The main thrust of this article is to avoid making mistakes that will cost you dearly. How you prepare yourself for bear markets, sideways markets and market crashes are vital to your success.

There are no secrets in investing ? no magic formula, no discovery of some useful ancient secrets. Just knowledge, hard work, common sense and discipline will serve you well in the years ahead. This verse from a 2500-years-old text is a useful reminder:

"Those who know do not speak, Those who speak do not know."
- Tao Te Ching, 56th verse

Stan Seecrets' Postulate: "There are two types of people in the world ? those who know what they don't know and those who don't know what they don't know."

You may freely reprint this article provided you publish it in its entirety, including the author's bio and activating the link to the URL below.

The author, Stan Seecrets, is a veteran software developer with 25+ years experience at (http://www.seecrets.biz) which specializes in protecting digital assets. He has developed real-time prices delivery systems and has witnessed stock markets collapse of 1987 and 2000/2001 in real-time. You can contact him via email (Stan at Seecrets.biz).

© Copyright 2005, Stan Seecrets. All rights reserved.

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

KSTP

Bring me the bleach: Investors seek stability as stocks fall
KSTP
After their years of eye-popping returns, those stocks had become some of the most popular to own among hedge funds, mutual funds and other investors. But just as they bought the stocks together on the way up, investors are now heading for the exits en ...

and more »

Benzinga

Best Technology Mutual Funds of 2019
Benzinga
A mutual fund is a collection of stocks handpicked by industry experts and sold as a type of prepackaged bundle. We've rounded up some of the best technology mutual funds currently available on the market—along with some tips to help you find the next ...

and more »

Economic Times

How your mutual funds played the balancing act during stocks crash
Economic Times
This suggests multicap funds are trying to capture opportunities across the market without going overboard on risk. Using the Sebi-defined cutoffs for market capitalisations and a look at allocations to each marketcap category across funds show mutual ...


USA TODAY

Can I sell a losing stock, deduct the losses and then buy it back?
USA TODAY
Generally, "substantially identical" means buying or selling the exact same stock. However, in the case of mutual funds or ETFs, it can mean buying another fund with virtually identical investments – such as selling one S&P 500 index fund and buying ...


CNBC

Goldman Sachs on 2019: Raise cash, get defensive and look out below if more tariffs happen
CNBC
Most investors (households, mutual funds, pension funds and foreign entities) are too overweight stocks and need to raise cash, Goldman said. "These entities have equity allocations ranking in the 89th percentile vs. the past 30 years," the report said ...
As the stock market and economy are set to skid, Goldman says cash will be kingMarketWatch
GOLDMAN: Cash looks competitive relative to stocks in 2019Yahoo Finance

all 106 news articles »

USA TODAY

As stocks skid, worries mount for 401(k) investors who can't 'stand the pain'
USA TODAY
Money starts to move out of stocks: While investors haven't exited the stock market in a stampede, more money has come out of U.S. stock mutual funds and exchange traded funds than has flowed in, Investment Company Institute data show. In the three ...

and more »

Morningstar Reports US Mutual Fund and ETF Asset Flows for October 2018
Markets Insider
20, 2018 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today reported estimated U.S. mutual fund and exchange-traded fund (ETF) asset flows for October 2018. In October, investors placed $20.4 ...

and more »

These people have been buying up stocks faster than anyone since 1989
MarketWatch
One of the easiest and smartest ways to get started is with a mutual fund that contains a basket of investments instead of a single stock. If you have a workplace retirement plan, mutual funds are going to be the main item offered on the investment menu.


Investor's Business Daily

When Growth Stocks Do This, These Silver Linings Appear
Investor's Business Daily
Does this behavior on Wall Street reflect a hunger by fund managers to grab shares at a discount vs. recent highs? Quite possibly. Here's one piece of corroborating evidence to justify this conclusion: At the end of 2016, a total 364 mutual funds and ...


After Sour October, Fund Managers Gird For More Volatility, Trim Stocks
Investor's Business Daily
Ouch! That summarizes the shrinking performance by the stock market and U.S. diversified stock mutual funds in October. The stock market forecast? Fearing volatility ahead, money managers and strategists are flashing yellow warning signs about the ...

Google News

The Cub; II

We keep hearing about this bear market and that the... Read More

Does Japan Matter?

For the last 12 years we have seen the Japanese... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

Long Term Financial Vehicles

Investing in long-term financial vehicles give you the most gains... Read More

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

Basics of Stock Market

Financial markets provide their participants with the most favorable conditions... Read More

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

Why the Majority Fail at Stock Investing

The gleam and bright lights of Wall Street lure in... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

Trend Trading - Trading Stocks Using Technical Analysis and Swing Trading Strategies

Peter is a professional trader, Paul is not. Peter has... Read More

Staying Sane While Wall Street Crashes

Everybody is riding the Wall Street Roller coaster. Even if... Read More

Analyst Reports

When you become interested in a stock or mutual fund... Read More

Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke

Are you attracted to the idea of being in control... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

Understanding Stock Market Indexes

A stock market index is a statistical measure of changes... Read More

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

Swing Trading Strategies

Using Swing Trading Strategies and Technical Analysis when Trading Stocks... Read More

Trading Tips No 8: Picking the Best Stock Market Price

Carefully thinking through your goal as a trader is of... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

The Exclusive Club of Large Caps

Picture one of those clubs where only the real heavyweights... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

The Shadow

The Shadow knows. There used to be a radio program... Read More

The Right Mutual Funds For Baby Boomers

If you are a baby boomer, time is not on... Read More

How We Eluded The Bear Of 2000

The date October 13, 2000 will forever be embedded in... Read More