What is Fundamental Analysis?

What is fundamental analysis? Hopefully you already know it has something to do with investing. Fundamental analysis is a way to analyze stocks. Would you just take a job without looking into it such as if it offers benefits, if you're required to work over-time, what the working conditions are, or even how much it pays? Your jobs biggest or maybe even sole purpose is to make you money, but you want it to work well with your life so that you don't end up quitting and having no money. When investing in stocks, you want to do the same thing. The sole purpose of buying stock is to make money, but if you don't do your research beforehand, you might end up losing money.

The fundamentals of a corporation are top priority when looking into a stock, unless you are using technical analysis which mainly uses charts. First, you should look at the financial statements of a corporation. If you don't have a degree in accounting or finance it's likely you don't know what financial statements are. Financial statements are exactly what they sound like, they are the statements that describe the corporation's financial statements. These include the Balance Sheet, Income Statement, Retained Earnings Statement, and Cash Flows Statement. It's important to be able to reads these. Get a good investing book that will teach you what these mean.

These financial statements will tell you what the corporation owns in assets, how much money they owe, how much money is owed to them, how liquid they are, how they are doing in terms of cash, where there money goes, and more financial information. Again, if this sounds confusing, click through the link below to find out more. Analysis of financial statements is an important step in fundamental analysis.

It's also important to look at management. What is the history of the CEO and other management authority? Do they look promising? Have they made many good growth-related decisions in the past? The managers of a corporation can make or break a company and you need to know they are going in the right direction.

Overall, you need to look at a company and decide if what they've done in the past will predict what they will do in the future and if they are a potential candidate for growth. Look at their past dividend history. If they pay well and often, they are perfect for the dividend seeking investor. Look at the price to earnings ration, their cash flow, and how much debt they have. A little bit of research and thought can go a long way.

Do you want more information on stock market research? Go to StockInvestingMadeEasy.info

Article Source: http://EzineArticles.com/?expert=Samantha_Asher

Why Technical Analysis?

Technical Analysis is the best way to invest in the market. It allows you the ability to cut your losses short and let your winners ride. There are many other reasons why technical analysis works great.

1. It allows you to go after short term gains. Because of the effect of compound interest short term gains have gain popularity. If you can gain an average of 3% a month you can do better than someone who makes 40% annually n their money.
This makes short term gains the fastest way to grow your money.

2. It can allow you to make longer term gains if you wish. Not everyone likes to go after the short term stock movements. Some people want to buy a stock and hold it for many months to even a few years. Technical analysis can be used to find the best buy and sell signals for multiple time frames.

3. It allows you to cut your losses short and let your winners ride. Because technical Analysis uses support and resistance lines it easily allows you to find good spots to place targets as well as lets you figure out when it is just time to exit the trade for a small loss.

4. It allows you to play on people's emotions. People are what really drive the market up and down. When someone buys a stock they are aiding in pushing it up. That is evident to anyone who actively trades the market.

5. It allows you to test and improve your strategy in a shorter time frame. If you are a longer term trader you might not know whether your strategy for finding long term stocks works until decades go by. Whereas short term trading allows you to find out at a relatively fast rate how you can improve your strategy.

All these reasons make technical analysis a great way to make money in the stock market.

For more information on technical analysis visit http://www.stocks-simplified.com/technical_analysis.html

For more information about the stock market visit http://www.stocks-simplified.com

Article Source: http://EzineArticles.com/?expert=Shaun_Rosenberg

Day Trading Risk Management

Day Trading Risk Management

Not risking too much money in a particular trade is of vital importance for day traders. Unfortunately, when most people start day trading, they do not think about the danger that they are

Every day trading strategy must take into account the maximum share of total trading day capital, which should be risked in a transaction. In fact, a Day Trader's ability to limit its losses is just as important (or even more important) as his success in managing to win crafts.

Think about it. If a dealer lost a small amount on each transaction, he will not stay in the game much more? Faced with huge losses is one of the main reasons why so many dealers will not survive in this business. Why dealers commit financial suicide this way, you may ask? If all the big losses start small, it should not simply to prevent loss of a small stake? The answer is "Yes".

Limiting losses when daily transactions with a lot of common sense. First, I do not believe that every dealer should risk more than 2 to 5% of its capital trading on a particular trade. Why? If a dealer sticks to a 1% to 2% maximum loss guideline, his chances to stay in the game are greatly increased because there will be many consecutive losses to wipe it out and it will be more opportunities available to him.

If a dealer Trading A $ 10000 account, he should not lose more than $ 100 to $ 200 (1% to 2%) to each position. With the same reasoning, if it is a trading company that the $ 100000 in size, the maximum loss can be increased up to $ 1000 or $ 2000 per trade. Based on these percentages and the amount of price against the trader can (out of the charts), he may be the maximum size of its position. This is much clearer with an example:

Position sizing example of the use of shares (remember that trade stocks to day you'll need at least $ 25000 in your account by law, so I will use an account size of $ 30000 in the example below)

Assume that an investor has a $ 30000 account to day-trade stocks. He wants to trade with Intel (INTC) stock, which is at $ 30 per share.

Based on its strategy, it finds that the stock can appreciate $ 1.00 during the day, but the benefits of appreciation, he must risk $ 0.50. Because he has a intraday margin of 25% (4 to 1 leverage), he can be a maximum of $ 120000 position in INTC with its $ 30000 (4 x 30,000 = 120,000). Should he do it? Let's do the numbers.

With $ 120000, traders can buy 4000 shares of INTC (120000 / 30 = 4000). If INTC moved up 1 point, the dealer profits $ 4000 If it drops $ 0.50 (his stop-loss), he loses 2000. A two thousand U.S. dollars loss represents 6.7% of its commercial capital - much too big a risk for him. Consequently, a 4000-shares INTC position is too big for his account size. On the basis of a 1% ($ 300) maximum loss, the Day Trader should not buy more than 600 Intel shares (300 / 0.50 = 600). Based on a 2% ($ 600) risk, the maximum size of the trade is 1200 shares.

Risk of day-trading (or in any other form of speculation) must be controlled. An effective means of risk management at the trade is not by taking over a position higher than an account of a certain size can handle. While some authors and "experts" have complicated method of determining position size, these methods tend to confuse traders and slow them down. The 1 to 2% guideline easier to use in my opinion. It is common sense more than anything else. Not for trading on a day other statistics - limit your losses all the time with protective stop orders!