8 Tips on How to Understand the Stock Market

There's so much jargon out there these days that sometimes it can be confusing for the novice to understand stock market terminologies and functions. So how to understand the stock market then and make sense of it all?

The first thing you need to do is get with the lingo. You can look up sites such as Investopedia or Investor Words for definitions that you some across while reading the financial section of the paper. Common terms you should know are "market capitalization", often simply called "market cap", P/E ratio, earnings per share, dividends, book value, stock price, and yield.

Once you understand the language, you can move to analyzing a company's financial reports: read balance sheets, annual shareholder reports, profit and loss statements, cash flow statements and familiarize yourself with these accounting concepts. Read about their long-term plans, directions for growth, which sectors they want to grow and invest in, product developments, brand loyalty, market goodwill, and more.

Next, you need to do some basic economic research. What's a bull market, what's a bear market, recession, depression, economic downturn, market analysis, etc – familiarize yourself with these economic terms.

A crucial part of how to understand the stock market is to understand government reports, outlooks and analysis. You should read reports put forth by the Securities and Trade Commission, be aware of the activities of the Federal Reserve and any rising or falling interest rates, and be generally aware of any government legislation that will directly or indirectly impact your stock portfolio (e.g. if you want to hold stock in healthcare and biotechnology companies, you'll obviously pay close attention to the health care initiatives of the government).

The next step is to conduct online research. Log in to the numerous financial websites such as Yahoo Finance and start researching. Look at stock movements, look at stock tables, read analytical reports and familiarize yourself with the working of the stock market. You can even set up your own online trading account for practice on stock investing.

Learn the functions of brokers, brokerage firms and specialists on the trading floor. Learn how each contributes, along with the buyer and seller, to determining the stock price for any given day. Do a little research on the services offered by full service brokerage firms and by discount brokerage firms and understand the differences in services and commissions. While full service brokers may offer value in terms of stock management and advice, discount firms will get you a trading account and let you learn and manage on your own, so choose a style you're comfortable with.

Read books, magazines and investor advice on how to understand the stock market. Play simulation stock market games by not investing real money but practice in the virtual world until you get the hang of it.

Learn how to invest for income or growth and not for speculation, which might be risky for a beginner and could burn you right at the start, thus making you afraid to delve deeper into stock market investing.

Learning how to understand the stock market is a crucial first step before you can begin actual investing practices. Follow the strategies outlined here to make sure you've covered all the bases in your research. This way you will start stock investing more confidently.

Way of Researching a Stock?

Let’s say you have an investment idea. You think that, for example, green energy is the next big thing, and you recently heard a television analyst talking about a specific company that manufactures solar panels. He thinks that this company is in a good position to capitalize on an increasing public demand for green energy sources. Since you think that this stock might have investment potential, you want to do more research. But where do you start?

This is a question that many investors struggle with. There are literally thousands of websites that provide information about stocks. You can find stock screeners, financial documents, analyst reports, charts, industry information, blogs, forums, and much more.

Many investors are overwhelmed by all of this information. Some might not do enough research before buying a stock. Others might spend too much time focusing their research on the wrong things. Yet others might simply hear a stock recommendation
from a colorful television analyst and decide to invest in that stock without doing any of their own research at all.

But what exactly is focused research? Before we address this question, let’s gain some perspective by learning a little bit about how the financial industry makes money from you and how this relates to your success as an individual investor.

Let’s assume that your stock broker made a recommendation about a particular stock, or gave you a “hot tip”. He urged you to buy a stock
quickly before you missed out on the opportunity. How would you know that the stock that your broker presented in his “hot tip” was actually a good investment? Well, to keep it simple, most people didn’t. They had to trust that their broker would recommend the right stocks.

At the time, researching a stock was much more difficult. You didn’t have access to all of the free information that is now available online. Since your broker was incentivized to make money for himself by convincing you to buy stocks, you couldn’t be sure that he had your best interest at heart when he recommended a stock. The only thing that was certain was that he was trying to earn as much commission as possible. The result of this system was that, if you were lucky enough to have a trustworthy broker who made good stock recommendations, you were able to make some money. But if you didn’t have a good broker, and you didn’t know how to find one, it was much more difficult to invest successfully.

Determining what is important to you in an investment isn’t easy. If, after spending some time thinking about this, you still don’t feel like you know enough about investing to understand what is important, You are suggested that you read a book or two on the topic before proceeding. To give you some basic ideas, here are some steps below that are typically used by investors.

* Review the company’s profile and some basic measures. This is a screening step that helps me to get an idea of whether I’m interested in the stock in the first place. There are a number of sites that post basic company profiles.

* Analyze financial documents, including the balance sheet, cash flow statement, and income statement. This step helps me determine the financial health and overall profitability of a company.

* Check for revenue and income growth over time. If I see that these measures are increasing over time, it is typically a good sign that the stock price could follow.

* Research the Industry and Compare the Stock to Its Competitors. I like to do some basic research about the competition and industry to gauge whether a company is in a favorable competitive position.

* Browse SEC filings, including the annual report and recent quarterly reports. There is a good deal of incredibly useful information in these documents that companies are required to disclose at regular intervals.

* Listen to the most recent investor conference call. The investor conference call is typically held each quarter, following the company’s quarterly earnings release. The investor conference call is a great source of both subjective and objective information about a company.

* Read recent news stories and research recent developments. Understanding what is going on right now with a company is also important to me. Therefore, reading news stories and researching recent developments helps me to gauge if a company is on the right track.

* Review trading volumes and insider buying activity. I like to look for recent institutional and insider buying.

* Review key financial ratios and numbers. A few of the key items that I review include the PE Ratio, PEG Ratio, ROI, ROA, ROIC, and a few balance sheet ratios.

* Research dividend history. The dividend is important to me because I think it tells you a good deal about a company’s financial health. I like companies that have been increasing their dividend payout ratio over time.

* Research the effectiveness of the management team. Does the management team have a solid track record of being able to improve profits? If the management team is new, I like to research their past performance at other companies or in prior roles.

* Analyze the stock price. I like to look at not just the stock price itself, but also the company’s historical stock price compared to its PE ratio. This gives me a better idea of whether I should buy a stock now or wait until it becomes a better value.

Understanding Stock Orders

More and more investors are opting to use an Internet-based broker for their trading, which often means they must know exactly the type of buy or sell order they want to enter.

You can use a variety of buy or sell orders to take more control over the transaction than a simple market order.

Some of the orders restrict the transaction by price, while others constrain it by time.

Let’s go over some of these orders, which work whether you are dealing with an Internet-based broker or an actual human.


Market Order

The market order is the simplest and quickest way to get your order filled (or completed).

A market order instructs your broker to buy or sell the stock immediately at the prevailing price, whatever that may be.

If you are following the market, you may or may not get the last price listed. In a volatile market, you will probably get a price close to that, but there is no guarantee of any specific price.

One final, but important note: Market orders will likely be the most inexpensive of the orders you place.


Limit Orders

Limit orders instruct your broker to buy or sell a stock at a particular price. The purchase or sale will not happen unless you get your price.

Limit orders give you control over your entry or exit point by fixing the price, which can be helpful.

However, you may want to do some math first. Check with your broker to see how the commission on limit orders compares with what you pay for market orders.

If there is a significant difference, you may be better off with a market order (assuming the price is at or near your target) and saving on commissions.


Stop Loss Orders


A stop loss order gives your broker a price trigger that protects you from a big drop in a stock.

You enter a stop loss order at a point below the current market price. If the stock falls to this price point, the stop loss order becomes a market order and your broker sells the stock. If the stock stays level or rises, the stop loss order does nothing.

Stop loss orders are cheap insurance that protects you from a loss.


Trailing Stops

The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against a loss.

If you have a profit in a stock, you can use the trailing stop order to follow it up. You enter the trailing stop order as a percentage of the market price. If the market price declines by that percentage, the trailing stop becomes a market order and your broker sells the stock.

If the stock continues to rise, the trailing stop follows it up since it is a percentage of the market price. This protects your additional gains.


Good Till Canceled

A Good till canceled order instructs your broker to keep the order active until you cancel it. Obviously, you use this order with other order types to specify a time frame for the order.

Some brokers have limits on how long they will hold a GTC order.


Day Order

A day order is any order that is not a good till canceled order. If your broker does not fill your order that day, you will have to re-enter it the next day.
All or None
The all or none order states you want the entire order filled or none of the order filled. You would use this type of order for thinly traded stocks.


Conclusion

You may find these orders called slightly different names at some brokers, but the concept will be the same. The most useful orders are market orders, stop loss orders, and trailing stop orders. The others are good to know, but you may not use them often.

Clutch Purse with Antique Pin Closure

The feminine shape of Amy Butler's handheld purse is accentuated by a sparkly, antique pin at the closure.

Get Started

Materials



* 1/2 yard of green floral for clutch body and tab
* 1/2 yard of coordinating print for lining
* 1/2 yard of canvas for interlining
* 1/2 yard of 13-inch-wide ultra heavyweight interfacing
* 1 1/4 inches of 3/4-inch-wide sew-on hook-and-loop tape
* Fabric marker
* Pressing ham (optional)


Finished clutch: 11 3/4 x 7 1/2 inches

Quantities are for 44/45-inch-wide, 100% cotton fabrics. All measurements include a 1/2-inch seam allowance. Sew with right sides together unless otherwise stated.

Cut the Fabrics

To make the best use of your fabrics, cut the pieces in the order that follows. The patterns are on pattern below. Note: When cutting your clutch body and tab pieces (A, B, and D), you may wish to align the patterns carefully to match up the fabric motifs.

From green floral, cut:

* 1 each of patterns A, B, and D


From coordinating print, cut:

* 1 each of patterns A, B, and D


From canvas, cut:

* 1 each of patterns A, B, and D


From ultraheavyweight interfacing, cut:

* 2 of Pattern C


Assemble the Clutch Body




1. Referring to Diagram 1, below, center an interfacing C piece atop the wrong side of the canvas A piece, leaving 1/2 inch of canvas exposed around the outer edges; pin. Note: The interfacing pieces are cut smaller than the canvas pieces to reduce bulk in the seam allowances and to make it easier to shape the sides of the clutch.

2. Sew 1/4 inch inside the edges of the interfacing to make a front interfacing unit.

3. Repeat steps 1 and 2 to sew the remaining interfacing C piece atop the wrong side of the canvas B piece to make a back interfacing unit.





4. Referring to Diagram 2, align the front interfacing unit, canvas side down, atop the wrong side of the green floral A piece; pin. Machine-baste 1/4 inch from the outer edges to make the clutch front.


5. Repeat Step 4 to sew the back interfacing unit atop the wrong side of the green floral B piece to make the clutch back.






Assemble and Add the Tab

The tab on this clutch serves as both a handle on the clutch back side and as a closure.













1. Layer the canvas D piece on the wrong side of the green floral D piece; baste 1/4 inch from the outer edge.

2. With right sides together, layer the green floral D piece and the lining D piece. Backstitching at the beginning and end, sew together the long edges using a 1/2-inch seam to make the tab; leave the short edges open for turning (see Diagram 3).









3. Trim the seam allowances to 1/8 inch. Turn the tab right side out by pulling the narrow end through the wide end; press.

4. Tuck 1/2 inch of the wide end inside the tab; press. Tuck 3/8 inch of the narrow end inside (see Diagram 4); press. Topstitch around the tab, 1/4 inch from the outer edge.









5. Referring to Diagram 5, center and sew the hook portion of the hook-and-loop tape to the tab's lining side, 1/4 inch from the wide end.

6. Fold the clutch back in half lengthwise and finger-press a crease for a placement line. Unfold the clutch back.









7. Referring to Diagram 6, mark a placement line 3 1/2 inches above the lower edge of the clutch back on the right side. With right sides together, center the narrow end of the tab over the center crease just below the marked placement line. Backstitching at the beginning and end, edgestitch across the narrow end, then again 1/2 inch from the edgestitching.







8. Referring to Diagram 7, fold the tab over the clutch back. With 1 inch of the tab extending toward the bottom of the bag, fold the tab back on itself and up, centering it over the center crease. Press and pin. The wide edge of the tab will extend past the upper edge.

Mark and sew across the tab 5 1/2 inches above the bottom folded edge, backstitching at each edge to make a handle on the clutch back; press.



Assemble the Clutch

1. Fold the clutch front in half widthwise and finger-press a crease for a placement line. Unfold the clutch front.

2. Mark a placement line on the clutch front 5 inches below the upper edge at the center fold (see Diagram 8). Center and edgestitch the loop portion of the hook-and-loop tape to the clutch front's right side, just below the marked line.








3. With right sides together, align the side and lower edges of the clutch front and clutch back; pin. Using a 1/2-inch seam allowance, sew together along the side and lower edges (see Diagram 9).

4. Trim the seam allowance around the bottom curves to 1/4 inch. Using a pressing ham, press the entire seam open. Turn right side out; press. Note: Pressing the seam open will help you to get a nice finished look around the curves at the clutch bottom.

5. Repeat steps 3 and 4 with the lining A and B pieces to make the clutch lining.









6. With the right side of the clutch body facing out and the wrong side of the clutch lining facing out, place the clutch body inside the clutch lining, aligning the side seams (see Diagram 10). Pin together the raw edges, making sure that the tab is tucked in between the clutch body and lining, out of the way.

Using a 1/2-inch seam allowance, sew together open the raw edges, leaving a 5-inch opening for turning in the center front.








7. Trim the seam allowance across the points of the clutch back, making sure not to clip into the stitching. Referring to Diagram 11, clip into the seam allowance just to the stitching line at the corners where the bag flap extends from the clutch back. Clip into the seam allowance at the center top of the clutch back.







8. Turn the clutch right side out through the 5-inch opening. Push the lining down inside the clutch, aligning the side seams; press the upper edges. To close the opening, topstitch 1/8-inch from the open edges of the clutch (see Diagram 12).





Complete the Clutch


1. On one side, match up the side seams on the clutch body with the lining; pin. With the clutch body facing up, start at the top finished edge on the side seam and stitch in the ditch 3 1/2 inches down (see Diagram 13). Repeat on the other side of the clutch body.











2. To give the clutch shape, fold a 1-1/4-inch angled pleat into one side seam, beginning at the top and tapering the pleat to end 3 1/2 inches down (see Diagram 14). Press the folds in place. Repeat on the remaining side seam. Note: The absence of ultraheavyweight interfacing in the area you're pleating should enable you to make crisp folds.

3. Attach a vintage pin onto the right side of the tab's wide end, covering the stitching where the hook-and-loop tape was sewn.

4. Fold the clutch back over the clutch front, aligning the hook-and-loop closures, to complete the clutch.

Tomato Story

A Jobless man applied for the position of 'office boy' at Microsoft. The HR manager interviewed him then watched him cleaning the floor as a test.

'You are employed' he said. Give me your e-mail address and I'll send you the application to fill in, as well as date when you may start.

The man replied 'But I don't have a computer, neither an email'.

'I'm sorry', said the HR manager. If you don't have an email, that means you do not exist. And who doesn't exist, cannot have the job.'

The man left with no hope at all. He didn't know what to do, with only $10 in his pocket. He then decided to go to the supermarket and buy a 10Kg tomato crate.
He then sold the tomatoes in a door to door round. In less than two hours,
he succeeded to double his capital. He repeated the operation three times,
and returned home with $60.

The man realized that he can survive by this way, and started to go everyday earlier, and return late. Thus, his money doubled or tripled everyday.

Shortly, he bought a cart, then a truck, and then he had his own fleet of delivery vehicles.

5 years later, the man is one of the biggest food retailers in the US ...
He started to plan his family's future, and decided to have a life insurance.

He called an insurance broker, and chose a protection plan..
When the conversation was concluded the broker asked him his email.
The man replied,'I don't have an email.'
The broker answered curiously, 'You don't have an email, and yet have succeeded to build an empire. Can you imagine what you could have been if you had an e mail?!!' The man thought for a while and replied, 'Yes, I'd be an office boy at Microsoft!'

Moral of the story

Moral 1
Internet is not the solution to your life..

Moral 2
If you don't have an Internet, and work hard, you can be a millionaire.

Online Stock Broker - How To Find The Best Online Stock Broker

Online brokers have an important role to play when you open an online trading account. Each broker can offer different services and features. You must research all the online brokers to find the best broker to meet your needs. I have listed a large number of online brokers and placed their information for you to read in one easy-to-read webpage. This is a free, "no-cost to you" service for our valued readers and can be found on this link: Best Online Stock Brokers

What to look for in an online broker.

Brokerage rates – this is the rate at which you are charged for buying or selling through your online account. These rates are usually charged based on a sliding scale. The more units you purchase in a single transaction, the less the "cost per unit" you will pay. The exact sliding scale can vary and may sometimes be negotiable for larger purchases. Compare each broker and read the fine print within contracts. Pick the one that best meets your buying and selling style.

Account fees – Look for hidden fees in account contracts within the terms and conditions. I know of one broker who requires an extra $10 to transfer money out of an account "quickly" as against withdrawing money normally. Hardly a fair fee, I’d say. All fees should be listed in the terms and conditions listed in opening an account.

Phone access – Online services can go down during hours of service. Interruptions to broadband services, power outages and computer problems can stop you from accessing information you need at critical points. This is why you must have phone access to your online broker. Do not even consider using an online broker if they do not provide phone access.

Access to your money – I prefer having instant access to my money even though it is held in a cash account by the broker. Most brokers will have a cash account facility that is linked to your trading account. My account is linked to a MasterCard account, which means I can access that money anytime through any ATM or make purchases as I would normally using a MasterCard. Don’t be misled into thinking you must only have a separate cash holding account with the online broker. There are lots of options open to you as a client and good online brokers will provide several options for your cash holding account.

Extra benefits – seek out those brokers that give you extra incentives to open an account with them. Some offer a limited free brokerage period. Others will offer free reports on the markets you are interested in. These bonus offers can help you getting you account established and setup a profitable trading account. For more information on finding the best online stock broker feel free to visit our website.

Outwitting a Crocodile

Sang Kancil, an intelligent mouse-deer was known for his cunning and wit. Several times he outwitted the big, bad crocodile, Sang Buaya.
Sang Kancil's home was full of trees and food and so Sang Kancil had no trouble finding food when he was hungry. Sang Kancil spent his days running and jumping, and his favourite pastime was to look at his own reflection in the river.
Sang Buaya, a crocodile, and a few other crocodiles lived in the river and were waiting for a chance to have Sang Kancil for dinner. One day, as Sang Kancil was walking by the riverside, he saw red, ripe fruits hanging on the trees across the river. Sang Kancil wanted to taste the delicious looking fruits because he was getting tired of eating only leaves on his side of the river. He walked to the riverbank and thought hard how to cross the river with Sang Buaya waiting for him at the bottom of the river.
Sang Kancil thought and thought and suddenly an idea came to him. He called out to Sang Buaya, "Sang Buaya! Sang Buaya!" Slowly Sang Buaya emerged from the water. "What is it, Sang Kancil? Why are you shouting my name? Aren't you afraid that I would grab you and have you for dinner?" asked Sang Buaya, opening his big mouth.
"Of course I am afraid but I have a mission to do. The King has ordered me to count the crocodiles in the river. He is having a feast and all of you are invited to attend. There will be plenty of food, but first I need to count how many of you are here. So would you please ask your fellow crocodiles to line up across the river so that I can count you up?" said Sang Kancil.
Sang Buaya was excited. He gathered all the crocodiles in the river and told them about the feast. Soon all the crocodiles made a line across the river. "Don't try to eat me while I am counting. Otherwise I would not be able to report to the King," warned Sang Kancil. "We won't eat you," the crocodiles promised.
Sang Kancil stepped on top of Sang Buaya's head and counted one. When he came to the second crocodile, Sang Kancil counted two and so to the rest of the line until he reached to the other side of the river. Sang Kancil turned to Sang Buaya and said, "Thank you, Sang Buaya for helping me to cross the river. This is my new home."
"What do you mean? You tricked us to help you cross the river?" shouted Sang Buaya. He was shocked. "There isn't any feast, is there?" The other crocodiles looked at Sang Buaya angrily. They knew they had been tricked.
After that, Sang Kancil lived happily in his new home and had plenty of tasty fruits and green leaves to eat. Sang Buaya, however, was ignored by the other crocodiles because of his foolishness.