Thursday, October 30, 2014

The 7 important questions to ask before Investing in a Stock

There are many investors who do their home work before they start investing in a stock. Many stock market crashes has not only taught us to do due diligence of the stock but also to avoid the careless nature of selecting a stock. Before you start finding stocks with excellent fundamentals, you should first look at seven important questions to ask before investing in that stock.

Here are the questions:
  1. Is the company free to adjust prices to inflation?
  2. Is it likely that a new product or service will come along within the next 10 years and completely wipe out customers’ needs for this product or service?
  3. Does the company have a strong moat? A moat is one or more of brand, exclusivity, size or price (for example, does the company have a strong, trusted and recognizable brand, does it have an identifiable consumer monopoly in its region or globally, is it large enough to overcome competitors or can it compete effectively on price for long periods of time?). What does the company do or have that protects it from competition and keeps its customers coming back?
  4. If a new competitor came along with one year’s worth of unlimited funds to fight for the company’s customers, how vulnerable would the company’s future be?
  5. If the company had to quit advertising or expanding for the next year, how badly would it be hurt? Could it recover after that year and bring customers back?
  6. Does the company produce a product or service that has been used by its customers for at least the past 10 years?
  7. Will this company’s products be used for the next 10 years?

If the company you’re looking at can make it past these questions, chances are you’re looking at a great company that just might make a terrific investment. On the other hand, if the company fails to pass through these questions, it’s probably best for you to ignore it and move on.

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Sunday, October 19, 2014

Tips for Successful Day Trading

Day trading is the practice of speculation in securities, with frequent buying and selling of stocks. Day traders close their positions within a day before the market is closed. Most of these traders rely on price fluctuations, technical indicators and patterns. Some traders usually close their positions within few minutes, the technique is known as scalping.

This Infographic on Tips for successful day trading can help you become a successful day trader.
Day trading tips


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Thursday, October 9, 2014

Top 5 Technical Indicators That Will Make You Rich

Technical analysis is a vast subject with nearly limitless facets one can travel into, but the problem most people run into is that they do not even have a good grasp of what the basics are and how to use them. With a few simple techniques applied PROPERLY, you can do some serious damage in whatever market you are trading.

The top 5 technical indicators:

1. Horizontal Lines - Yes, you heard right, just boring old horizontal lines. These are the most overlooked, yet one of the most effective ways to trade in any market. The proper way to use horizontal lines is to see where price has bounced off of in the past. You should be able to see an obvious place to draw a horizontal line for this to work. If you are looking too hard, then it is not there. Once you see an obvious horizontal line then you have to wait until price interacts with that line and then trade accordingly. The most important part here, and with the other indicators, is that price has to interact with the horizontal line. This is the part that most people forget, they believe that since it is approaching a horizontal line of support or resistance that they should trade the other way. The truth is that you have to wait for price action at the horizontal line.

2. Round Numbers - These, are de facto horizontal lines. The only difference is that these occur in specific places (i.e. 1.0000, 1.0100, 1.0200 in a currency pair) these are nothing more than strong psychological levels for the people who are participating in the trading. After all traders are the only people who make price move, and whatever psychology is going on in their head, the successful trader must understand.
         
3. Trend Lines - These are much like horizontal lines, in the fact that they must jump out at you when you look at the chart, but instead of being horizontal, these are slanted, to follow the tops or bottoms of where price was at in the past. These lines are less trustworthy than the plain horizontal lines, but they still work wonders in specific situations. The situations that work the best is where price respects the lines over and over again, and it gives a price action indication when it returns to the line.

4. Moving averages - These are like trend lines, except that they ebb and flow with the price of the instrument. You will often see price respecting these lines and then blowing right through them. Your goal in using these lines is to use price action as an indicator of when price will be respecting the line and when it will not be. That way you can be on the winning side of the trade when price blows right through a moving average, when so many other traders took the opposite position and thought price was going to bounce off.



5. Fibonacci Retracement Lines - These lines are from the famous golden ratio that Fibonacci first derived. These are drawn from the top of a move all the way to the bottom of it. They try to predict where price will run into trouble and possibly reverse back into the original direction of the trend. When coupled with price action, this can be as reliable as any other indicator out there.

If you are still with me until here, you will have noticed I have brought up the topic of price action many times throughout this article. If you are unfamiliar with the term, price action is anything that tells us what price is currently doing, this is usually manifested by candlestick pattern reading but has many different facets to it as well that are beyond the scope of this article. If price is coming down to a horizontal support line and it drops down to it and then pushes back upwards, then which way is price moving? Most people trade right into support when price is moving down, and they have no indication that it will ever reverse, which is just dead wrong. Wait for the price action and always ask yourself "Where is the path of least resistance?"

It is important that we have an objective factor like price to tell us what is about to happen. Why is price objective? It is because it is not open to interpretation. If you ask 10 different traders to draw the trend-line you will likely get 10 different answers, but if you ask 10 different traders what the price is, you will get the exact same answer (if you have an accurate feed that is)

These indicators are all simple, but there is really no need to get any more complicated, if you use them with solid price action, only taking the best setups, you are almost certainly going to become a net-winning trader.


Author: Jeff Willette
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Thursday, September 25, 2014

Tips for Opening Franchise

Do you want to start your own business and be an entrepreneur so that you can be your own boss but aren't interested in starting from scratch with a brand new company? If so, you may be thinking about starting a franchise, such as a Cold Stone franchise or something else along those lines. No matter what type of place you want to run, you know that the key is finding top talent when looking for employees and then retaining the best ones. A low turnover rate means that the business will run well consistently and that you will have to spend less time finding workers. So how do you do it? These tips can help. 

1. Communicate with your employees. 
When your workers are doing everything right, make sure that you tell them. When they are making mistakes, talk to them about that, as well. Not only does this help to make them better workers, but it gives them incentive to stay. Employees like to have a boss who communicates with them so that they know what they should be doing at all times. It makes them feel wanted and appreciated. If they feel ignored or overlooked, they may start searching for another job. 

2. Show them that they can move up. 

There are different levels for workers in any industry, whether they are just starting out, working as a supervisor for a certain shift, working in overall management or something along those lines. Make sure that your workers know that they can move up into these positions, gaining more authority and increased pay as they go. One of the biggest reasons people leave their jobs is that they feel like it's a dead end. They think they have to leave if they want to move up at all and improve their quality of life. If employees know that they can do that by staying with your company, that is far easier for them, and they will stay. 

3. Create a positive work environment. 
There are times when work is going to be stressful. You can't fully avoid that. However, you want to create a positive work environment so that people enjoy their jobs and so that they like the people they work with. This can help reduce stress, and one of the biggest reasons people stay in jobs is because they like their coworkers.
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Thursday, September 18, 2014

How to Pass the CFA Level 1 Exam ?

The Chartered Financial Analyst designation is one of the most highly regarded titles in the financial industry. The first in a series of three exams is, at its best difficult and at its worst, nearly impossible. Only half of all candidates that take the level one CFA exam pass it to move on to the more difficult level two exam.

Instructions Concepts

1 Know the exam breakdown. There are 10 main topics: Ethical and Professional Standards, Quantitative Methods, Economics, Financial Statement Analysis, Equity, Debt and Alternative investments, Derivatives, corporate finance and Portfolio Management.

2 Get a copy of the CFA Candidate Body of Knowledge and study the Professional Standards of Practice and the Ethical Practices sections.

3 Study Quantitative Methods. Pay close attention to the following financial concepts: time value of money, statistics, random variables, probability, probability distributions, correlation analysis, linear regression, multivariate regression, time series analysis and basic portfolio concepts.

4 Brush up on your economics. Study the concepts of both macro and microeconomics as well as international trade, international finance and how economic activity relates to investments.

5 Understand Financial Statement Analysis. Know how to analyze inventories, assets, liabilities, taxes, investments, leases and balance sheets. Become familiar with financial reporting systems and principal financial statements as well.


Investments and Derivatives

6 Learn the analysis of equity and debt investments. Study the market indexes, equity risk terms and definitions, benchmarks, investment risk, debt investments, interest rates, yield spreads, debt investment valuation and credit analysis.

7 Have a grasp on derivatives. This includes the following markets: Forward, Futures, Options and Swaps.

8 Know about Alternative Investments. Study the following alternative investment concepts and markets: real estate, hedge funds, venture capital, investment companies, commodities, distressed companies and closely held companies.

Portfolio Management

9 Study the following concepts of Portfolio Management: capital market theory, employee benefits, endowment funds, insurance companies and asset allocation.

10 Learn portfolio management theories and concepts. Know how to manage both individual and group investor portfolios.

11 Learn about portfolio construction, debt and equity portfolio management, alternative investment portfolio management, risk measurements and performance measurements.

Corporate Finance

12 Grasp the concepts of Corporate Finance. The following concepts are covered on the CFA Exam One: fundamentals of corporate finance, capital investment, long-term financial policies and mergers and acquisitions.

13 Learn about Valuation. This section also covers the concepts and implications of corporate financial valuation.

14 Study the concepts of business risk and financial risk as they related to corporate finance.


Tips & Warnings

  • Give yourself ample study time to prepare for this test. There are a lot of concepts covered, giving yourself plenty of time to study these concepts will ensure that you pass the exam.
  • Buy study guides and materials. These guides and materials will give you more detailed and comprehensive information regarding the concepts covered in this exam.
  • Don't cram. Cramming, or studying right before exam day is sure way to fail.



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