We all follow the calendar in planning our future so do the markets and so do many economic and business trends. Companies report their earnings quarterly. Tax is collected at the end of the year. Companies close their books for tax purposes at the end of the year. Investors are also evaluated quarterly.

Retail sales follow the holiday season. Demand for commodities follows the growing season. Demand for fuel follows the weather. Keep these three calendar effects; The January Effect, The Monday Effect and The October Effect in mind when you trade stocks.

So what is the January Effect after all. Is it real and why does it repeat itself every year.January Effect has been observed for the last many decades. It has something to do with the taxes and holiday. Every year, at the end of the year we have file for our taxes. So stock investors tend to liquidate their positions in the last week of December before filing for their taxes. They then reopen their positions in January. So massive selling in December makes the stocks cheap and every year their is a January Rally.

It may also be due to the fact that at the beginning of a New Year, people are flush with excitement and hope for the New Year that just started. They want the market to go up, so they go and buy securities and put their money to work for the rest of the year.

If the stocks go up in January, you could take a jump by buying in December. That would make stock prices go up in December and if they go up in December, you could buy in November. This is precisely what people started to do and now you will see a very weak January Effect taking place.

In an efficient market, these price anomalies are spotted by the people and then they trade on them until they disappear. Now some years January Effect can be really pronounced and other years it can be weak. Just use this January Effect to understand the market psychology not as a hard and fast trading rule.

Monday Effect: Monday is a bad day for the markets! People are not happy going back to work after the weekend. Second people spend the weekend analyzing bad news from the past week and just sell when they get back to the office.

The October Effect: Stock market had two great crashes one in October 1929 and the other in October 1987. Due to these two great crashes traders believe that bad things happen in October. Nobody knows why it happened in October but it happen so the October Effect. Tech bubble in NASDAQ market burst in March 2000, so you never know which month is bad!

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It feels like a lifetime ago when we were in a huge bull market for several years straight. This question would be a lot easier to answer then but do I believe that penny stocks can make millionaires even today? Yes, it is possible. But it’s not going to be a quick and easy ride.

A lot of folks are attracted to penny stocks because they like the sound of huge profits with little money invested. At least thats what people who are trying to persuade you to buy penny stocks usually say. Nothing could be further from the truth. Let’s separate the facts from the fiction.

Fiction: Penny stocks are cheap so you can buy a lot of them and make big profits quickly

Fact: Penny stocks usually are priced at less than $5 and have a relatively small market cap. These stocks don’t usually have a lot of volume so sometimes the prices of these stocks won’t budge at all. At other times, the prices can drop or rise fast. These stocks are very volatile. So, a few big orders can move these in either direction.

Fiction: I will make a killing in a few trades and retire.

Fact: Making profits in penny stock trading is not that easy. Sure you might get lucky and hit it big in a trade or two. If you do, this is likely to breed overconfidence and you won’t settle for anything less than a home run from that point. The end result is making a lot of bad trades as a result of greed. I haven’t heard of anyone ‘retiring’ from penny stock trading. Yes, there are folks who make big profits by devoting a smaller percentage of their portfolio to small cap stocks. They do this by continuously learning from their trades and getting good at it over an extended period of time.

Fiction: I just bought stock XYZ after I heard a hot tip. It’s a sure winner.

Fact: It’s common in investor psychology to gain more confidence in your trade after immediately making the trade. The same thing happens when you place a bet at the racetrack. We’re hardwired that way. Don’t fight it. It’s better to stick to the facts. When you hear about ‘hot tips’ get answers to the following questions about the stock: Is the source of the tip reliable? Have you invested in this sector successfully before? Does the stock chart fit a technical pattern that you are familiar with? Are the fundamentals of the company solid?

We think small cap or penny stocks are an important part of your portfolio especially if you are looking for growth in the longer term. There are some strategies you need to be aware of otherwise you will learn everything the hard way.

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Pair trading in one of the most popular trading strategies among stock traders when they take simultaneous positions in two similar stocks. Both these stocks are almost similar but for the time being are facing dislocation. Stock traders benefit from this temperary dislocation in these two almost similar stocks by going long in one and short in the other in equal dollar amounts.

What you do is try to find two stocks in the same industry and the same sector with a strong historical correlation between them. Yet for the time being, these two stocks are experiencing dislocation with one stock higher in price as compared to the other stock. Overtime, both the stocks are going to converge to the same price level.

You benefit from this convergence by going short on the higher priced stock and going long on the lower priced stocks. So when both the stocks converge, you make profit. If both don’t converge, you don’t lose much. So in pair trading, you try to profit from the convergence of the two stock prices to the historical levels.

Now this same strategy can be used in currency trading. The good thing in currency trading is that you don’t have to buy two separate currencies. Pair trading is sort of in build in it as you can only trade currency pairs meaning you can go short on one and long on another or the other way around.

Now when you pair trade stocks, you are striping out the market influence from your postion by going short on one and long on the other. These two positions cancel each other as the market moves since both similar stocks are supposed to move in the same direction.

Currencies can also be viewed as stocks with countries replacing companies. Just like companies are affected by the broader economic fundamentals in the same way countries get affected by sovereign debt, trade protectionism, trade balance, budge deficit and so on. These things affect the respective currencies. Now two countries in the same region with strong trade and economic relationship can have their currencies behave in almost similar fashion. This is the basis of pair trading in forex.

Japanese Yen (JPY) was a popular carry trading currency. Traders were happy selling JPY and buying another high yielding currency like AUD. But in 2009, carry traders lost their risk appetite and suddenly started unwinding their yen positions. This massive buying back of JPY made JPY appreciate. So this appreciation of JPY is short term.

Korean economy is closely tied to the Japanese economy with its Won doing well but you can profit from this short term divergence in JPY and Won by trading the pair JPYKRW. Similarly you can pair trade Euro and Pound!

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Most people are attracted to penny stocks because they think big returns and big profits with smaller investments. While some folks can get ‘lucky’ and strike it rich quickly with a few trades, most will find themselves in the red unless they learn how to do it ‘right’. Here are a few common mistakes made by novice and intermediate investors alike that you would want to avoid if you plan to make any money (or continue making it):

Fact checking

This phrase is very common in journalism. It basically means verifying the facts in any article before publishing it. Wondering how this is related to trading? When you hear about a ‘hot’ penny stock either via email or through your online research the first thing you need to do is to add it to your ‘Research more’ list. Some traders, especially newbies, just drop everything they are doing and start finding everything they can about this new find because they fear that they will miss out on an incredible opportunity. Nothing could be further from the truth. If you are trading penny shares there will be enough good picks coming your way once you have gotten your feet wet. Be patient. When you are looking for a new stocks to trade, you should open up your ‘Research later’ list and then pick one for further investigation.

Confusing luck with skill

This is more common than you would think. Especially in raging bull or bear markets a lot of investors make profitable trades. In the late 90s just before the dotcom bust happened, even cab drivers were giving recommendations. Nearly everybody was throwing money at the stock market hoping some of their picks would stick. A lot of investors made money. Was this because they had amazing investment analysis skills? Maybe a few did. The majority just got lucky. Similarly in the financial crisis of 2008-2009 a lot of traders were shorting the market when the DOW was losing couple hundred points every other day. It’s easy to get it right when there are heavy trades going in a single direction. We suggest you keep an investing journal. This is where you should track every successful and unsuccessful trade that you make. After a while you will be able to see where your strengths and weaknesses lie. This one skill can make you a better trader. In fact, we recommend keeping a journal even while you are paper trading. Who said you *have* to lose money just to get the lesson?

Poor money management

This is something that annoys us to no end. Do not invest money in stocks unless you have a rainy day fund set aside with 6 months of expenses set aside. Nobody likes to lose money but the funds that you will use to invest in equities should be money that you don’t need. This is not because we expect you to lose all of it. But, this is the only way you won’t lose sleep over your trades. If its money you can’t afford to lose, then you can expect a lot of sleepless nights.

To avoid expensive mistakes visit –> http://www.pennystocktradez.com/

Good luck profiting from the best penny stock investments.

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1.Create a portfolio with Finance.Google.com or Finance.Yahoo.com - This will allow you to trade stock without using real money; which means you get to practice as much as you want and see how you do without using real money before jumping into the real deal. You can start by giving yourself as much money as you $200, sometimes more, to try out the market.

2.Start Testing and the Stock Market - Now that you’ve created your account with no real money, you may commence buying ‘dummy stocks’ straightaway. Since this is ‘Stock Market Basics’, the stocks you want to focus your buying power on are consumer staples, consumer discretionary, and healthcare; things people use on daily basis. These are known as “DEFENSIVE” stocks that will survive through good and bad times in the economy. Examples of such stocks are: 3M, Procter & Gamble, Kimberly Clark, Exxon Mobil, Walmart, Costco and more.

The underlining principle here is that everybody’s got to eat and clean up regardless of the state of economy, right? You bet! Anyway, many of these companies survived through the Great Depression and will survive the current economic downturn no matter what; meaning they’ll be around for a long time to come.

The main advantage of buying these DEFENSIVE stocks is that you can sleep at night knowing your money is doing well. However, there are NO guarantees that you won’t lose money; it’s just that these stocks are the best and safest for people like you who are looking for tips on stock market basics. In addition, they pay good dividends too which is the main thing.

3.Step 3: It’s Time to Start Buying Stocks - Once you’ve tested the stock trading waters and are comfortable, you can finally put in some real money to buy real stocks. A good place to start is at ScotTrade.com (or similar) because they’re excellent stock trading platforms for beginners.

In conclusion, here are a couple of advices for you here: Since you’re reading “stock trading basics”, chances are you’re new; so DON’T DAY TRADE. If you do, you’ll end of being a rookie in a world of professionals. Also, day trading involves a lot of commissions to the broker. With all the commissions deducted from each trade, you’ll be lucky if you only lose half your money.

A number of people have posed the question “how easy it is to make millions using stock investing?” They wanted to actually hear from the many people who claim to have made themselves millionaires completely by using the versatility and profitability of the stock market. Unfortunately, not many such millionaires are willing to disclose how they did it. And even those who did let out their secret at a price you’ll probably struggle to cough out in your current situation. After reading this ‘Stock Investment for Dummies’ article, you’d have learned how easy it can be for you too to make thousands or even millions of dollars by just finding your way around the stock market.

Another secret is to be very slow to selling your stocks even when everything points to a possible lose. If you do you homework, you’ll discover that most successful stock traders like Warren hardly or ever sell their stocks. This is the main secret to making millions using stock investing.

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Nicholas Darvas loved beautiful women and stocks. He was a prpfessional ballroom dancer who would trade stocks part time as a hobby. He was smart and dashing. Those were the last few years of 1950s. He would sit in the night and study stock chart patterns. One night, he made a startling discovery. He had discovered the famous chart pattern now known by his name as the Darvas Box. He started trading stocks using his Darvas Box Trading System and turned $25,000 into $2.25 Million in just under 18 months. A remarkable feat keeping in view the fact that he was neither a stock broker or an investment banker. He was just a part time stock trader. The story spread like wildfire. Time Magazine checked and double checked the story and eventually decided to make Nicholas Darvas the cover story.

He was a ball room dancer who would be busy all day at Broadway. He had to made frequent dancing tours to Europe and other parts of the world. So, he would sit in the night for two to three hours and analyze stocks that he could trade. Ultimately he developed his famous Darvas Box Trading System.

Darvas Box is based on the observation that security prices tend to trade between two levels before breaching a level and rallying or falling. This is what is known as the accumulation phase or the consolidation phase in the market.

Darvas would only trade those stocks that would trade between the two clear support and resistance levels. You would ask what is support and resistance. Support and resistance is a very basic concept in trading. Everyday, you will keep on hearing about the support and resistance. Support is the price level around which buyers feel that the stock price is cheap. So they jump into the market and start buying the stocks. As more and more peopl start buying the stock, the stock prices stop moving down and start to climb up again. On the other hand, resistance is the price level around which sellers think that the stock has become overpriced and they should immediately sell it and take profit. So they start selling the stock. This selling pressure eventually reverses the upward movement in the stock price and the prices start to fall again until they reach the support level where buyers again step in.This to and fro movement between the two levels continues until the fundamentals change and new support and resistance level is established.

Darvas would not waste time with securities that did not fit nicely into this mold. After identifying a security as trading between the two price levels, Darvas would patiently wait until the security price broke out of the upper band on heavy volume. Darvas would buy then placing a stop loss just below the support level of the rectangle formed by the support and resistance levels.

Now, if the stock prices kept on moving up and made another rectangle eventually trying to digest and consolidate the recent gains in price. Darvas would replace the stop loss and move it below the new support level formed. Now, a Darvas Box can work in the reverse when the breakout in prices is to the downside. When the breakout happens to the downside, short selling is done. When a stock is trading between two horizontal levels and the stock price eventually breaks out to the downside, short sellers do the exact opposite of the buyers.

Short sellers place the first stop, right above the support level. If the security forms a new lower Darvas Box, short sellers move that stop loss to an area slightly above the new resistance level. Darvas was not a swing trader. His time horizon was much longer so he would wait for the new consolidation in the security price.

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Many investors call a stock trading for less than $5 per share as a penny stock. While other investors think that any stock trading for one cent is a penny stock. Both these definiations are correct. But a more accurate definition of a penny stock is stocks that trade on OTCBB- Over The Counter Bulletin Board.

Both these definitions are correct. There is not one way of defining a penny stock. But the most accurate definition of a penny stock is a stock listed on the Over the Counter Market and the Pink Sheets.

Now, if you accept this definition of a penny stock, it simply eliminates all those stocks that are being traded for let’s says even $0.1-$5 on New York Stock Exchange (NYSE) and NASDAQ Small Cap Market. Those stocks that trade on NYSE or NASDAQ Small Cap Market for this price of $0.1-$% are those stocks that are in trouble as their companies might be facing mismangement or financial trouble. This means most of these companies are close to bankruptcies and soon will be delisted from NYSE or NASDAQ Small Cap Market.

Now, there are investors who specialize in investing on bankruptcies. It is upto you. However, it is more profitable to invest in companies that are about to start their future rather than companies that have ended their future and are about to enter bankruptcy. Most of these companies will get liquidated so why invest in their stocks and lose your investment. Now, many companies who once were penny stock companies with shares selling for something like $0.5 eventually got listed on NYSE and NASDAQ and their stocks skyrocketed to $50-100. If you had invested in Microsoft. Toys R Us or even MCSI when they were penny stock companies, you might have made millions when their stocks got listed on NYSE or NASDAQ.

So what is an Over The Counter Market? The Over the Counter Market or Over the Counter Bulletin Board (OTCBB) is a regulated quotation service that displays real time quotes, last sales price and volume information in stocks listed on it.

What types of stocks get traded on the Over the Counter Bulletin Boards (OTCBB)? Stocks that get traded on OTCBB might include national, regional, foreign equity issues plus warrants, units, ADRs (American Depository Receipts) and DPPs ( Direct Participation Programs).

Over the Counter Market (OTC) started in 1990 when the Penny Stock Reform Act of 1990 was passed. Penny Stock Reform Act of 1990 mandated Securities and Exchange Commission (SEC) to start an electronic system that would implement the rules of Section 17B of the Exchange Act. This OTC Market eventually became the Over the Counter Bulletin Board (OTCBB). As said earlier, it is easier for a company to get listed on OTCBB as compared to the regular exchanges like NYSE or NASDAQ. Many young companies start from OTCBB and eventually make it to NYSE or NASDAQ. If you invest in one such penny stock company, you can become rich in a few years time!

Mr. Ahmad Hassam has done Masters from Harvard. Get these 3 FREE great Stock Investing Reports & discover a Stock Trading Course that can make you rich in 2010. If you can read an email, you can print cash with these Strignano’s Forex Signals & learn how to trade like pros from Tom Strignano- an EX CHIEF BANK TRADER. One new member made $15,000 in just 24 hours!

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In day trading, you fight for the best entry price and the best exit price in each trade. Now, every day trader should make some right judgment calls when competing for the right price. Now, the areas where most of the day traders mess up and often go wrong is the in picking stocks to trade, lacking concentration and not watching the market moving news.

First step first. Most new day traders don’t have a solid trading system. Most don’t understand that first you develop your trading system and after that you select the stocks as it is all about working with the right stocks.

When it comes to the right choice of stocks, most new day traders have a weak and shaky idea of what stocks will be best for day trading. Most bad trades are due to beginners who are trying out unfamiliar stocks. If you are accustomed and used to the rhythm and swings of a stock and you have traded that stock with success than you should pick stocks that are similar.

Don’t try to trade a stock that you discovered in your late night research session. First try to become familiar with that stock for days and even weeks. Learn how the stock behaves daily. What are the swing patterns the stock follows everyday. After you have thoroughly researched the stock for many days and even week, only then think about day trading that stock.

When you select a stock for day trading, make sure that there are no current headlines that affect the stock that you have chosen. How do you know that there is nothing in the news about that stock? Go through the headlines in the financial sections of different newspaper to see if that stock has got anything reported about it in it. The less news, the better.

It is critical for you to be patient with unfamiliar and new stocks. You should treat all new stocks as your first date. Someone totally new that requires exploration! Most often, the new stock that you find may not be a good stock for day trading. So, initially you should drastically reduce your exposure by trading only 100 shares and not more. Stock picking is the area where most new traders make blunders. Pick your stock carefully.

But my friends, this is not the time for day trading stocks. This is the time for day trading currencies. Trust me; forex day trading is going to make many millionaires in this decade. Forex day trading is much simpler that stock day trading.

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Have you ever thought about investing in the stock market? Does the whole complexity make you a little nervous. You are certainly not alone. Many people don’t understand why current stock prices are where they are or why they fluctuate so frequently. In order to understand why, you’ll need to understand supply and demand.

Supply and demand is rather simple. The more people that buy interest in a company than sell it will cause the price to go up. When more people sell their shares rather than buy it, the price will go down. Supply and demand is one of the underlying reasons for these prices.

One of the reasons why people buy and sell shares in a company is due the most current news or forecasts about the company. If news is good, the price will go up as more people purchase shares. If the news isn’t good, then it will go down as more people sell their shares. Another important influence on stock prices are the earnings reports, which are released every quarter, or every three months. If a company has shown a profit, in most cases, the price will go up. If the earnings are there but not as good as expected, then the price will fall.

One thing to remember is not to compare one company to another. While it may seem like a good idea to compare two similar restaurant chains, for example, when it comes to current stock prices, they will be affected by how much the company is worth. To get this number, or market capitalization, you multiply the number of outstanding shares by the price per share. While each company may have a current share cost of $50, the number of outstanding shares could vary by millions. Just because one company has a lower price does not mean it is worth more than a company with a higher cost per share.

If you would like to learn more about the market, then consider taking one of the many online courses in how to buy and sell, what affects each company’s worth, and all of the other important factors. While you can’t rely on a graph or chart to completely predict which company you should invest in, it’s a good idea to make sure and do some research ahead of time. You may be surprised at what information you can find. However, don’t overlook the value of an investment broker, either.

Finally, you have one site to answer all your questions about current stock prices, what affects the movement, and how to decide if it’s the time to buy or sell. Learn all you want about popular stocks, such as Ebay and AIG stock prices.

Article Source:http://www.articlesbase.com/finance-articles/understanding-current-stock-prices-1596230.html

Online penny stock trading is an exciting venture, but with so many sites offering the service, it is important to do your homework before you dive in.  Knowing the market helps, and just because a stock is inexpensive does not deem it a good investment.  The first step in finding the best online penny stock trader is to find the right site to work with.

Comparing the tools and resources will deem which sites are viable as well as how easy they are to work with.  Research all areas of the site to be aware of what fees are being charged for online penny stock trading.  Some sites will not have extra surcharges or minimums required on the penny stocks, making it easier to jump in.  There may be other fees that apply to software, wiring charges, etc, so before making a commitment it is imperative to know all aspects.  It is also important to understand a site’s commission structure within all the fees.

Often times a site will offer a free demo that shows off their tools and provide the online penny stock trader with a higher level of comfort.  Some sites provide free trades upon signing up for certain levels of membership.  While a trader is in the driver’s seat as to what to buy or when to trade, a reputable site will offer online service advice as well.

An advanced technology site will provide the most up to date, real time buying and selling.  Adding financial reliability such as SIPC protection will ensure the safety of your transactions.  Fast, seamless execution of transactions is also important to the quick pace of the stock market.  Online penny stock trading is easier when the site offers direct access, platform-based transactions.

Investment newsletters will provide information on following the online penny stock trading.  By watching the accumulation/distribution ratings of a company, an investor can follow the money to see where the movement is happening.  If a stock is showing a lot of activity then the price will increase, so the desire to capture one early will benefit from the growth.  While there is no guarantee you will get rich quick, online penny stock trading has great potential for those willing to stay on top of it.

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