All investors find it hard to resist buying a stock after it has suffered a large fall. Take a quick look at the charts of the big four banks, Telstra and Woolworths.

Given how much they have fallen in the past month, it is tempting to buy these companies at their currently depressed prices.  This is natural, because we ground our concept of “value” according to price.

If a stock falls from $10 to $5, we at some level, still view it as a $10 stock. Thus, the temptation is to buy a stock that has recently fallen, because we believe it should naturally gravitate back to where we perceive its value to be: $10.

Fear of bottom picking

So, what does this have to do with bottom picking? Fear, both your own and the market’s, is closely tied to the way we treat stocks when they fall. The fear of missing out on an ‘easy’ trade might cause you to take a position in a falling stock too early. So, how do you avoid pulling the trigger too early? Look closely at the market’s behaviour: is technical divergence indicating the selling is easing?

Bottom picking is usually an unpleasant habit. But if you can watch the market, and identify when bearishness is in decline, you can be prepared to take a position when the price starts moving in the right direction.

The technical analysis signs of divergence should tell you to get ready, but the price action should tell you when to go. Once again, patience, and control of your emotions, are the keys to successful trading.

Reversal patterns

Reversals are more technical than simply a stock going up after having fallen and so on. First of all let us confirm that there are only two types of price patterns – a continuation pattern and a reversal.

Continuation patterns are temporary corrections or minor pauses in the market before it continues on in the previous direction. Reversals, as the name implies, are a complete about face of the trend that had been in existence.

These are the common traits of all reversals.

>	A trend must have been in existence for a reversal to occur. Seems pretty obvious but unless there is a clear and sustained movement in a share price in one direction, then we are only looking at a price fluctuation – not a reversal.
>	A major trendline is broken prior to a reversal. The act of breaking the trendline doesn’t confirm a reversal; it merely warns us that there may be a reversal ahead. A break of the established trend may simply be a continuation.
>	The longer the trend has been in place and the larger the movement of the share price during the trend, the more significant and larger the reversal. Clearly a trend that has been in place for 6-12 months and has run 20-30% is far more significant than one that has only occurred over a month and moved the stock a few percent. A reversal of the former is far more significant than the latter.
>	At the top of an uptrend the reversal tends to occur more quickly than the reversal at the bottom of a downtrend. Shorting at the top (if your timing is right) realises quicker profits than going long at the bottom because prices at the top tend to be more volatile.

Reversals at the bottom take longer to build and the price movements tend to be smaller. Price movements at the turn of a long-term downtrend will tend to be smaller and gradually build over a longer period as the market gets more convinced of a reversal the volume and price will accelerate.

Volume is an important consideration in determining the power of and stage of the trend. Volume should rise as the trend accelerates and should surge at the completion of the pattern.

In the early stages of a trend the volume is not so important, however, as the momentum builds we need to see the volume rise with it – this shows us that there is true depth in the market, there are more and more buyers on the way up or more sellers as the price drops.

When looking at a potential reversal at the bottom of a trend it is imperative that volume spikes. If the prices begin to rise but there is no discernable change in volume then we’re probably not looking at a reversal.

If you are looking for more information on share market education and how to buy shares click on the corresponding links.

Carl Capolingua
Follow Carl on Twitter @CarlCapolingua
Head of Education
Australian Stock Report

   Written by: Carl Capolingua   Other posts from: Carl Capolingua

Traders must always remember to develop a style that reflects their personality and is individually suited to them.

Most individual trading styles are either a combination of techniques or positional in nature. It’s pretty uncommon though for a trading style to be both.

There are a number of dominant trading styles that occur despite the differences in personality, education, experience and all the various facets that go into the preferred style of a trader. Let’s take a look at the common ones below:

Positional traders

Positional traders take a certain number of positions within a certain price area when the market is looking favourable to their strategy.

These can occur on short term weakness when the long-term trend is a bullish one. A known risk is assumed for a certain profit-taking area, and positions remain in place until profits or losses are taken, or the price action nixes the trading strategy.

Such traders hold their trades from a few weeks to a few months, which is ideal is a trader cannot watch the markets all day, or if the trader wants to avoid entering and exit markets on a frequent basis.

Combinational traders

These traders are known for being less ‘patient’ than positional traders in that they seek immediate results or will exit trades quickly.

These traders usually take on extra orders as the market moves in their favour, thus building up big positions for quick 2 – 6 day price moves. They then take their profits and exit.

Those who favour combinational trading enjoy putting options together into various combinations, resulting in some unique risk/reward profiles.

However, this form of trading may not necessarily be lucrative, as there is no magical combination that allows a trader to consistently produce positive returns.

System traders

These traders follow a trading system discipline whereby a series of analyses are conducted to determine whether to buy or sell based on signals derived from technical or fundamental analysis.

Usually, system traders use technical signals to create a buy or sell decision, when such signals point in a direction that has historically led to a profitable trade.

System traders use either manual or automated systems. The former involves sitting at the computer, searching for signs to buy or sell; the latter revolves around the trader teaching the software what signals to look for and how to interpret them. Automatic systems are good in that it removes the emotional component of trading that can cloud a trader’s judgment.

Method traders

The method trader is different from the system trader in that a method trade can follow a system with no discretion or be traded with discretionary intervention.

A method trade allows a trader the ability to change parameters. The method system also gives full disclosure of all its parameters and the logic behind the trading method.

The method trade isn’t exactly based on rationale, rather it is based on statistics. That is, when a certain pattern or setup occurs, and the trader behaves in a certain manner, the result is statistically in harmony with the probable outcome.

The complete trader

This trader can combine all or parts of the above approaches with an individual, personal style.

But in order to be a complete trader, one must be a master of observation and judgment, and have the ability to take decisive action when it is called for.

Carl Capolingua
Follow Carl on Twitter @CarlCapolingua
Head of Education
Australian Stock Report

If you want to get the latest recommendations and learn more on how to buy shares, access our research and educations files free for 7 days by clicking below.

 

   Written by: Carl Capolingua   Other posts from: Carl Capolingua

Panic buying occurs when investors become blind-sided by a sudden market movement and start buying up shares hastily as price increases.

High volume panic buying occurs because people are following price, not fundamentals. And this is a grave mistake for any trader to make!

What happens

Panic buying can be signaled on a stock chart by a sudden spike in volume. The spike is decided and signifies a very sharp increase in volume.

The spike indicates that high volume buying is driven by panic because of a) the short time frame in which buying occurs and b) the lack of a solid fundamental reason for buying.

This form of buying is driven by the fear of not acquiring securities before price rises even further. The problem with this is when can you tell that the price is going to stall?

And even though a panic buyer may get “in” on a trade before price peaks, who’s to say that the investor will be smart enough to get out of the trade before the inevitable fall comes?

In fact, since the panic buyer has bought without thinking in the first place, it follows that they’ll fail to smartly get out in time, too.

Beware the trend?

We’ve all been subject to panic buying before. The term doesn’t just relate to the stock market, but in all forms of buying. If we see that an asset is gaining value, the natural instinct is to buy along with the trend.

That’s where the trader has to be careful, because we are all taught from day one that, when it comes to the stock market, we should follow the trend.

However, a trend should be established and sound if we are to rely upon it. Panic buying doesn’t really signal a trend – it’s too short-term and irrational in nature to constitute the term.

Even charts pooh-pooh the idea of panic buying as a trend, as such events appear as short (though violent) blips on the chart’s radar, so to speak.

Black Friday

One of the most famous examples of panic buying is that of “Black Friday”, also known as the Fisk-Gould Scandal. Black Friday – 24 September, 1869 – occurred when the market crashed after investors tried to corner the gold market unsuccessfully.

A group headed by James Fisk and Jay Gould capitalised on market rumours at the time that the US government would be putting a lot of money into gold. Fisk and Gould used their social connections to get close to Abel Corbin, a financier who supported the pair’s arguments against the government sale of gold. Through Corbin, the men obtained assurance that the government would tip them off when it was about to sell gold.

So Fisk and Gould began buying up massive amounts of gold, sending the price up. Soon, gold was up by around 30%; and then the government’s gold flooded the market. The premium for gold plummeted literally within minutes, as ruined investors tried to sell their holdings. (And, no, culprits Fisk and Gould weren’t financially ruined by their meddling – just everyone else.)

Don’t panic

We realise that events like Black Friday only happen rarely – this, of course, is an extreme example, and not intended to make you see a conspiracy in every instance of panic buying.

The fact is that panic buying swarms the market from time to time and that will probably never change. It’s not often that market-wide panic buying occurs, but panic buying can certainly occur on damaging enough scales, usually based on unfounded market rumours concerning different companies, stocks, commodities, etc.

Panic is driven by human nature; and as the market is driven by human nature, panic will always be part of the market. However, the smart trader will recognize market panic for what it is, and not indulge his or her own tendency to panic.

Carl Capolingua
Follow Carl on Twitter @CarlCapolingua
Head of Education
Australian Stock Report

If you want to get the latest recommendations and learn more on how to buy shares, access our research and educations files free for 7 days by clicking below.

   Written by: Carl Capolingua   Other posts from: Carl Capolingua

Have you ever been in a position where you purchased a stock, and rode it all the way up before the stock came crashing down before your very eyes only to say to yourself, ‘It’s alright, I’ll sell out my position on the bounce back up and realize a smaller profit’…and it never happened, resulting in a lower profit or at breaking even, or even worse, suffering a loss?

Does that situation sound all too familiar, perhaps happening too often? Yes, you may have in fact timed your entry perfectly and picked ‘the bottom’ but you failed to take profit and lock in the gains you could have made.

Set targets

One of the most difficult steps in trading is to find a good entry and exit point. It is definitely not easy to do, and those traders who can do this will be finely rewarded.

There are traders who are better at entering a trade but worse at exiting a trade and vice versa. It is your responsibility to define your weaknesses and work on improving them.

However, to become a successful trader, you have to learn to take profits based on for example, pure technical analysis key resistance points or moving average crossovers as a reference for an exit price.

It is important to set a specific price target and make sure you stick with it. However, it does take courage to execute taking profits at the target price. Remember, once the profit is locked in, it cannot be taken away from you.

Sometimes greed is not good

Let’s take for example a situation where you purchased a stock on a breakout of $1.00 and you anticipate the stock to reach up to $1.50 based on a major resistance up ahead.

After several months, your analysis proves correct and the stock rises to $1.50. There are two actions you could take.

When you first made the decision to purchase, you told yourself to sell out at $1.50, locking in an outstanding 50 cent profit given the technical evidence which is one action.

On the other hand, the emotional side of you kicks in and tells you not to close out because you may be limiting your chances of further profit, irrespective of what the logical technical evidence tells you.

This is the second action, to wait and see what will happen with the price. This is where the greed and hope factor kicks in.

You decided with the second action to wait and selling pressure begins to mount, sending the stock price lower over the coming weeks, showing evidence of lower highs and lower lows. You start feeling regret, wishing you could have sold at $1.50, and in hindsight it would have been a good idea.

Once again, taking a profit at an already predetermined set price based on logical technical evidence is easier said than done. So when a target hits, take the courage to sell out at least half the amount and trail up the stop level for the remainder of the shares to lock in a profit, and leave some exposure to catch further potential upside.

Carl Capolingua
Follow Carl on Twitter @CarlCapolingua
Head of Education
Australian Stock Report

If you want to get the latest recommendations and learn more on how to buy shares, access our research and educations files free for 7 days by clicking below.

   Written by: Carl Capolingua   Other posts from: Carl Capolingua

Expectation is a factor that new traders must seriously consider and have under control before they embark upon their trading careers. Unfortunately, these days trading has been hijacked by the many and varied ‘operators’ on the internet who promise quick and easy riches.

As an exercise, type in the words ‘trading’, ‘profit’ and ‘easy’ into Google and see what comes up.

You will be bombarded with tag lines such as “we will give you a simple strategy which can make you big profits in around 30 minutes per day and anyone can learn it quickly” and “Trading for Profit – Make Money Fast” and “Learn how to create consistent monthly income trading stocks and options like a Wall Street Pro”.

Now, I cannot say that the strategies taught by the people/companies using these tag lines are rubbish, because in truth I have never used them, but what I can say is that in my opinion, such tag lines are misleading and indeed dangerous.

The simple fact of the matter is that trading is a difficult pursuit and that the clear majority of retail traders end up leaving the game with less money than when they started. If it were so easy, everyone would be doing it and everyone would be making money.

So, coming back to expectations, new traders MUST be mindful that the odds are stacked against them and that unless they are very careful when they start out they will lose money.

As hard as it may be to avoid the hype, understand that you are not going to take $10,000 and turn it into $1,000,000, you are not going to be sailing the Whitsundays in your private yacht, and you are not going to be driving your new Ferrari around anytime soon.

To put it in perspective, I give you the example of Warren Buffett. Admittedly Warren is not a trader, he is an investor, but he is widely regarded as the most successful market participant the world has ever seen. I repeat, he is widely regarded as the most successful market participant the world has even seen. In 2006 Forbes reported that over a 40-year period, Buffett had delivered an annual compound return of 22%.

Below is a table highlighting what you would return if you started with $10,000 in your trading account and matched Warren’s returns over a 10-year period;

	Starting balance	Profit at 22% per annum, compounded	Cumulative balance
Year 1	$10,000	$2,200.00	$12,200.00
Year 2	$12,200.00	$2,684.00	$14,884.00
Year 3	$14,884.00	$3,274.48	$18,158.48
Year 4	$18,158.48	$3,994.87	$22,153.35
Year 5	$22,153.35	$4,873.74	$27,027.08
Year 6	$27,027.08	$5,945.96	$32,973.04
Year 7	$32,973.04	$7,254.07	$40,227.11
Year 8	$40,227.11	$8,849.96	$49,077.07
Year 9	$49,077.07	$10,796.96	$59,874.03
Year 10	$59,874.03	$13,172.29	$73,046.31

 
So, as can be seen from the table above, if you start with $10,000 and average 22% return per annum, compounded, at the end of 10-years you will have $73,046.31. As mentioned above, this will not get you a yacht and it will not buy you are Ferrari (unless you are looking for one without an engine!!!)

The point of all of this is not to scare you away from trading. It is simply to keep your expectations in check. I have seen many new traders come to the market thinking they will make huge amounts of money or having spent their winnings before they have even earned them. This is an extremely dangerous attitude. In my experience it is indeed the new traders who are most cautious and who have a healthy fear and respect for the market that tend to achieve success.

If you want to get the latest recommendations and learn more on how to start trading, access our research and educations files free for 7 days by clicking here

   Written by: Chris Conway   Other posts from: Chris Conway

When someone who is new to the market contemplates the question ‘how to buy shares’, they are really asking to different questions;

1. What is the process I need to go through in order to actually purchase shares?

and, far more importantly…

2. Which shares should I buy or which companies should I invest in?

The answer to the first question is simple enough. Everyone who wants to purchase shares must either do so

›	From the company itself in the very first instance of the shares being offered in a float. The word float is used when a company seeks to raise money by offering its shares to the public for the first time.
›	Following the float, shares are bought from other investors via the sharemarket. THIS IS THE MORE COMMON METHOD.

Whatever the method, you will need to set up an account with a broker. Setting up an account is not particularly difficult and most people simply set up an account with their major bank (i.e . Commonwealth Bank customers typically use Comsec).

Most stockbroking firms require you to provide funds before they accept your first order to buy shares. Many brokers will require that you set up a client account or trading account before you can start trading. This can take up to a week to finalise but can usually be done in 24 hours. Many brokers will require you to establish a cash management account with a bank or financial institution, to which they have access. This is to facilitate the transfer of funds to pay for your purchase of shares and to allocate proceeds to you from the sales of shares.

When you place an order to buy or sell shares, you have a choice of two ways to tell your adviser what price you will accept. You can place your order ‘at market’, meaning you will accept a price at or about the market price of the shares at the time you place your order. Alternatively, you can place your order ‘at limit’, and inform your adviser of the highest price you are prepared to pay or the lowest price at which you will sell.

When placing an order with your adviser, make sure you are fully informed and that your order is confirmed. Ask for the current market price and write it down. Then tell your adviser the details of your order (i.e. the amount of shares to be bought or sold and the price at limit or at market). The adviser should then repeat the order back to you.  Internet based stockbroking websites provide confirmation screens for you to double check your order before it is processed.  Your adviser will not necessarily call you as soon as your order has been filled. However, if you place an order very near the current market price, it may be filled quickly.

When you buy shares in companies listed on ASX, you are buying them from investors who currently own them. Shares bought and sold on the sharemarket can only be done so through the services of a stockbroker.

So, all of that is fairly straightforward stuff. It’s a matter of simply dotting your i’s and crossing your t’s and making sure you understand the process.

What is far, far more challenging and of exponentially greater importance is what one should buy, now that they are able to do so.

Which companies one chooses to invest in and when, will of course determine whether or not one makes money or loses money. As such, it is at this point that new entrants to the market should seriously consider the guidance of some professionals.

That might sound costly or time consuming but it really needn’t be. It does not mean that you have to have a dedicated financial planner or full service broker who charges you an arm and a leg for his advice.

It could be as simple as picking up the Financial Review each day and reading about companies, or regularly visiting a free financial website in order to educate yourself about what is affecting the market.

As long as the bodies from which you source information are credible, reliable and trustworthy, you’re on the right track. Those who are prepared to outlay some capital should also consider buying research reports from independent research companies or engaging the help of a seasoned investor.

In short, you MUST conduct research – as much of it as possible. Reading all the information you can on a company will help you to see how all factors affect the price of its shares and subsequently help you determine whether or not to invest.

Once you’ve conducted enough research to satisfy yourself and you’re comfortable with a company, then you can go ahead and buy the shares through your broker. Always remember though, the sharemarket is not a casino. Sound, well reasoned research will trump hopes and dreams every time.

Get started with what share to buy with 7 days of free guidance- click here

   Written by: Chris Conway   Other posts from: Chris Conway

Our Head of Trading and Research Chris Conway examines what technical analysis is, to read the complete article please click here.

Why Technical Analysis?

Written by: Chris Conway – Head Of Research & Trading – Australian Stock Report

In simple terms, technical analysis is the study of a financial instrument’s price and volume movements. It contrasts fundamental analysis, which is a study of a company’s earnings, dividends, product innovations, management team, research and development, etc.

Technical analysis discounts all of these factors by examining what investors believe about the aforementioned fundamental factors and, most crucially, whether or not investors/traders have the courage to back up their beliefs with their money. If that sounds like mumbo jumbo, let me put it in perspective for you.

I personally might believe that stock XYZ is a great company with strong earnings and growth potential, solid management, and a fantastic R&D department that has numerous quality projects in the pipeline. In believing all this, I think XYZ should be trading at $10 per share. When I search for XYZ’s price, however, I discover that it is only trading at $3 per share.

Faced with this startling discrepancy between my beliefs about the value of the company (however they are arrived at) and the actual market price, I consider the possibilities;

1.	I am the best fundamental analyst in the world and I have managed to uncover significant value in the company using only my limited resources. Value which other analysts and whole research teams, with huge budgets and sophisticated forecasting models and far greater access to the company in question, have failed to uncover. Not likely, but possible.
2.	I have not uncovered any value; the market has simply priced this instrument incorrectly. The collective market universe, for some inexplicable reason, simply has not priced this instrument correctly and will likely soon realise this. Markets are inefficient so this is slightly more possible than option 1, but still unlikely.
3.	I have completely messed up my calculations. Whilst performing the pages and pages of calculations required to do a discounted cash flow, or a debt to equity ratio, I have made a mistake somewhere (for those of you out there who are screaming that this can all be done by computer nowadays, let’s say that you put the wrong figures into your model). I am usually pretty good with my numbers, but this is more likely than options 1 and 2.

Faced with these options, I simply decide that I am not confident enough to invest in or trade XYZ. I’m not so arrogant as to think that I am the best fundamental analyst in the world and there is a good chance that I messed up my calculations. Furthermore, and this is the kicker, I don’t believe that markets are that inefficient that they will misprice an instrument so badly.

So, my fundamental analysis has left me in no better a position than I was before.

To continue reading the remainder of this article please click here

   Written by: Chris Conway   Other posts from: Chris Conway

Australian Stock Report is proud to launch the Learn to Trade @ Home education multimedia program.

The Education Multimedia program has been designed with both the beginner and experienced trader and investor in mind.

Learn to Trade @ Home allows you to access education material, review workshop notes and watch live video examples. When the time is right we’ll even help you open your trading account and help you place your first trade, just to make sure that you are comfortable with what you have learnt.

View the content as many times as you like in your home, office or on the road. Interact with all the online education support tools and access our support forum and “Ask the Presenters” to ensure that any of your questions are answered.

View the video below and register your interest.

Learn to Trade @ Home covers 8 Modules, incorporating the following topics:

- Introduction to Trading	- Money Management
- Trading Foundations	- Mindset
- Trading Tools	- Where to Now?
- Trading Methods	- Interactive e-Learning Portal
- Trading Methodology	- Access to Optional Face-to-Face events

   Written by: admin   Other posts from: admin

Australian Stock Report is proud to launch its Investors & Traders Expo in 2011. The Investors and Traders Expo is a daylong, multi-speaker event hosted by Australian Stock Report covering topics including Technical & Fundamental Analysis, FX trading, CFDs, Options, Charting software and much more.

Taking place in Melbourne, Sydney, Brisbane, Perth, Adelaide and Auckland the Investors & Traders Expo will be the best value and most informative event for investors and traders looking to maximise their returns from the financial markets in 2011.

Tickets to the Expo cost only $49 including lunch, morning tea and an Expo-pack containing over $500 of included value. Places are limited so it is essential that you reserve your seat now.

The Program

08:30 – Registration

09:00 – Welcome and Introduction

09:10 - The Science of the Markets (Part 1): Technical Analysis and FX Trading (more details below)

10:20 – Morning Tea (included)

10:45 – How to Profit Safely from the CFD Revolution (more details below)

12:00 – Practical Fundamental Analysis Techniques (more details below)

13:00 – Lunch (included)

14:00 – Key Note Speaker’s Presentation – Kel Butcher (more details below)

15:10 – Options as Part of a Comprehensive Investing Approach (more details below)

16:00 – The Science of the Markets (Part 2): Unleash the Power of MetaStock (more details below)

17:00 – Finish

The Science of the Markets (Part 1): Technical Analysis and FX Trading
presented by Carl Capolingua, Head of Education Australian Stock Report

Technical analysis is the study of how security prices change over time on a chart. It is the preferred method of analysis for many professional traders allowing them to quickly, accurately and confidently analyse many securities in a very short space of time.

In this presentation Mr Capolingua describes what he calls “The Science of the Markets” and presents his unique view on what key technical analysis concepts must be mastered by investors before using this potentially very profitable approach on share and FX markets.

Register your seat here.

How to Profit Safely from the CFD Revolution
Presented by Jason Andor, Associate Director IG Markets Australia

CFDs are the fastest growing financial services product in Australia. Thousands of investors and traders have flocked to this revolutionary tool for trading shares, indices, foreign exchange (forex, or FX) and commodities from the same platform and account.

Mr Andor will provide a broad overview of CFDs, their uses and benefits, and also their risks. He will also discuss new industry guidelines and their impact on investors in choosing the correct CFD provider.

In addition to the above, Mr Andor will provide a detailed ‘how to’ guide for the IG Markets award winning trading platform PureDeal. When used correctly PureDeal is a powerful tool for identifying potentially profitable trading opportunities and quickly and easily turning them into trades.

Register your seat here.

Practical Fundamental Analysis Techniques
Presented by Geoff Saffer, Head of Research Australian Stock Report

Mr Saffer will guide delegates through the most practical and effective tools which they can use to gain an edge in the markets. You will learn how each fundamental technique can be applied in the Australian market and how to source the necessary information accurately and inexpensively.

In addition to the above, delegates will learn how to better utilise all of the information, resources, and tools within each of Australian Stock Report’s research offerings.

Register your seat here

Key Note Speaker’s Presentation – Kel Butcher
presented by Kel Butcher, Professional Trader, Author, Trading Coach

As with any profession or business, trading requires learning and skill development, a plan, and lots of hard work to achieve success.

This presentation delves into the most common trading mistakes novice traders make and how to avoid them. Based upon Mr Butcher’s bestselling book, it will discuss the combined wisdom of Dr Van Tharp, David Hunt, Justine Pollard, Louise Bedford, Brett Steenbarger, Russell Sands, Davin Clarke, Ryan Jones, Wayne McDonell, Gary Stone, Christopher Tate, Jake Bernstein, Larry Williams, Glen Larson, Tom Scollon, Dr Harry Stanton, John Robertson and Jason Cunningham.

Register your seat here

Options as Part of a Comprehensive Investing Approach
presented by Luke Cummings, Managing Director HC Securities

Options are the most used derivative instruments around the world by share traders looking to better minimise risk and increase returns over basic share trading. Unlike other derivative instruments such as CFDs, options allow investors to take advantage of not only rising and falling markets, but also range bound markets. It is this important distinction which allows options traders to have the ability to profit under all market conditions:

In this presentation Mr Cummings will dispel the myths of options trading versus CFD trading, outline the key benefits of options trading and why ALL investors should consider using options in their investing approach. Delegates will learn about a number of key strategies professional investors are using to improve their returns with options.

Register your seat here

The Science of the Markets (Part 2): Unleash the Power of MetaStock
presented by Carl Capolingua, Head of Education Australian Stock Report

MetaStock is the world’s leading investing and trading analysis software and is used by over 300,000 investors in 90 different countries to streamline and broaden their analysis.

In this presentation delegates will learn how to use MetaStock to identify the best trading opportunities from all over the world. In this informative and practical overview of the software you will learn how to use the Expert Adviser, The Explorer, The Enhanced System Tester, and the Fundamental Analyser. Live scans, explorations and simulations will be run on the current markets to demonstrate the power of MetaStock.

Australian Stock Report looks forward to seeing you at the expo of your choice. Click here to register now and reserve your seat to trading success.

   Written by: admin   Other posts from: admin

Fundamental stock analysis can seem scary to most newcomers to the market – and with some reason. Looking at some of the 30-page reports from broking houses, about just one company, can seem stupefying to the best of us.

However, one of the reasons it appears terrifying is that analysts can make it as complex as they like: there’s virtually no end to the level of calculations you can perform.

Importantly, when it comes to numbers, there’s a simple four-step process to fundamental stock analysis of companies. First, is the company likely to still be around in a year? Second, is there cash coming in? Third, is the company making money from this cash? And, last, are you likely to get any of that cash?

1. Balance Sheet

A balance sheet is a snapshot of a business’ financial condition at a specific moment in time. From this, analysts try to identify whether the company is financially healthy, especially in relation to debt.

A balance sheet comprises assets, liabilities, and owners’ or stockholders’ equity. Assets and liabilities are divided into short and long-term obligations including cash accounts such as checking, money market, or government securities.

At any given time, assets must equal liabilities plus owners’ equity. An asset is anything the business owns that has monetary value. Liabilities are the claims of creditors against the assets of the business.

2. Cash Flow Statement:

This is a financial document detailing the exchange of cash between a business and the outside world. The flow is categorised as:

-       flow “in” from Operations (cash the company made by selling goods and services)

-       flow “in” from Financing (cash the company raised by selling stocks and bonds)

-       flow “out” to Investing (cash the company spent investing in its future growth)

Each of these flows can actually flow both ways. It is a measure of a company’s financial activity. Investors like to see that the company can cover its spending with cash from operations, without having to turn to financing.

The cash flow statement also has to reconcile the net effect of these flows with the difference in its cash holdings at the beginning and end dates of the reporting period.

3. Earnings per Share (EPS)

Total earnings divided by the number of outstanding common shares. Great companies have earnings that are growing quarter by quarter, year on year.

However if the number of shares have increased markedly or there has been a merger, the earnings per share can be diluted. Therefore, earnings per share are more important to the investor than total earnings.

4. Dividends

Dividends are distributions of money, stock, or other property a corporation pays you because you own stock in that corporation. Most are paid in cash, but you can also be paid in shares.

Basically dividends constitute the element of profit the company does not reinvest back into itself.  Shareholders will pay income tax with respect to their dividend income.

These four measures aren’t the full story, however. A company might look great, but it might be very expensive. The next step in stock analysis is to understand how much you are paying for the company.

   Written by: admin   Other posts from: admin