When approached properly, investing is the financial commitment to undertake an educated guess. How do you minimize the risks of making the wrong guess?

The Golden Rule in reducing investment risk is: Do not invest more than you can afford to lose. Obviously, no reasonable person will want to lose anything; you should consider the implications of losing 100% of the capital you are about to invest. If you put more capital at risk than you can afford to lose, you are no longer investing; you are gambling, and presumably not merely with financial obligations, but other types of obligations (e.g., family, health, education, etc.). Read the rest of this entry »

HOW DO YOU BECOME A SUCCESSFUL AND PROFITABLE TRADER?

POSITIVE FRAME OF MIND

Well you start by getting yourself into the right frame of mind. You are who you are. You are human and your moods, health and inspiration will fluctuate. You need to feel good about yourself to do battle against your opponent.

Your opponent is the Stock Market or Mr. Market as Ben Graham has called him. He is the aggregate of all computations of company values and of all the greed and fear surrounding the future valuation of these companies. Like yourself, Mr. Market has good days and bad days and although he is very smart, he is not always right. It is always worth remembering that good advice is hard to find at the tops and bottoms of stockmarket cycles. Read the rest of this entry »

The most important thing to know about oil investing is this: No one knows where oil is heading.

Only four months ago (May ’08), oil cleared $120 a barrel on its way to $145. Within a month, analysts were calling for $150, even $200 oil. Countless graphs and charts surfaced showing how demand was outpacing supplies. Pundit after pundit commented that emerging markets like China and India were fueling an unstoppable mega-boom for black gold.

Then Russia invaded Georgia, and oil took a nose dive falling more than 20 consecutive days from $145 down to $115 a barrel. Hurricane Gustav gave it a brief shot in the arm, but the damage was less than expected and oil rolled over the next day. Read the rest of this entry »

If we were to define what a stock actually is, its fair to say that it is a share in the ownership of a company. The more shares you own, the greater the stake is in the company. The terms equity, stock or shares all mean the same thing. You have a claim on the company’s assets and earnings.

Before you start making big plans for this company you own shares with, it’s important to remember that you are one of many other owners. Some will have lots of shares, others only a few. Just like your peers, you have a say. However, the peers with more shares happen to have a bigger say. Those are the perks of ownership of voting rights to the stock.

Not so long ago (before the internet), shareholders were rewarded with a stock certificate. This acted as proof of ownership. When you wanted to sell your shares, you literally took the physical shares to your brokerage who would arrange the sale for you. Fortunately today, we dont have to worry about that kind of delay. The brokerage firm holds these documents electronically (called holding shares). Now when you want to sell, you just pick up the phone or click a mouse and your brokerage firm is no longer “holding shares”. Read the rest of this entry »

If you ask most people what the key to wealth is, they will probably say making a lot of money. It makes sense… if you are making a lot of money, you have more money to spend, save, etc. which will help make you wealthy. However, in practice, that’s not what wealth is about. The biggest key to wealth is saving money, and spending less than you earn (no matter if you make a lot of money or a little). If you are able to do that, no matter how much money you make, you can become wealthy. Obviously it can be a lot easier to do this when you are making a lot of money, but it is not absolutely necessary. You just have to have the discipline to save and look ahead to your future.

Just think about it. We all know people that may make a lot of money but always seem to be broke. Why? Because they fail to save any money, spending it frivolously on the things they want and think they need. Are these people really wealthy? I will say that just because someone may be accumulating a lot of “things” and “luxuries” does not necessarily make them wealthy, as this doesn’t go toward securing financial security later in life, which is what you do when you really become wealthy. Read the rest of this entry »

In general terminology the abbreviation “pip” may refer to many things like Protective Industrial Products, Picture-in-Picture, Personal Identity Provider, Partners in Protection, Preferred Internet Provider, Performance Index Paper etc.

In currency trading “pip” stands for “percentage in point”. This is the smallest increment of change in forex trade. It is the smallest number in quotation of a currency.

In foreign exchange market, rates are quoted to the fourth decimal point. For example, if the price of a burger in the market is $1.22, in forex market the same burger will be quoted as 1.2200. Under this example, the 4th decimal point will constitute one pip and normally equals 1/100th of 1%. Read the rest of this entry »