Thursday, October 11, 2007

Approaches to Investing

Here is a small summary of the three major approaches to investing:

1. Fundamental Analysis

Truly superior companies exist, are sometimes undervalued by markets, and can be identified by mostly financial research. Earnings and dividends, stock prices and markets can be adequately forecasted. All these can be identified by analysis of their financial statements. Buy where forecasted price is greater than current price by a satisfactory margin.

2. Technical Analysis

Patterns in past price behavior of a security in question and the overall market can be used to direct profitable trading strategies. Some technical analysts also refer to a company's fundamentals in combination with its technical indicators.

3. Efficient Market Theory

No possible market-beating investment strategy exists. All information relevant to a stock's long-term price performance, including information not publicly available, is already present in the stock price for any given period of observation.

And here are two more "truly real" ways to approach investing:

1. The Proud Way and

2. The Humble Way.

The proud way is for those who believe that they're smarter than everyone else and can use their insights and abilities to make superior investment choices.

The humble way is for those who believe that they don't know everything. This humble approach leads them to study what has worked over the long term and then use it.

The path to achieving investment success is in studying long-term results and finding a strategy or group of strategies that make sense. This strategy is the humble way ... And it does work!

Copyright 2005 I.E.C. Haramis

Ioannis - Evangelos C. Haramis was born in Greece in 1951 and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank.

E-Currency Explained and How I Consistently Beat These Average Returns!

I saw an interesting article the other day that was written by Ken Materson It basically described how a person or a stay at home mom could capitalize on the E-currency business. This was a well written article and it basically opened my eyes and made me realize just how good the returns are on the system that Im currently involved in. Here is a brief description of the E market and how it works.

So what is e-currency exchanging all about? Due to global commerce consumers find themselves conducting business with companies and people from different parts of the world. This has resulted in a heavy reliance on third party currency exchange services such as pay pall, e-gold, e-bullion, and plenty of others to complete cross-continental transactions more efficiently.

This influx of e-currencies has created a window of profitable opportunity for those in this business. With so many different forms of e-currencies available there is now a need to exchange between them. In this marketplace you will be operating as a lender of e-currencies that you have purchased.

You will do this by investing in digots, a term used in this business, which represents a digital value determined by a region of activity within the DXInOne system. When you purchase a digot, it simply means that you are investing in the activity of some region of the world.

The higher the activity in that region is, the higher the digot will increase in value. With a small investment in the system you will be making .2% - 2% on each exchange that you are involved in. The profit percents are a range because they will depend on how well you're digot picks perform in each trading session.

The best part about this business is that you can not loose money; since your profit comes from the fluctuation of your digot values the only thing that changes is how much you make. So, on some highly profitable days you will be operating at the full 2% earning huge returns while on slower days your return rate will be less. People with large investments have netted profits over $5,000 per month.

This is just a brief explanation of what this home business is all about and it really does entail more than what has been stated. Since this business is relatively new there is not yet that much information about it readily available.

There are however several e-currency exchange experts out there who offer training on how to be very successful in this home business opportunity. But I suggest looking at a program that Im involved in first. It consistently brings me daily earnings of $1K to $3K daily. You would have to have Hundreds of Thousands on Hand to get the returns that I do on one simple program. This simple system took off like wild fire and It never slows down. See for yourself. It literally allows you to quit your Job in 6 months or less.

John Gibbs is an online Mentor and Marketer who specializes in Traffic Generation and Mentoring people to Success. He consistently earns $1K to $3K a day.

5 Keys To Stock Option Trading

Stock option trading offers the skilled trader more potential for making a fortune option trading than almost any other form of online trading in todays market. The degree of controlled risk along with superior leverage allows a knowledgeable option trader the chance to make huge profits but an aspiring option trader must have a solid foundation of education about what makes up a sound option trading method in order to have a long term success at option trading. There are five essential keys that any option trader must understand when developing a winning stock option system.

First, you must understand the degree which time affects the premium of the option you are considering trading. There are two parts you must consider when factoring time into the stock option trading decisions. The first thing that you must take into account is the intrinsic time left on an option. Since options have a limited time period of anywhere from 30 days to several year depending on the particular option that you bought you must be sure that you purchase the correct option containing enough time on it to insure that time decay doesnt erode your investment away before your position has enough time to be profitable.

The second skill of trading options profitably is factoring time into your trading system in relation to trading a particular stock option and knowing the statistics of your option trading methodology or option trading setup by knowing the average holding period of a trade signal. If your average holding time for an option trade is seven days then you dont want to buy an option with three months of time premium left on it because you would be paying more for the extra time with the options purchase price. Nor would you buy an option with less that 30 days till expiration as time decay would erode the value of option so quickly that even if the options underlying stock movement moved favorably to you the time decay would prevent you from realizing a gain in the option itself.

The third thing to profitable stock option trading is understanding the relation of volatility between the market, the underlying stock that underlies the stock option, and the effect is has on the value of the option itself. When the general stock market as an index goes thru periods of volatility or low trading ranges the stocks that make up the market tend to follow overall trend and also begin to experience periods of low overall volatility which in turn can cause derivative like stock options to become cheap or low premiums. But if the markets volatility rises it is likely that individual stocks will follow the trend causing stock option premiums to increase in value given that the market moves in the traders favor. The next key in how to trade stock options successfully is having a stock option trading method that takes these key factors into consideration while giving clear entry signals, clear exit signals, a defined system of trade management, and a profit factor greater than your average loss over a series of trades. Knowing the ins and outs of various trade setups is useless if you dont have a trading methodology that guides you in every step of the trade process. A solid trading method holds you by the hand and defines each step while leading you to being a consistent winner in the markets and a profitable trader when all is said and done.

Finally, the fifth and final key to successfully trading stock options is yourself, particularly your trading psychology. Human beings and there mental makeup are extremely complex so it is extremely important that stock option traders not only have a sound stock option trading methodology but the discipline to follow their trading methods. You can give two people the same exact winning trading system but it is very common for them to have different results. Invariably, the one that has the ability to remain as detached from his losing trades as well as his winning trades while maintaining the discipline to follow the systems rules no matter the trading result will emerge the greatest winner in the end.

Using these five keys as a basis to develop your stock option trading methodology can help you avoid the mistakes and pitfalls of many beginning option traders. By understanding time decay, factoring an options time into your trading method, how volatility impacts a stock options value, what defines a reliable stock option trading methodology, and your own trading psychology you now have a foundation to develop into a winning stock option trader.

Would you like to learn cutting edge trading methods for trading stocks and options? Sign up for a free newsletter and ebook at StockOptionSystem.Com and read more articles like this one at StockOpSys Article Directory!

Magic Bullet To Retirement

Everyone is looking for that magic bullet that will allow them to retire rich or at least comfortable. They want to be able to do what the TV ads show - vacationing in Fiji, fly fishing in Vermont, etc, etc. It seems so easy on TV.

A pretty financial analyst from some big company shows the prospect how it is done. The next part of the trick is getting it done and that aint easy. It usually means a change because the potential retiree must take part of the cash now being spent on present life style and put it away not to be spent until retirement becomes a reality. If the couple shown in the ad do it they will be glad they did. Sacrificing some current pleasantries will have been worth it. The $2,000, $3,000, $5,000 trip today could be worth twice that amount or more at age 65 if the worker now is lucky enough to have a good broker or planner one who will not allow loss of principal during subsequent bear markets.

Annuities sound good, but 99% are rip offs. If an annuity is appealing insist on a sample policy. Take it to an attorney and pay $250 or so to have it translated into English. The most important paragraph is the cancellation clause. Get a letter from him stating the major features. When the policy is delivered compare it line for line with the sample to be sure they are the same. Accept no substitutions or changes. The persons saving will want to have a financial planner who has an excellent exit strategy. There are very few of them. Ask to see their model portfolio results for the years 2000 to 2003.

If they lost 30, 40% or more find another advisor. Advisors like to show how they did in relation to the S&P500 Index which lost 40%. They show they did better. Better still means they would have lost the clients money. This is the road to disaster as there will be another serious bear market and customers money will go down the rat hole again. A smart investor will continue due diligence until such an advisor is found. Rarely will it be a stock broker. Occasionally a financial planner can be found. Search on the Internet. Make them prove (and be sure it can be verified) the results. Dont accept 10-year projections.

These are nonsense. Even during the bad 3 years there should be profits. When people come to the end of the road and may no longer be able to work for an income the money put away will be their blessing. The great Social Security farce may have blown up by then. People must take personal responsibility for their retirement. Few have done so and think the government will take care of them. Think again or enjoy those canned cat food sandwiches. Act now. Unless you are the Lone Ranger there will be no magic bullet.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter and receive his market letter at and discover why he's the man that Wall Street does not want you to know. Copyright 2007 All rights reserved

This System Will Help Those Forex Traders With Just A Few Trading Hours Available

There are diverse systems and methods for Forex trading that will teach you pretty successful approaches to a profitable trading career. But many of them will ask you for a good chunk of your working day. And that may become a problem if you still have a full time job and besides you still have a family you must consider and take care of.

If this is your case then you should look for a forex trading system that will improve your trading with new strategies that will allow you to keep your fulltime job and mainly, keep your family happy.

In order to save time used on chart analysis and indicators reading you must use a trading strategy like the ones used in what is known as swing trading. This is a forex trading approach that relies on identifying winning trades on short time intervals (15 min, 30 min, 1 hrs charts). As you can see from the trading intervals this kind of system will naturally free you from spending the whole day watching how the markets evolve with time. You just need short bursts of profits from time localized trades.

With the correct swing trading system you will have good, solid and consistent profits resulting from clear entry orders, calculated exits and this without spending too much time watching the markets. A forex trading method with a high winning percentage will be rewarding psychologically, will keep your morale high (very important in this hard trading world) and will be enjoyable to trade. After all, a string of profits will build the confidence of anyone.


Forex Education Bollinger Bands Can Give You a Huge Trading Edge Here's Why

One of the critical pieces of forex education for any Forex trader is to understand the concept of standard deviation of price and how to use volatility to their advantage.

If you understand the concept you can easily apply it with Bollinger bands which are an essential tool for all forex traders.

Lets look at why Bollinger Bands are so useful and profitable, when incorporated in your Forex Strategy.

If you dont know what standard deviation is simply check our article on the concept right, lets take a look at Bollinger bands.

Bollinger Bands Defined

Bollinger bands are simply volatility bands drawn either side of a moving average.

You calculate Bollinger bands using the standard deviation of price over the same period as moving averages the mean price, then the volatility bands are plotted above and below the moving average.

Moving averages are used to identify the underlying trend of currencies and Bollinger bands take this one step further by:

Combining the moving average of the currency with the volatility of the individual market (or the standard deviation) this then creates a trading envelope with a middle mean price (moving average and 2 x bands (expanding or contracting) either side that reflect volatility or standard deviation.

As prices move away from the longer-term average, the standard deviation rises - and thus the bands will fluctuate in varying amounts, away from the average.

Why they work

In any market, the value of a currency traded tends to rise slowly over the longer term.

Prices can and do spike quickly in the short term, but will normally return to the longer term moving average - which represents fair value.

The standard deviation of the outer bands (how far they are from the mean) shows how far prices are from longer-term value.

Most price spikes are caused by trader psychology with greed and fear to the fore and this can be graphically seen with Bollinger bands.

So how should you use Bollinger bands?

There are 3 main ways to use them.

1. Spotting price spikes

When the bands are a long way from the mean you can use Bollinger bands as profit taking signal on existing trades or use them to spot contrary trades.

2. Enter exisiting trends

If you have a good trend in the forex markets then you can use dips to the middle band to buy at fair value.

3. Entering new trends

When prices are trading in tight range and start to breakout with a change in volatility a great new trend could be emerging.

Bollinger bands can certainly give you a new dimension to your forex trading strategy and any currency trading system can benefit from the extra insight that they can give you.

A word of warning

Like all technical indicators you should not use Bollinger bands in isolation to enter trades, however combined with timing indicators such as, the stochastic or RSI, then you have a powerful combination for greater FX profits.

With regard to forex education, knowing what standard deviation is and how to apply the concept through Bollinger Bands, will give you a huge trading edge, so make sure you use them.


On all aspects of becoming a profitable trader including features, downloads and some critical FREE Trader PDF's and more FREE Forex Education visit our website at

The Bubble-Rooter

A gentleman from South Carolina has sent an e-mail last week. He has been reading my Articles on Real Estate Economics, and wants to know how I can possibly take the position that there is no real estate bubble bursting out there. This gentleman believes not only that there is a burst in full progress but that, in fact, it looks more and more like a market crash at least in the area where he is located. He corroborates the e-mail with an impressive set of figures taken from local sources.

While I am grateful to this individual for taking the time to send his otherwise lengthy message privately, I thought Id present my response also to the public at large, in hopes to shed some light on this subject matter. Following, therefore, is a FAQ on bubbles formulated in accordance with the points and concerns raised in the e-mail. I have, furthermore, notified this person that this Article represents my response and have invited him to come and read it in this forum.

So here we go.

Q.What is a real estate bubble?

An economic bubble is a particular market condition, wherein prices of commodities or assets increase to levels so high as to no longer reflect the utility of usage of the commodities or assets being exchanged. The main cause of an economic bubble is speculation. Speculation is one of the many forces that act on capital at any given time. In theoretical Economics, speculation is defined as the acquisition of financial or capital assets made solely to quickly profit from fluctuations in their prices, or of goods or commodities with no real intent to consume or otherwise use them for production.

Contrast this with investment, which is defined as the acquisition and use of financial or capital assets with a view to generate income, or of goods and commodities for the purposes of consumption or production.

Clearly, pursuant to the foregoing definitions, the real domains of speculators are the stocks, bonds, treasuries, futures and debentures markets, cumulatively referred to as the Stock Exchange. Many investors in the Stock Exchange actually speculate, since they bet on a quick gain dependent upon the volatility shifts of the market they operate into, and since they do not intend to consume the products they buy. A purchaser of one-hundred shares of IBM does not intend to actually go work for IBM, nor does he necessarily intend to start consuming outputs produced by IBM. He merely intends to buy IBM shares at a lower price and resell them with a mark-up.

Speculators do operate in the real estate markets, but to a far lesser extent, mainly because real estate typically moves in slow, very slow motion even when real estate markets are fast. The fluctuations in prices that occur in the Stock Exchange in a few hours typically take days, or even weeks, to happen in real estate. Additionally, fluctuations expressed as a percentage change of their nominal market value are far greater and substantial in the Stock Exchange than in real estate. For instance, it is not unusual for stocks to gain or lose 30-, 40- or 50-percent of their value in the round of a week, sometimes even in a single day, but no such dramatic variations exist in real estate. One never hears of a rancher abutting a golf course that on Monday morning is offered for sale for $500,000, and which by Friday afternoon has been reduced down to $250,000. Because of this, speculators tend to shy away from real estate markets.

The few speculators that do operate in real estate are those who engage in the flipping of real property assets. Many investors think of themselves as masters of flipping, but truth of the matter is that they do not flip at all. They resell for profit. True flipping, in real estate, consists in the purchase and selling of an interest in land without paying for it with ones own money. Thus, a speculator flips real estate buy putting in an offer to purchase an asset, and then flips the same asset (which the speculator does not own as of yet) to a second purchaser for a higher price, who will complete the transaction on the same day as the speculators original transaction. The speculator will then take the money from the second purchaser, retain his profit margin, and transfer the balance to the Seller. The speculator, in other words, will pay the Seller with the money of the second purchaser, not with his own money. This is a practice known in the United States and some Canadian Provinces as double escrow.

Needless to say, all those who purchase fixer-ups, refurbish, remodel and then resell them, and think of themselves as great speculators, are not speculators at all. They are also no masters of flipping. They are just merely ordinary investors, with a super ego.

Here is the classic comparative economic breakdown, by category, of market participants operating in both the Stock Exchange and Real Estate:

Stock Exchange ... Real Estate


65% ................ 5%

Investors (short term)

25% ................ 35%

Investors (long term)

10% ................ 60%

I have seen some sources last year pegging the percentage of real estate speculators to double the one of the forgoing table, and am further aware of some economists and market analysts who cite a 15 percent figure. But even if, by hypothesis, speculators represented a 20 percent of real estate market participants, 4/5 of all participants would still be made up of regular short and long-term investors. Therefore, as the primary cause of economic bubbles (speculation) is almost entirely absent from real estate, or has otherwise minimal or reduced impact, it is ludicrous to speak of real estate bubbles.

Thus my position.

Q.Still, prices are tumbling down. If its not a bubble, what is it?

Price deflation. Plain, ordinary, old-fashioned, lemon-flavoured price deflation.

Deflation is a decrease in the general pricing levels of assets or goods, which occurs when the equilibrium between supply and demand is altered, resulting in a higher or lower purchasing power of money within the market (in the present case, the purchasing power is higher since prices are coming down).

There are two, and only two variables capable of altering the equilibrium of supply and demand: 1) a tightening or expansion of the money stock which, in turn, alters the cost of borrowing, i.e. a shift in interest rates, or 2) an increase in inventory supplies. Alfred Marshall (1842 1924) was the first to attempt to explain price behaviour within the context of the equilibrium between supply and demand in competitive markets. Marshall discovered that consumers attempt to equate prices to their marginal utility, defined as the measure of happiness or satisfaction gained by consuming goods and services. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain consumer behaviour in function of shifts in pricing.

The propensity to invest in real estate is partly dictated by the expectations of future profitability and by the present perception of market risk. The table above shows that a good 40 percent of real estate market participants is composed of speculators and short-term investors. These folks are in the market solely to increase their level of wealth, in the short and very short run. When the perception of market risk on the part of 40 percent of market participants increases sharply - which is exactly what has been happening these past few months - capital will exit more and more from the sphere of real estate and will find its way elsewhere (typically the stock market). There occurs, in other words, a shift in volatility risk.

The turnover in real estate markets drops when the pool of buyers ready, willing and able to consume real estate products abates. This, in turn, discourages consumer spending on real estate products, demand lowers and markets cool off.

Q. Bubble, deflation ... call it any which way you want, the result is all the same for me.

But not for me.

The difference consists in the repercussions and effects that bubble bursts and deflation have on market wealth, defined as the combination of materials, labour, land, services and technology in such a way as to capture a profit (Adam Smith). The aftershocks of a bubble that bursts are usually terminal and irreversible: market wealth disappears, it vanishes entirely. And it takes forever to re-build it, right from scratch. The greatest example in recent times is the infamous Black Monday October 19, 1987 when the Dow Jones collapsed 22.6 percent in value in a single day! It took nine years for Wall Street to lure investors back.

The burst was so powerful that even today, nineteen years after the fact, there are people out there still hurting. Lives were changed forever, companies were wiped out, families were ripped and broken apart and a few people committed suicide. And not only in the United States, but all over the world. Markets fell 41.8 percent in Australia, 22.5 percent in Canada, 45.8 percent in Hong Kong, and the 26.4 percent in the United Kingdom.

Now, thats a bubble burst!

With deflation, on the other hand, wealth can be recovered. It is still there, though it cannot be tapped.

Finally, a few words about the soundness of real estate as a wealth-generating vehicle, even during times of deflation. Homes have appreciated consistently to the tune of 7.5 percent per year over the past thirty years, notwithstanding the numerous ups and downs the industry has been going through. Unfortunately, 40 percent of Americans and 35 percent of Canadians are renters and that is too bad, since the fastest way to riches is buying real estate, as opposed to buying just about anything else, including stocks and bonds. The average Canadian renter has a net worth (assets minus liabilities) of CAD $6,000. The average Canadian homeowner has a net worth of CAD $225,000 (source: Canadian Real Estate Association). Figures in the States are comparatively similar.

One of the best wealth-generating source is mortgages. Even the so-deprecated ARMs are good, since they are used to buy homes and build up value. We do everything with our homes in addition, of course, to live and sleep inside them: we use them as collateral for personal lines of credit, we use them to increase our net worth, we use them to establish our hierarchy within society, we use them to improve our own self-esteem and, last but not least, we also use them as the parachute of last resort to save us from dire financial straits. Ownership of our homes is everything to us.

My concluding remark is that a slow-down in real estate has actually a positive influence on the economy by allowing salaries and wages to catch up and thus to regenerate the pool of buyers, especially first-time Buyers, entitled to take their first steps into the world of real estate. The ratio between wages and real estate market values is too skewed to values. Whereas market values in metropolitan areas have appreciated an average of fifteen percent per year for the past five years - or a total of seventy-five percent, salaries have increased an average four percent per annum or twenty percent total. There is, therefore, a fifty-five percent gap, which accounts for the problem buyers are facing today when it comes to go to the bank and qualifying for a loan.

Thank you for the e-mail.

Luigi Frascati

Luigi Frascati is a Real Estate Agent based in Vancouver, British Columbia. He holds a Bachelor Degree in Economics and maintains a weblog entitled the Real Estate Chronicle at where you can find the full collection of his articles. Luigi is associated with the Sutton Group, the largest real estate organization in Canada, and is based with Sutton-Centre Realty in Burnaby, BC.

Luigi is very proud to be an EzineArticles Platinum Expert Author. Your rating at the footer of this Article is very much appreciated. Thank you.