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ANALYSIS OF SHARES. Continuation. The technical analysis

Posted on July 22nd, 2008 by admin, under Uncategorized.

ANALYSIS OF SHARES. Continuation. The technical analysis

The technical analysis is the kind of the analysis that entirely bases on the examination graphs of prices and volume of the tenders of the given share. In this sense it is not, strictly speaking, consistent with fundamental analysis. Experienced traders and investors know how to use both types of analysis correctly.

Historically technical analysis proceeds from the “Dow Theory”: The main characteristic of market of shares is trend of set of shares (stock indexes come from here and the oldest of them – Dow Jones). Naturally the definition of points of trend’s “breakthrough” (i.e. turn) have special importance.

Dow has suggested to define trend by index of leading shares (industrial Dow) and a turn to determine the validity of a turn use the confirmation signal from the “transport Dow” (index of the transport companies).

Today, the major indexes for the American market are not only the Dow, but also S&P 500, NASDAQ 100, but the Dow technique can be applied now also.

Also the major indicator, especially in dramatic moments of turn of trends is the volume of trading. At the end of rapid growth almost always the last movement upward happens (in the day time scale) on sharp falling volume, and strong first falling - at great volume. Such picture took  place in a deep correction on the Russian stock market on May 10, 2006, for example.

So, the technical analysis. Major POSTULATES:

  • Price takes into account EVERYTHING;
  • Prices are moving directed;
  • History repeats itself.

It is classical, “educational variant”. I’d like to offer some of my own amendments – clarifications:

  • Price takes into account everything. However this happens not immediately but gradually! And the more global acting factor is, the longer is the “response time” of price.

The theory of efficient market implies INSTANT action of the new information to the price:

  • Prices are moving directed. SOMETIMES! But not all the time.
  • History repeats itself. This fact is the most nebulae, I will not comment it. Usually in training “figures” of technical analysis are demonstrated – double peaks, “head-shoulders”, etc. But you can always find cases where the figure “does not work”.

Nevertheless the technical analysis is the major tool of the analysis as it helps to understand the state of the market (in what condition is our share?).

Let’s try to supplement postulates of technical analysis:

  • The prices graph contains simultaneously casual and non casual component;
  • The ratio of “casual-non casual” components defines efficiency of the market: the higher is the share of casual components, the more effectively market is, and the more difficult is earning on it.
  • Task of trader (and investor) is to allocate non casual component and use it for profit.
  • We can identify two states of an active (or the market): trend movement and consolidation. Two of these are moving from one state to another, cyclically, but through different time-intervals.

It is fundamentally important for the trader (investor) to learn to identify are we in trend motion or in zone of consolidation. There is the best trade tactic for each of these states, but when applying the tactic at the wrong market, we risk to get losses instead of profits.

 

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Basic strategies on the market of shares

Posted on July 21st, 2008 by admin, under Forex Strategies, shares.

Basic strategies on the market of shares:

- A strategy of long-term retention of positions ( “buy and hold”) is a simple but effective strategy. It assumes acquisition of first-class shares (necessarily without using credit leverage!). Ideally requires opportunities of regular buying extra securities over a long period. Result (yield) increases substantially if producing “additions” in case of considerable (20 and over%%) declining market. Disadvantages are obvious - extra-long “jam” in positions is possible in case of an unsuccessful point of initial entrance;

- Strategy of investment “in index” - is a kind of previous strategy, with the shares acquired in accordance with their share of the common indexes (USA - Dow Jones, S&P500);

- Portfolio growth strategy – shares are purchased to the portfolio, having (from the point of view of manager) high growth potential. Advantage of this strategy is high profitability in a growing market;

- Strategy of aggressive portfolio management – strategy designed to yield additional profitableness, received because of manager’s professionalism. It is critical enough to behaviour of the market.

 

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Bond loans

Posted on July 11th, 2008 by admin, under Forex Bonds Options and Futures.

This article describes bond loans to Forex players.

The organization and placement of bonded loans allows financial markets to involve larger sums under lower rates than loans on bill loans. However, this type of financing may not be available immediately to all enterprises. It is essential that the company-emitter had already positive public credit history, that is attracted funds from the previously open markets, for example, by borrowing bill loans. It is necessary to note also that the production and placement of bonds is more difficult and lengthy procedure than the placement of bills and much more expensive for the organization of the release.

However, all this is justified, because the fact of placement of bonds considerably raises the image of company, and if there were several successful releases of bonds and there were no problems with their repayment, investors start to treat with greater trust to the emitter. Besides the positive public credit history of the company is very valuable non-material active allowing to place bonded loans under lower interest rates in further. It makes bonds of one of the cheapest forms of financing.

Thus, the emitter becomes recognizable in business community of investors, portfolio managers, managers, speculators and financiers. Demand for papers of the emitter raises, that opens prospect to the company to be on the share market, after IPO. The public companies have a number of advantages over private companies, they have a good tool of financing of the business that makes real realization of many expensive projects.

Process of issue of bonds consists of eight basic stages:

  • Carrying out of the analysis, whether company can place in general the enterprise bonds;
  • Careful study of parameters of the future bond loan;
  • Decision-making on release of bonds
  • Realization of activities to raise interest of investors to release of bonds of the Emitter;
  • Preparation and registration of the prospectus of issue;
  • Placement of bonds among investors;
  • Registration of the report on release;
  • Organization of the secondary market.

The organization of the secondary market is the important stage in placing of the bond loan, allowing investors to buy and sell bonds freely, diversifying their forex investments and increasing demand for papers of the Emitter.

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Ordinary shares as the tool of investment

Posted on July 4th, 2008 by admin, under Forex Bonds Options and Futures, Stocks.

This article describes ordinary shares and investments basics to Forex players.

Ordinary shares attract Forex investors for different reasons: it is an opportunity to earn much, if the rate will “fly up”, for owners of large packages of dividends can provide a permanent source of income. Considering variety of shares traded on the stock market (more than securities 20000 in U.S.) – it could be argued that whatever is investor’s objective, he could always pick up the paper, suitable for his investment strategy.

The basis of attractiveness of shares is that their owner is entitled to participate in profits of the company. Naturally, in case of rapid growth of company income rate of its shares also grows - the history of the stock market knows many examples when the stock price increases in the tens and hundreds of times by year or two. Bad aspect is that the investor is not only not guaranteed any level of profitability, but simply keeping enclosed means in safety. Stock market knows a lot of stories when strongest market falls and bankruptcies of largest companies such as the crisis of 1987 and 1999-2000 in USA, the Russian stock market collapse in May of 2006; Enron collapse and bankruptcy of YUKOS.

Stock indices - Dow Jones (S&P500,NASDAQ) have stable growing momentum in the long scale.

Difficulty, therefore, lies in correct selection of shares for inclusion in a portfolio of the investor.

 

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Why are investments in Forex better than investments in mutual funds? Comparing Forex and mutual funds investments.

Posted on June 27th, 2008 by admin, under Mutual Funds.

What your share in profit on use of your money?
Bank deposit You get only interest rate that was agreed in advance with bank. The bank leaves all other earned profit to itself.
Opened mutual fund Every day you know the pureexpense of your shares and accumulated profits. You can always take away all the profits.
Forex active management / Forex 50 % from profit received on yours to the account
What is the average profitableness on investments?
Bank deposit 9-13% per annum
Opened mutual fund 30-50% per annum
Forex active management / Forex 100-300% per annum
What are the investment risks of loss of invested
funds?
Bank deposit Low
Opened mutual fund Average
Forex active management / Forex High
How do investors receive the income?
Bank deposit Payment of income at the end of term of the deposit. Bank receives revenue by lending its customers and other ways.
Opened mutual fund Possession of fund does not provide reception of regular payments in the form of percent or dividends to its owner. The income of the shareholder consists of the difference between the price of redemption and price of the acquisition of shares. The investor may receive income from their investments only in the case of a sale of its own shares, provided that the value of shares during the period of possession of them has grown up.
Forex active management / Forex The monthly distribution of profit received at management of your trading account.
How strongly expenses of the managing director reduce
profit on use of your money?
Bank deposit You do not know this. Expenses of the bank are opaque to you.
Opened mutual fund You know the maximum possible expenses in advance - it is specified in Rules of fund and is controlled by the state. Charges of the investor are in average 3,5 % from the invested sum of year plus on the average 1 % from the deposit at entering or removal of money resources.
Forex active management / Forex The company has its own expenses to manage your account.
How do your money invested?
Bank deposit You do not know this. According to the law, the bank is not accountable to you. You can not evaluate how risky the bank plays with your money.
Opened mutual fund The structure of the fund’s actives is tightly regulated by law. You always know, where and with what efficiency your money are invested.
Forex active management / Forex Money are invested in purchase-sale of currency. All transactions are reflected on your trading account. In online mode you have access to your account and can control the actions of a manager.
What will happen if you
want to return your money urgently?
Bank deposit Bank will leave to itself all the accumulated percents on the deposit under early withdrawal of funds. At best, you will receive the minimum bid, as demand for deposits.
Opened mutual fund You can sell the unit and away themoney at any time. You do not lose accumulated income. (Only for opened funds).
Forex active management / Forex You can always pick up take away all of money or part of the money from your trading account.
What unforeseen expenses may arise?
Bank deposit The bank may unilaterally on their own install an additional commission, if you want to take away the money ahead of schedule.
Opened mutual fund The fund is not fine its shareholders. You know in advance all expenses. The fund may increase or decrease them, only changing the rules of fund, which preliminary are a subject to the state registration.
Forex active management / Forex In case of early termination of the contract profit shares according to the contract signed between the investor and the company, additional penalty at a rate of 1% of the amount in the management, is paid by
the initiator of break, at current losses at the time of terminating the
contract loss falls on the initiator of terminating the contract.
And if bankruptcy?
Bank deposit Bank may fail. You can lose all your money. If the bank is a member of deposit insurance, then you can count on the compensation at a rate up to sum defined in the law.
Opened mutual fund Fund can not fail. Every day you know the expense of active pure actives of the fund.
Forex active management / Forex The broker may fail, but each account is insured for 100 thousand U.S. dollars.
And how do your maximal losses depend on you?
Bank deposit In the case of bankruptcy of the bank you can lose all the money. You can not know the likely size of probable losses in advance.
Opened mutual fund Every day you know value of shares. If the value of the Fund’s actives decreases, you can at any time sell their units and limit your
losses.
Forex active management / Forex The company guarantees preservation of 75% of the deposit. Because trade is conducted only 10% of deposit.
Whether your money can be stolen?
Bank deposit It can be, but it is a criminal offence and such cases are rare.
Opened mutual fund It cannot be. The Fund’s actives are kept in a specialized depository.
Forex active management / Forex It cannot be. Any withdrawal of input / output from your account to the account of third parties is forbidden by the law.
What taxes the investor pays?
Bank deposit If the rate on deposit is less than 13% of income derived
from the deposit is not subject to income tax.
Opened mutual fund The tax is kept from the value of income received by shareholders. In turn, the income is formed only in case of repayment of shareholders shares. Thus, when shareholders continues to own shares and does not sell them, the income and taxes does not arise.

At payment of shares, if the shareholders is a private person, the management company, as the tax agent, keeps him from income tax at a rate of 13% of the value of income.

In case when shareholder is the legal person, the profit tax is paid by them independently.
Forex active management / Forex Since all operations are conducted in the international market, the investor independently calculates and pays the tax in the country in which he is resident.
How profitableness of investments is guaranteed?
Bank deposit The bank itself takes the obligation to pay income after
term of expiry of the deposit.
Opened mutual fund According to the legislation Management Company can not guarantee profitableness of an investment in mutual funds. Typically shareholders makes a decision on purchase of shares based on information about the profitability of mutual fund for prior periods. The operating companies are interested in achieving the best results of management of money of investors as comparison of results of various funds allows to draw a conclusion on a level of their professionalism.

Nevertheless, with investments shareholders should bear in mind that the share price could rise as well as shrink; investment results in the past are not indicative of the future; State do not guarantees profitableness of investments into investment funds.
Forex active management / Forex Profitableness of investments is not guaranteed. But the company sends all the efforts and previous experience to receive guaranteed minimum annual yield of 100.

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Mutual funds

Posted on June 23rd, 2008 by admin, under Mutual Funds.

Mutual fund is a combined investment funds transferred to trust management company. Mutual fund itself is not a legal entity, it is so-called “property complex”, and indeed, is investment portfolio.

Investing money in mutual funds, investor actually enters into a contract with the management company and trust management becomes the owner of investment shares. Management Company extradites shares, making this trust management of mutual funds.

The assets transferred into mutual funds by shareholders, remains the property of shareholders and management company is implementing trust management of mutual funds, making transactions with that property.

The Management Company is entitled to transfer their rights and responsibilities for managing mutual funds to another management company.

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Sequence of investment actions

Posted on June 21st, 2008 by admin, under Sequence of investments.

When investing serious amounts of money on stocks it makes sense to work out a plan of investing. We need to define the aims of investing on stocks – terms and sizes of investments, what risk is acceptable in the process of investing, expected profits. Then you can try to pick up suitable instruments for investing on stocks.

It is necessary to estimate financial instruments in terms correlation of profitability and risk - we can do this only after detailed consideration of types of instruments.

In order to reduce the risk of any adverse events associated with specific financial instrument (bankruptcy of company, defolt of the state etc.) we must strive to diversify investments – aim to invest in different markets, different industries, different companies. These attachments will make the “diversified portfolio”. Once your portfolio is formed, it is necessary to “manage the portfolio”. This means withdraw from portfolio investments that didn’t show planned profit, or instruments that didn’t meet expectations, with the acquisition of potentially profitable instruments instead.

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Sructure of investment process

Posted on June 20th, 2008 by admin, under Structure of investment process.

Investment process is a mechanism of bringing together of investors (having temporally free funds) and sellers of financial instruments (actions, bonds) – having needs for money. It is possible on stocks.

Financial markets is a mechanism, taking together “sellers” and “buyers” by means of mediators (exchange stocks). There are a several types of financial markets - stock market, bonds, market of futures and options.

Investors participate in financial operations on markets both directly and through “financial institutes” – banks, insurance and pension companies (funds), investment funds.

The most important participant in financial markets is, as a rule, state - as a seller of government bonds, as investor (placing temporarily free funds) and as a regulatory organ.

Companies typically act as nets-borrowers. Private individuals supply considerable part of free funds to the market in order to get profit.

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Basic concepts of investing

Posted on June 19th, 2008 by admin, under Stocks.

Investment is any tool, in which you can put the money, hoping to keep or to multiply their value and (or) to ensure a positive value of income. In the broadest sense investment is mechanism necessary for financing the economy growth.

Free money can not be considered an investment because the value of money will gradually be absorbed by inflation, and thus there will be no income. Bank deposit is considered an investment because it guarantees a certain income.

Securities or ” stock values” are investment instruments, confirmative a debt obligation (bond) or right to participate in the income of company (action).

Investing in “real assets” are investing in acre, real estate, in own business. A direct investment is buying of securities directly by an investor. Indirect investments are investments through collective funds.

The risk level is the most important characteristic of investments. In the area of finances risk means possibility of adverse end of investing. This is possibility of not to receive supposed profit or to receive loss. As a rule, higher risks are peculiar to high-yield instruments of investing, and vice versa – low risks usually means low profitability.

Investments are divided into “short-term” and “long-term”. Short-term investments are usually up to a year, and long-term ones – more than a year. We are entitled to expect a higher profits on average in the case of long-term investments.

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Investing basics

Posted on June 18th, 2008 by admin, under Forex Bonds Options and Futures.

In this section we will view investing to financial instruments – deposits, promissory instruments (actions, bonds), and so-called derivative instruments (futures and options – commodity, index etc.)

This section is intended for those who are going to invest in the amount of 10000 dollars and more and more concerned with reducing risk than ultra-high returns. In so doing, many of you do not have a serious investment experience and do not understand all the “pitfalls” of the process.In our time Internet gives the real opportunity for anyone, not even being a professional, multiply their funds by investing them in world financial markets In this section we will view investing to financial instruments – deposits, promissory instruments (actions, bonds), and so-called derivative instruments (futures and options – commodity, index etc.)

This section is intended for those who are going to invest in the amount of 10000 dollars and more and more concerned with reducing risk than ultra-high returns. In so doing, many of you do not have a serious investment experience and do not understand all the “pitfalls” of the process.

In our time Internet gives the real opportunity for anyone, not even even being a professional, multiply their funds by investing them in world financial markets.

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