Have you ever consistently watched the price of a stock?

You probably noticed that the price changed every day.

It may have gone up one day, down the next, and back up the following day.

That’s typical for any stock.

But what causes a stock price to change so often?

It’s simple, all kinds of things…

What We Don’t Know

So, why does a stock price change?

The short answer is: nobody knows specifically.

“The Dow is down 50 points as investors react to news of [X].”

Stop it, you’re just making stuff up. “Stocks are down and no one knows why” is the only honest headline in this category.

*Taken from Morgan Housel’s article “Stupid Things Financial People Say“

There are many reasons for a stock price to change, but there is no one person that can tell you exactly why a specific stock’s price changes on any given day.

Enough about what we don’t know, let’s talk about what we do know…

The Economist Answer

The most foundational aspect of the stock market (like any market) is supply and demand.

It’s like anything else, if there are more buyers than sellers, the prices rise. If there are more sellers than buyers, the prices fall.

That explains the basic economic reason that a stock price would change, but that doesn’t really help you much, does it?

The Stock Trader Answer

Stock traders are different from investors.

It’s not necessarily bad to be a stock trader, but it’s not really my idea of sound financial practice, and 9 times out of 10 it’s about as safe as Vegas.

So, what do traders notice about stock prices?

Stock traders attempt to track every single change.

That’s a lot, considering that stock prices change all the time due to:

• Company news…good or bad.
• Earnings reports…good or bad.
• Popular stock advisers endorsing or denouncing a stock.
• Analysts opinions.

The Investor Answer

Investors don’t really care about stock price changes.

Investors are not affected by trivial news and an “earning miss” here or there.

The market fluctuates. All the time. It’s too stressful to worry about every movement.

Investors don’t base their decisions on a stock price.

What You Need to Know About Stock Prices

There is one very important thing to understand about buying stocks…

Stock prices don’t matter.

We will never fully know the exact reason for a stock price change in any situation.

A stock price alone doesn’t show you the value of a company.

We don’t invest in a company’s stock price, we invest in the company.

Whether you invest in individual stocks, index funds, or mutual funds…you shouldn’t let stock prices alone affect your decisions.

You can watch the market every single day if you want to, but don’t let the daily changes lead you to make changes in your portfolio.

Hopefully, this article gave you an insight into some things that can affect a stock price…basically everything can.

More importantly, hopefully you understand why stock prices don’t matter.

Read more on investing here.

Photo Credit: Trey Ratcliff, arianne, PittCaleb, Talk Radio News

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Traders make money through different investment means, and one of them is stock investing. Investing in a company’s stock involves buying its shares on the stock market. The profits realized are from the return on investment, which every investor is liable for as the company keeps growing.

Many investors have become rich through stock investing, according to history. However, in the advent of the company not growing, the investors bear losses. In this guide, we will discuss whether investing in stock is a wise decision or not.

Reasons to Invest in Stock

Many reasons make a stock a good investment, and they include:

1. Returns Increase with Economic Growth

Corporate earnings increase with the growth in the economy. There is more creation of jobs, incomes, and sales with increased economic growth. There is a surge in consumer demand when there is a fat paycheck; therefore, the cash register of the companies sees more revenues.

2. Inflation Does Not Affect Investment Over a Long Period

According to history, annualized huge returns are realized when investors purchase stocks over a long time. The image above shows the valuation of S&P 500 increasing over a long period of time. Whenever you invest over a long period of time, inflation will not affect your overall ROI. Thus, the temporary drop in a stock value will not affect the total gain

3. Ease of Obtaining Stocks

It is easy for an investor to buy into a company through the financial market. Stock investing will be possible after creating an account. The means of buying stocks are numerous. You can easily buy stocks online or through a brokerage.

4. Does Not Require Large Sum to Start

Some brokers do not charge any commission for buying and selling stocks. Likewise, some brokers do not require any minimum amount before you can start buying and selling stocks. Some brokers also allow investors fractional stock investing when the stock they intend to buy is costly.

5. Two Means of Generating Returns

The main means of making money through stocks that many investors use are buying low and selling high. In this case, they invest in companies that are growing fast so that their values appreciate. The day traders utilized short-term trends to make profits, whereas the long-term investors wait for the stock to appreciate over a long time before getting ROI. Both investors believe that outperforming the market is based on their stock investing abilities. However, other investors prefer earning dividends by buying companies that pay it.

6. Ease of Converting Stocks to Cash

There is nothing stopping investors from selling their stock at their preferred time. At a low transaction cost, investors can quickly turn their assets into liquid, especially when there is an urgent need for money. However, the price of the stock is not stagnant. Therefore, the investor can suffer losses when turning the shares into cash.

Why is Stock Investing Bad?

Although there are many positives of stock investing, it also has its downsides which include:

Highly Risky

Forfeiture of portfolio is possible when the company whose stock you bought is doing badly. Such that, the price plummets after selling of the stocks by many investors. Thus, investors who cannot withstand the risk are advised not to dive into stock investing.

Stockholder to Receive Payment Last

When a company faces bankruptcy, those that will get paid first are the bondholders/creditors and preferred stockholders. The common stockholders get paid last. However, if your portfolio is well-diversified, there will be no cause for alarm after a company becomes bankrupt.

Payment of Taxes

Investors are taxed according to the profits they make from stock investing, thus reducing the overall investment return. However, investors do get a tax break when they suffer losses.

Require Time

Before you buy into a company, there is a need to research extensively, especially when you purchase it yourself. You will need to dedicate time to learning and understanding the reading of financial reports. Also, you will dedicate much time to monitoring the stock market to check for any fluctuations in the market price and watch out for corrections.

Conclusion

Stock investing has numerous advantages likewise downsides as stated in this guide. There are certain risks attached to it, however many investors generate huge ROI after holding the shares for a long time. Stock is a good investment opportunity for those that understand risk management. Diversifying helps traders not to suffer much loss when the value of the company drops. Likewise, when the stock rises, you tend to make a huge ROI.

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What is a place where they make a lot of money, buy and sell shares in companies, lend money?

The stock market, of course. We’re going to talk all about the stock market, its participants, and how to make money with it.

What is the Stock Market?

The stock market is a place where stocks, bonds, currencies and other assets are traded.

The American stock exchanges NYSE and NASDAQ are the largest by capitalization and the most attractive for investors.

Americans are introduced to the stock market and exchange at school. Shares in the United States are owned not only by millionaires, but also by many ordinary citizens. By choosing to invest in stocks or other securities, the investor receives a number of advantages compared to earnings from a bank deposit or a private business. In wealth and investment management, you can be helped by a fintech software development company.

Stock Market Participants

Companies enter the stock exchanges to sell shares/bonds on the market and attract money for development;

States issue bonds to attract investment in the country’s economy;

Private investors choose investments in stocks or bonds as a way of earning money;

Brokers are mandatory intermediaries between investors and the exchange;

The exchange provides a trading mechanism through dealers, underwriters, there are also depositories and other participants;

Institutional investors are legal entities that trade large blocks of shares and provide most of the trading on the exchange. These include:

• investment funds
• pension funds
• financial and insurance organizations
• banks and credit unions

Platforms on the Stock Market: Coinbase and Binance

COINBASE is an American company that operates a cryptocurrency exchange platform.

Coinbase is now:

• Coinbase Pro (formerly GDAX) is a platform for professional trading, offering traders a terminal with advanced functionality.
• Coinbase Wallet is an online wallet for storing cryptocurrency, which allows you to maintain full control over your digital capital.
• Coinbase Custody is a service for large buyers and sellers (the minimum amount is 10 million US dollars)

During its existence on the market, Coinbase has achieved results:

• 30 million customers;
• 150 billion $ turnover;
• entering the TOP 100 exchanges by trading volume;
• serving users from 103 countries;
• work with 23 types of coins, including Bitcoin and other popular altcoins;
• work with the main currencies: dollar, pound, euro.

The Coinbase trading platform has many advantages that make it a great place to start trading:

• A serious reputation;
• Insurance of client accounts;
• An easy-to-use platform with extensive functionality;
• High level of security.

BINANCE is the largest cryptocurrency platform used by millions of traders around the world. Now everyone can become a client of Binance.

At Binance, you can:

1. Buy / Sell cryptocurrency;
2. Trading on the stock exchange with leverage (up to 125x);
3. Keep assets for a long period of time;
4. Put assets in a savings account with % per annum;
5. Participate in free cryptocurrency sweepstakes and many more nice features.

Why should you choose Binance?

1. Since this is the largest crypto exchange in the world, this ensures that your assets will be in integrity and will not be lost;
2. High level of security;
3. A convenient wallet system;
4. a huge list of coins supported by the platform;
5. Small commissions;
6. Secure purchases and sales of cryptocurrency, Binance uses KYC to confirm its users and is an intermediary when making transactions on P2P.

9 Steps to Start Earning: Procedure and Investment Rules for Beginners

It is best for a novice investor to adhere to proven behavior algorithms. You can do this:

1. The investor chooses an exchange;
2. Then the investor chooses a broker. It is imperative to check the accreditation of the broker on the exchange, its licenses, ratings, range of services and the number of clients served. It is also worth getting information directly from a personally known client of this broker;
3. The investor and the broker conclude an agreement, which prescribes the rights, obligations and all the key points of the relationship;
4. The broker opens a brokerage account for the client;
5. The investor replenishes this account;
6. The investor then gives the broker instructions to buy certain assets;
7. Information about the purchase is registered in a special depository in the name of the investor. He becomes the owner of these assets;
8. When a client gives an order to sell shares (bonds), the broker checks the client’s availability, finds a buyer and conducts a transaction;
9. The money from the sale is credited to the client’s brokerage account.

For beginners, it is best to choose a management company that will invest itself, but in favor of the client. This should be chosen carefully, because it determines the investment income of the client.

The post How to Start Investing From Scratch in the Stock Market appeared first on MoneyMiniBlog.

Deciding on good stocks to invest in is never straightforward. Countless companies are listed on the stock exchange, with large volumes of relevant information about them, choosing whether to invest or not is not making it easier.

It is difficult to sift through the valuable and helpful information from all the useless data. Fortunately, a tool such as a stock screener can help you concentrate on those stocks that match your requirements and compliment your investment strategy and portfolio.

Think of a stock screener as a highly efficient and effective filter when you need to see a list of companies you are contemplating investing with. Due to the number of stocks actually listed, it is not a feasible task to manually monitor and track the whole suite of them manually. A trade ideas screener will refine, reduce, and produce a finite number that you can then personally scrutinize further.

With access to a stock screener that accommodates your needs, it is possible to invest so much faster, which then maximizes the probability that you can become profitable sooner than later.

Stock screening technology is the key to success. The most reliable stock screener will be the one that will offer the screening functionality that matches your investment intentions. Day trading is separate from swing (or medium-term) trading and investing. Therefore, a particular investment style will have specific screening requirements.

How Do Stock Screeners Actually Work?

Stock screeners are popular with day traders – as they can identify stocks that are moving in a promising and profitable direction – and promptly as well (almost in real-time).

A stock screener must have (at least) the following three components:

1. A current database of the available companies that can be invested in.
2. A set of variables that will perform the filtering or screening capability.
3. A screening program that uses the filtering variables, and then generates a list of companies that meet the screening requirements as output.

Utilizing a stock screener is quite straightforward. One of the initial tasks an investor will need to do is to identify and utilize the screening variables that will assist the screening program with the filtering process. A suite of investment questions should be answered beforehand, and they may include topics like the following:

•  Do you prefer small-cap or large-cap stocks?
• Is your preference for stock prices that have recently fallen in price?
• Are you looking for stocks in companies within a specific sector, or industry?

These questions are merely a sample or subset of the screening variables that can be utilized based on an investment strategy.

A good screener will allow an investor to search using just about any metric or criteria they desire. After finishing inputting your answers, you will receive a list of stocks that meet your investment requirements.

You Need to Know What to Screen For

The significant challenge using screeners is understanding the criteria that will be used for its searching program. There are hundreds of variables that will make the possibilities for diverse combinations appear endless. Some screeners will list the most common predefined stock screening options to assist and encourage investors, with their variables already entered.

Watch Out for these Possible Stock Screening Limitations

Granted, stock screening tools are quite useful, however they do have limitations.

 Screeners do not have pertinent information about a company, such as labor dilemmas, any pending lawsuits, or low customer experience levels.

 Screeners handle databases that are updated, but when and how? It is prudent to check the timeliness and relevance of the stock data.

 Be mindful of industry-specific lack of information. For example, most startup high-tech companies will not display within screening results because they will have large capital already invested, but without any tangible outputs for consumers to potentially purchase just yet.

Do Your Homework First

As previously stated, stock screeners will not be aware of relevant recent news that has affected (or will affect) individual companies. Therefore, it is ideal to use stock screening data results as a single starting point and commence further research from there.

Follow up on those companies that have piqued your interest by reading the current financial and legal news – you might be surprised to read up on issues affecting the companies that you have chosen as prospects to invest in. Always search for news that may pose a risk to a company’s bottom line.

If you are not sure which screening tool to use, take your time and download sample programs, and test the tools until you find the ideal one that will suit your investment style.

Final Words

It is important to understand that stock screeners are not a magic wand that will identify stocks that will earn you loads of money instantly. There is no simple alternative to research and analysis. Stock screeners can present a starting point to commence the research process, as they will save investors valuable time narrowing the complete set of potential stock options down to a manageable collection.

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Trading stocks online is one of the best ways to build your wealth portfolio and accomplish new things with your cash. However, there’s a massive difference between placing your money into long-term investments and assets, and trading securities within the stock market. Before you jump in, it’s important to determine what you want to accomplish, and how you’re going to reach your personal goals. Remember, there’s no one-size-fits-all strategy for doing this right. Rather, you need to decide what kind of plan you’re comfortable with, based on things like your capacity for risk. Here are some quick tips to get you started.

Penny Stocks or Day Trading: Choose a Strategy

Before you jump into the trading world, you’re going to need to decide which road you’re going to go down. If you’ve maxed out your 401k plan, and you feel like you need to do something different with your cash, you might decide to launch your career in the stock market. When this happens, you’ll have various kinds of investment opportunities to choose from. Do your research from Warrior Trading to learn as much as you can about different practices, including day trading, swing trading, and even penny stocks. These low-cost assets can carry more risk than their counterparts, but you can review the basics on how to use them to your advantage as a beginner by clicking here.

Get Your Education

Once you know where you’re going to be using your cash to build a portfolio, the next step is to learn as much as you can. Don’t expect to decide to start buying assets and do so within the next couple of days. You may need to dedicate months or even years before you feel comfortable using your hard-earned cash in this way. Take your time to find resources you can trust for your education. There are plenty of guides and articles out there to help you, as well as various educational facilities like webinars. It’s worth looking into things like brokerage accounts that allow you to access educational centers, mentors, and even paper trading facilities too. This will allow you to test your strategies without wasting any money.

The strong financial position of top AI companies is why investors predict a tremendous growth potential. The AI industry has been generating high revenue growth over recent years and this makes wise investors consider buying artificial intelligence stocks particularly from companies on the leading edge of innovation.

Make Sure You’re Committed

Where investing can be more of a passive experience, getting involved with stocks and shares requires you to commit a certain amount of time from each day to practicing and developing your skills. If you don’t have the time or focus to do this might now, you might need to wait a little longer before you jump in. You can’t rush into this process haphazardly, or you could risk a lot of money. Assess how you feel about your long-term and short-term goals, and ensure you have a brokerage in mind that will help you to reach your target. Once you’re ready, schedule a block of time once or twice a week to begin with that you devote entirely to learning, trading, and focusing on various parts of the market. You’ll begin to ramp up your commitment levels over time.

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If you want to invest in stocks and you are a newcomer in the world of trades and investments, the first thing you need to do is find a safe and practical way to invest. Investing through brokers is a good idea as they can help you learn about investing and you can use the unique features of the brokers at your convenience. However, you need to find the best stock brokers that are genuine, efficient, and reliable if you do not want to lose your hard-earned money.

If you are looking for the best broker for you, it is important to check if the broker fulfills your specific needs as an investor. You need to consider twelve key factors to compare the stock brokers before you can choose the most suitable one. The factors are:

• Trade commissions
• Customer service
• Trading tools
• Account minimums
• Market research
• Investment options
• Other fees
• Retirement accounts
• Banking
• Account security
• Speed and order execution
• International trading

Taking these key points into account, the top 5 stock brokers you can go for in 2020 are…

1. TD Ameritrade

TD Ameritrade is one of the largest online brokers in the world. It prioritizes finding new investors and makes it easy for them to get started in investments. The stock broker maintains an active social media presence so the younger audience can be familiar with the company, as well as the concept of investing. If you are a new user and you want to invest in stocks through TD Ameritrade, you need to know that financial education is the key component of the broker’s offering. The online resources of the broker feature wide learning pathways for both beginners and advanced investors.

2. E*TRADE

This broker offers three computer-based platforms with two mobile platforms for investors. Each platform provides an array of investing styles and interests. If you are just getting started in investing, the standard E*TRADE website and app are designed for you. Both the app and the website have two-level menus. From there, you can access numerous screening tools, education offerings, and portfolio analysis easily. The broker also offers a demo account in the form of a paper trading platform that is modeled after the Power E*TRADE platform that traders use to practice on. The more advanced the platforms are, the more elegantly they are designed. These advanced E*TRADE platforms can guide investors as they graduate to more complex asset classes.

3. Merrill Edge

When it comes to customer service, no broker can beat Merrill Edge. Not only it has great resources built into its technology for newcomers in investing and investors exploring different life stages, but users can also sit down with an advisor face-to-face in almost all branches of Bank of America nationwide. Besides, the consultants are focused on life stage planning primarily than trading advice. Apart from its extensive advisor network, Merrill Edge offers two computer-based trading platforms. The native mobile apps are well-designed and have plenty of built-in context-sensitive help. By using the story features, you can understand what is going on in your portfolio well and you can also check what affects the performance of stocks or funds.

4. Fidelity

This broker concentrates on its customer experience on value. Fidelity finishes rank 1 for research tools and it offers a website that is easy to use. Users can screen for trade ideas, research on stocks and are provided with market commentary. The website offers everything that everyday investors require to manage their portfolios. Active Trader Pro is the flagship desktop platform of Fidelity and it is loaded with trading tools like real-time analysis, and real-time position trading. Other tools include website watch lists and charting.

5. TradeStation

TradeStation provides the most advanced desktop trading platform within the industry. Apart from stocks, the platform is brilliant for options, ETFs, and futures trading. The best part of the broker is that it truly focuses on traders – whether it is new traders just learning, a casual trader, or an active trader in day trading or swing trading. TradeStation desktop tools include real-time streaming, custom screening, ladder trading, and advanced strategy testing. Apart from desktop trading, users can invest through this broker on the web, and also mobile.

You can know more about these brokers online.

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Building wealth is something that you should be concerned with. Accomplishing your goal of building a fortune before you retire will require hard work and the right investments. With all of the different investment options available to the modern consumer, choosing the right ones can be difficult. Stock options are a great way to leverage the capital you invest in the market.

While stock options are similar to normal stocks, there are some stark differences you need to know about. In essence, stock options allow you to buy stock at one price and sell it at a later date, hopefully for a profit.

Before buying stock options, you need to use an options profit calculator. With this calculator, you can figure out what your profit will be on this investment.

For instance, if you bought 100 options at a $50 stock price, have a strike price of $75 and expect a monthly growth rate of 3% over the course of two years, this investment would generate a profit of $2,663. Having a stock options calculator is helpful to determine what your goals and limits are. Click here for more info on how these calculators can help you plan your investments.

If you are curious about stock options trading and whether or not it is a good fit for your needs, consider the great information below.

What You Need To Know About Stock Options

The first thing you need to know about stock options is that the price of your contract is influenced by the current stock price. In reality, you will not actually own stock in a company if you opt for a stock option contract – options are actually just a contract saying that you can sell the options at a predetermined time in the future.

In most cases, you can get an options contract for a fraction of what it would cost to actually buy stock. You need to look at stock options as a stepping stone to other types of investments. When handled properly, these options can provide you with a lump sum of capital to work with.

Time-Limited Stock Option Contracts

The contract that you are issued for stock options will have a defined time limit regarding when you need to sell. Knowing this sell date will help you determine if the stock options being offered are a good fit for you. There are many sites online that allow you to run a technical analysis of a particular stock and doing this research is recommended. This analysis helps you see growth trends before you sign off on an options contract.

If you neglect to do this in-depth research, you run the risk of losing money on your stock options investment.

Nearly 55% of American adults are invested in the stock market in one way or another. Stock options are an affordable way to try your hand at trading and make a few dollars. The main thing you have to do before choosing stock options is to assess whether you are being offered in-the-money or out-of-the-money options.

A stock option contract that has an in-the-money option has some intrinsic value built into the contract. This value will be assessed at the time of the contract signing. Generally, the value a company comes up with is what you will pay for shares of their stock. 

Out-of-the-money option contracts are cheaper, but they are harder to turn a profit with. Basically, out-of-the-money options only payout if the stock in your contract reaches a certain dollar amount. If you are unsure about what type of stock option contract to pursue, you should consult with an experienced investment professional.

Start Your Search for Stock Options

Now that you know more about stock options, it is time to get to work. Working with investment professionals is essential if you want to find stock options that have the capability of generating a good profit.

The post Essential Information You Need To Know About Stock Options Trading appeared first on MoneyMiniBlog.

Day traders, swing traders, position traders, and investors routinely use powerful tools to track the performance of their portfolios. Stock portfolio trackers are sophisticated computer programs that assess the price movements of each of the holdings in your portfolio. Besides that, these resources help you to reconcile differences between your long-term goals, and your portfolio’s performance against the market.

There are many challenges to overcome as a new trader on the scene. For one thing you have to decide how to populate your portfolio with the right financial instruments. This is no mean feat. It takes lots of research, pouring over charts, graphs, and data to pick out winners. You will find several resources particularly useful at this juncture, notably stock screeners and stock scanners. Fortunately, several portfolio trackers also offer you access to stock screeners.

What is a Portfolio, and Does Every Trader/Investor Have One?

A portfolio is a combination of investments in an account. It could be stocks, bonds, indices, commodities, forex, ETFs, crypto and options, or any combination thereof. A portfolio tracker is a useful resource for assessing the performance of your investments in terms of asset allocation. If you continually check your asset allocation, you may over trade, so the right balance needs to be struck.

Portfolio trackers can be assessed in terms of several factors, notably a user-friendly interface, the number of assets you can track in your portfolio, the cost of the portfolio tracker, and the speed with which the portfolio tracker loads and updates. Equally important is the degree to which your portfolio tracker can be integrated with your chosen trading platform. If your portfolio tracker is platform-specific, and you decide to switch elsewhere, it can be problematic.

Some portfolio trackers offer added value in the form of stock screeners. With a stock screener, you can set parameters for picking out specific stocks. These include price, volatility, market capitalization, sector, industry, and other factors. Portfolio trackers are designed to help you achieve your trading objectives. Experts state that portfolios should be checked at least once a month for short/medium-term investments. If you’re working with long-term investments, it’s best to check your portfolio every three months.

What Are Some of the Benefits to Using a Stock Portfolio Tracker?

Among others, stock portfolio trackers are particularly useful in terms of assessing multiple components of your portfolio simultaneously. You can easily determine the composition of your portfolio. These trackers also show snapshots of transaction statements at a specific point. Whenever you buy or sell stocks, all of the profit or loss statements come into play. A portfolio tracker is pretty useful in this regard.

 Over the years, several notable portfolio trackers have made the headlines. The best stock portfolio trackers include the likes of Yahoo! Finance Portfolio Tracker, the SigFig Portfolio Tracker, StocksToTrade Portfolio Tracker, the Morningstar Portfolio Manager, and the Personal Capital system. Each system certainly has its merits, although some are much better than others. Before you rush to sign up with a premium (pay to use) portfolio tracker service, it is a good idea to sample the performance of these trackers with free accounts.

Nowadays, the best stock portfolio trackers offer additional benefits such as charts, graphs, technical analysis, live news, financial reports, et cetera. Some portfolio trackers even offer direct access to social media such as Twitter feeds, and Securities and Exchange Commission filings. These are particularly useful since you don’t need to search elsewhere on different tabs, browsers, or computers for relevant information.

As a trader, or an investor, your budget is sacrosanct. It is absolutely imperative that you track your budget in real-time to avoid any shortcomings that may occur. If you burn through your bankroll, you’re out of the game. This type of software keeps your eyes on the prize, so that you know exactly where you stand at any given time. By keeping a running record of all your investments, particularly the bad ones, you don’t need to hold onto poorly performing stocks. With portfolio trackers, you will see exactly which stocks are failing, and you will be able to divest them.

With that said, you can confidently make intelligent trading and investing decisions with powerful portfolio trackers as part of your overall trading repertoire.

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Technology has found its way into various markets and altered how these markets operate. The stock industry has changed considerably, thanks to technological advancements. Trading platforms are different from what they were ten years ago. Technology has introduced high levels of trading efficiency, even in the forex market.

Such innovations have seen the foreign exchange daily volume reach almost $6 billion. Tech has also significantly enhanced efficiency in cfd and etf trading platforms. If the tech aspect were eliminated, these markets would encounter considerable losses. Here are some of the crucial ways that technology impacts the everyday operations of the stock market.

Gaining Stock-Related Data

By 2020, nearly 55% of United States residents have stock market investments. These investors have access to data regarding stocks and relevant firms. With the internet, it is easy to obtain existing stock prices and earnings reports from the companies.

Financial consultants can explain to their clients the current market development. On the other hand, firms can monitor real-time stock performance. The outcome of this almost instant data is more enlightened consultants, traders, and investors.

Trade Execution

Computer systems quickly note purchase and sale orders. Investors can almost instantly determine vital details, such as their price. There are also fewer errors when dealing with online trading transactions.

The verification process that seeks to confirm the transactions is still instated. However, instead of the typical three days, online trades usually finish this process within seconds. 

High-Frequency Trading (HFT)

Technology has introduced HFT to the world of stock trading. Traders can now conduct their trades using computers for a short period. When compared to thirty years ago, stock trading is now faster and more efficient.

The most apparent tech impact in the stock market is the increase in the number of traders trading every day. Those who prefer day-to-day trade can open and close numerous trades throughout the day. Day trading has become a widespread practice that is adopted by both individuals and large corporations.

It implies that the contemporary stock market has numerous high-volume trades transacted at high speeds. There are intense market dynamics that have emerged from this practice. Today, it is normal to find a vibrant market that has resulted from high-frequency trading.

Use of Trading Apps

Several trading apps have emerged in the stock market. The invention of these trading apps has simplified how traders access the stock market. Such tech-driven provisions have significantly fewer overheads leading to a considerable fee reduction. Traders and investors are continually looking for ways to lower their general turnover.

Investors can trade their preferred amount with the existing decrease in fees. These trading apps can be accessed through smartphones, which implies that traders can carry on with their activities at their convenience. Consequently, there are fewer restrictions when it comes to stock trading.

With fewer limitations comes more opportunities to change the stock trading process. For example, you may discover several sites that offer free trading. You can use a demo account to know the fundamentals of stock trading. This is good practice before involving real money in a trade.

The post How Technology Has Impacted the Stock Market appeared first on MoneyMiniBlog.

Given that every stock trader is used to looking at the same sales figures and gross domestic product, it is always helpful to find new ways to predict a company’s earnings or the growth rate of a national economy. For stock traders, fluctuations in exchange rates can mean the difference between a profitable and a losing quarter, while for foreign exchange traders, stock movements can help determine whether market participants are willing or averse to risk.

With this information, traders and investors can better understand the close relationship between the two markets, as well as gain the added advantage of predicting market direction.

Impact of Currencies on Stocks

There are many ways in which currencies can influence stocks. For multinationals, currency fluctuations can increase or decrease foreign income. For importers and exporters, exchange rates can affect profitability and sales. Let’s see how this relationship works.

Relative Competitiveness

According to TradingView, fluctuations in exchange rates can mean a better or worse position than competitors in the industry. Take, for example, the American aircraft manufacturer Boeing and the French Airbus. They clearly sensed a yield divergence in 2006-2007, when the euro appreciated 20% against the dollar. Boeing saw a sharp increase in orders.

There was a noticeable change in the interest of foreign buyers as soon as the euro rose from 1.18 to 1.42. On the other hand, its European competitor Airbus has been hit hard by the strengthening of the single currency. In the third quarter of 2007, it was announced that Airbus would cut 10,000 jobs and accelerate the production of the new aircraft to fully offset its $810 million loss.

Importers Versus Exporters

Strengthening or weakening currencies can also mean the difference between the performance of one sector of the economy over another. For example, when the dollar weakens, companies, which import most of their products, perform weaker than companies like Boeing, which sell large quantities of their products overseas.

International Business

For multinationals, doing business overseas can be both a plus and a minus. If the national currency weakens, then this increases foreign income, if the currency strengthens, then foreign income decreases. The period from 2002 to 2007 was marked by a weakening of the US dollar. If you take McDonald’s, for example, it is clear that it benefited from this weakening dollar in the form of increased foreign earnings.

At the same time weakening currency can affect bonuses that various brokers offer to their clients. For instance, XM no deposit bonus which is mainly directed towards new customers at some point can include less bonus depending on the currency.

In 2007, UK advertising company Aegis PLC posted an 18% drop in profits in the first half of the year due to unfavorable exchange rate movements. The US dollar fell 10% against the British pound in the first six months of 2007, while the euro fell 1.8%. This negatively affected the profit margins of US and European sales. Companies from Europe, the United Kingdom and even Canada have felt the blow from the lower dollar as the value of contracts with American partners in local currency declined significantly.

Mergers and Acquisitions

Sharp fluctuations in foreign exchange rates can also lead to an increase in international mergers and acquisitions of companies. When the Canadian dollar hit a 31-year high in 2007, Canadian companies experienced a buying boom. It’s not hard to guess why this happened, given that the Canadian currency rose 62% from 2002 to 2007. This appreciation boosted the market capitalization of Canada’s third-largest bank, Toronto-Dominion Bank, to $52 billion, allowing it to buy the US bank, Commerce Bancorp, for $8.5 billion. The deal was paid for 75% in shares and 25% in cash. If a Canadian bank had decided to buy six months earlier, when the USD/CAD rate was trading at 1.16, it would have cost it $1.3 billion more.

Canadian banks in 2007 made or announced billions of dollars in foreign takeovers. Currency fluctuations have clearly impacted international mergers and acquisitions, and this trend is very common – when companies in countries with significantly higher currencies spend their unexpected wealth in this way.

Impact of Stocks on Currencies

The strongest relationships that have been observed between stocks and currencies were between “carry trades” and the Dow. In 2007, many currency pairs could be classified as “carry trade” transactions. The most popular ones are the New Zealand and Australian dollars against the Japanese yen. With extremely low-interest rates of 50 basis points in 2007, the yen has become an extremely cheap financing instrument, not only for investments in higher-yielding currencies but also for investments in equities.

When a stock index rises actively, it usually reflects the growing willingness of traders and investors to take risks. Countries offering higher interest rates tend to have a higher risk or lower sovereign debt ratings. This is why both the Dow and carry trades are indicators of risk. Of course, this relationship is not absolute, but in general, when there is a sharp rise in the Dow, carry trades tend to rise, reflecting the growing appetite for risk. When the Dow falls, carry trades — cross-rates against the Japanese yen — are subject to a massive close, reflecting increasing risk aversion by investors.

Of course, carry trades can deviate from the stock market dynamics in short-term periods, so traders should not necessarily expect that if the Dow rises, then carry trades will also rise. However, the chart above shows that carry trades and equities have a very strong correlation in the medium term. The reason why this is happening is that, at their core, carry trades are essentially a constant hunt for returns by global investors. When carry trades work well, it creates additional profits not only in the form of higher yields but sometimes also in the form of substantial capital gains. This additional profit creates a massive amount of capital that tends to generate more speculative gains and often spills over to the stock market.

On the other hand, strong growth in the stock market attracts even more participants to the market. To maximize the impact, many international investors, especially hedge funds, borrow in low-yielding currencies like the Japanese yen and Swiss franc to leverage their investments in US equities.

Final Words

Ultimately, movements in the foreign exchange markets will and will continue to influence companies’ performance in the future. The importance of these relationships continues to grow as companies look to global markets and competitors and expand their reach. As a result, sales and production efficiency are exposed to foreign exchange risks. Therefore, given that all participants in the stock market look at the same things, it is worth taking a broader look and taking into account movements in the foreign exchange market as a harbinger of future income. Ultimately, this can give the average investor an added edge in the market.

The post How Stock Markets Affect the Forex Market and Vice Versa appeared first on MoneyMiniBlog.

The COVID-19 pandemic has affected so many different parts of life and society in general. Obviously, there has been a major impact for people who are dependent on regular work in a number of different industries and fields.

The COVID-19 pandemic forced a number of states to shut down for weeks or even months on a financial level. Non-essential workers legally had to stay home rather than going to the office, and while as many as possible attempted to keep employees working at home, this wasn’t always possible.

While some industries were able to rebound to an extent, there is still a great deal of economic stress within the country. Furthermore, COVID-19 very much is still an issue within the United States and beyond. Many states are beginning to see spikes in their infection rates, and this has resulted in a lot of people becoming worried about whether or not there is a potential for a major second wave.

A second wave could result in states shutting down again, and of course further restriction on international travel. With that being said, what is the economic future within this crisis? Much of that remains to be seen, but to a certain extent, the condition of the stock market following the beginning of the first wave is quite indicative of what a second wave would look like. Of course, there are many who would argue that the United States, in particular, is still in the midst of its first wave.

It was inevitable that COVID-19 would have an effect on the stock market. The fact that the president of the United States contracted the virus in itself had an effect on the stock market. But it’s important for Americans, especially those who may be interested in investing their money in the future, to consider the impact of the pandemic on the stock market.

The Internal Struggle: Financial Health Versus Physical Health

The act of shutting down a state’s economy, essentially, has a major impact on the residents of that state personally and financially. As previously mentioned, many people did lose their jobs temporarily or permanently following these shutdowns. This can be proven through the fact that unemployment rates have risen from 3.5% to 11.1% since March 2020, with a real rate of 18%. Obviously, people becoming unemployed due to the pandemic directly has something of a domino effect.

Let’s use the restaurant industry as an example. Restaurants were almost immediately shut down on a dine-in level, as there was a lot of understandable concern regarding the rate of potential infection within the closely packed quarters of a restaurant. While some were still able to maintain business through takeout and delivery, the income of many restaurants was greatly diminished, and for that matter, though some servers were able to work takeout and delivery services, many were not. This meant that servers were out of work and on a greatly reduced income, with many surviving on unemployment benefits. When people lack regular work and are living off of unemployment, they simply don’t have the money to spend on luxury goods, “wants versus needs”. This puts stress on companies that produce and sell such goods, and they, in turn, must lay off employees.

A big reason why many were upset about the shutdowns that were made in response to the pandemic is that the economic toll was so high. Millions of Americans have been left without jobs and consistent incomes. This means that ultimately a lot of them are dealing with potential poverty in a way that they haven’t before, and the American economy is at great risk.

Of course, the argument would be that if the economy fully reopens too quickly, there will be a spread of the virus that results in real debilitation and death. The COVID-19 virus does spread quite quickly; several sports teams have reported high rates of infection since attempting to work together again. For that matter, the fact that the spikes in infection have occurred after the school year restarted and many schools return to full session seems indicative of how easily the virus is transmitted.

Recovering: How Can The Economy Become Strong Again?

The fact is that some aspects of the economy and the stock market won’t simply bounce back, and this has been proven by the fact that even after many states have reopened their economies fully, unemployment rates are still quite high. This is because companies can’t immediately bring back everyone that they furloughed, even if they want to.

Furthermore, there is a real issue that comes with people being concerned over public health. As consumers watch infection rates spike again, they may become scared of going to restaurants, even if they’re allowed to. Theme parks that were major job providers, like Disney World and Disney Land, are either unable to reopen or flagging in the face of people being unable or unwilling to spend money on expensive luxuries that may present a health risk.

Some industries, like the travel and hospital industries, will likely be permanently affected by the pandemic. Though they may move back into action eventually, they will likely need to scale down and follow different guidelines. Furthermore, a number of different industries are now seeing the financial benefits of keeping employees that can work from home in their home offices. This means that the demand for commercial real estate may gradually fall. While stocks typically do begin to rise again three to six months before an economic recovery, the nature of the virus has made it difficult to predict what will happen next. Ensuring that the American economy recovers may be a matter of changing your mind about how the economy can best work for you.

The stock market can benefit from the fact that a lot of people are investing in stocks that are weaker right now, like those around the hospitality industry. But it is too early to know what these investments might yield. With that being said, hopefully, the economy will recover more once an effective vaccine is made and distributed.

The post How Has COVID-19 Impacted The American Economy? appeared first on MoneyMiniBlog.

Mr. Market is a concept first introduced by Benjamin Graham in his book, The Intelligent Investor, in chapter 8. Graham is known as the father of “value investing.” He is also famous for being a mentor to Warren Buffett. Graham is an important person in the investing world—especially for beginners—as his ideas establish a specific mindset.

Most of the time, the price of a stock is accurate to its objective value. But sometimes prices are not right; they are indeed wrong. Mr.Market does not always price stocks in a way an appraiser or a private buyer would value a business. Instead, when a stock is going up, he happily pays more than their objective value and when they are going down he is desperate to dump them for less than their future true worth.

The most prominent example of this is the tech bubble. The valuation of many companies went from nothing to billions. Some of these companies had never earned a dollar. In many cases, the revenue simply wasn’t there yet.

A great example is Microsoft, one of the highest valued companies in the world . The average revenue growth given by the company from 1990 to 2019 was approximately 14% CAGR (compound annual growth rate). During the euphoric period of the Dotcom Bubble, the revenue was approximately $22 – $25 billion, but the market cap went to $600 billion. The valuation of almost all the internet companies was insane. Mr. Market was happy to buy Microsoft stock at any price whatsoever. The stock went down 50% in 3 years (2000-2003), because the Dotcom Bubble burst. It took 14 – 15 years for Microsoft stock to break even, but sales were growing on a year-over-year basis

Would you be willing to allow a certifiable lunatic to come by at least five times a week to tell you that you should feel exactly the way he feels? Would you ever agree to be euphoric just because he is miserable, just because he thinks you should be? Of course not. You’d insist on your right to take control of your own. But when it comes to financial lives, Mr. Market tells you how to feel and what to feel despite the obvious facts, from time to time, it can get nuttier than Charles Manson.

Mr. Market’s only job is to provide you with prices; it’s our job is to decide whether or not to take advantage of it or to act on the prices. We do not have to trade with him just because he constantly begs us to.

By refusing to let Mr. Market be your master, you transform him into your servant.

One of Graham’s most powerful insights is this:

Basic advantage means the investor has the luxury of being able to think for him or herself, not to follow Mr. Market blindly. When asked what keeps most individuals from succeeding, Graham had a concise answer:

If we own a house, other real estate properties, or farmland, do we call our broker every two hours to find a quote on it? Of course not. But in the case of the stock market, where we can check the quote every minute, we tend to do so. Does the value of a company really change in an hour? No. Do the company’s sales change? Not much in an hour. Does its profit change? Not really. SO why do we drive ourselves mad by checking our stocks every hour?

The stock market is a long term game. Do people, in general, flip real estate daily? Then why on earth do people think they can flip stocks or trade constantly? Shares are just small pieces of business ownership; it’s the most important thing to understand for a investor. Short-term news may affect the short-term price, but company growth and valuation always create the long-term price of a stock.

One of the present examples of the insanity of Mr. Market: There’s a company listed on NYSE call Service Corporation International and they are in the business of providing funeral goods and services, as well as cemetery property and services. The business has a huge moat. But due to the coronavirus crash, with practically all other stocks, Service Corporation International also went down. This makes no sense from a logical standpoint. If COVID-19 was supposedly going to kill a huge number of people, the stock should have gone up. This is simply an example of Mr. Market’s insanity.

One of the ways to make big money in the market is to overcome the psychological effects on the brain which Mr. Market tends to instill. One of the ways to neutralize psychological effects is to consider profit and losses. Pay less attention to the news and current events when it comes to stocks. Because psychological studies show that the pain of a financial loss is more than twice as intense as the pleasure of an equivalent gain. And we have to think long-term when it comes to the stock market.

About the Author:
Sahil writes more investing articles over at Financial Wizard India.

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