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Stock Market Research

Why is Stock Market Research Important?

Stock Research is important part of the Technical Analysis of the stock or Fundamental Analysis of the Stock depending on what type of market research you are involved in. The Stock Research has to be done to predict the future trends of the stock, to built market timing system or asses the real value condition of the company.

Market Stock Research General:

Before starting your market research company , determine whether the company is publicly held (traded on a stock exchange), privately owned, or a subsidiary of a publicly held organization. You will be much more successful in obtaining information on publicly held companies. Public companies must report certain financial information to the Securities and Exchange Commission (SEC) and their shareholders. Also, serious investors use the Internet to research potential stock purchases or monitor companies in their portfolios. As a result, the Internet provides much more information on public corporations than on private companies.

The first step in “research stock” is to identify the stock exchange ticker symbol for the company of interest. It can be found at

After finding a ticket symbol for the company you should know on what Exchange stock is trading, to what industrial group (ETF) it belongs is an important part of company research. The according Exchange Research and Index Research (ETF) have to be done as well.

When you are doing stock research (company research) you should consider what price and volume movement did your stock experience in the past two months, or three months, or six months, or YTD (year to date) and up to 10 years? Understanding price and volume movement is one of many concepts that will enable you to hold on to your equities (stocks or stock mutual funds), long term.

Some Tips of the Stock Research Company:

There are some some of the facts to look at to properly evaluate your stock to do your Stock Analysis?

  • Price to Earnings Ratio
  • Does the company have earnings?
  • Increasing revenues and profits yearly?
  • Stock split history?
  • Is the company paying dividends?
  • Future plans of the company
  • Past and Current news on the company?
  • Company graph of price and volume over time
    The company ranking in its industry

Five Steps of Market Research

Market Research can be divided in several separate steps.

  • First of all you have to get the basic knowledge about market, exchanges, stocks, indexes, ETF, shares, options, futures etc.
  • Second step of market research demands you to define a subject of research, your target. During this period you have to answer on the following questions: what type of trader you are and what you are trading.
  • On the third step of Market research you have to define relationships. If you are trading on the stock market, you should know to what industrial group ( ETF ) this stock belongs, on what exchange it is traded etc. Other words doing stock research you have to support it with according index and exchange researches too.
  • The forth step is one where you are collecting information such as historical price and volume, etc. Real time quotes of price and volume, real time charts are always the most important part of any type of market research ether it stock research, stock market option research, research index or trend research.
  • The last step demands you to analyze all data gathered during your market research and make conclusion either it prediction of trend movement or assessing real value of company ( stock ).
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Stock Market Charts for Technical Analysis

Real Time Charting – How Important is it in Market Timing?

Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The Stock Market Charting already knows the news is coming. For a real stock Technical Analysis make sure to get real-time stock charts if you trade often. The stock market charts should automatically update themselves. You should also be able to see bar charting that show at least two-minute intraday price action.

What is Stock Market Charts?

A Stock Market Chart is a sequence of prices or volumes plotted over a specific timeframe. In statistical terms, stock charts are referred to as time series plots. An investor who plots information about share prices and trading volumes on a stock chart, looking for patterns is a Chartist.

Investors, technical analysts and chartists use stock market charting to analyze and forecast future price movements. Any security with price data or volume data over a period of time can be represented by a stock chart for analysis.

While technical analysts use real time stock chart almost exclusively, the use of stock market chart is not limited to just technical analysis. Because stock chart provide an easy-to-read graphical representation of a security’s price and volume movement over a specific period of time, they can also be of great benefit to fundamental analysts.

Investors, technical analysts and chartists use stock Market chart to analyze and forecast future price movements. Any security with price data or volume data over a period of time can be represented by a stock chart for analysis.

Be aware of using free real time charting; try to understand why some of the providers support you with free charting tools and who pays them for it.

What should you ask before using a Stock market Charting tools for your Market Timing System?

Be sure that the chosen by you charts for the technical analysis are in accordance with the questions below. Otherwise a provider that gives you those charts is running behind the time. The modern hardware and software resources allow to satisfy all of them:

  • Does the chosen stock market chart work in real time or with some delay?
  • Does the stock charts update automatically themselves or you have to refresh it each time?
  • What is the minimum and maximum time scale of your stock chart, does it has intraday timeframe? One-minute intraday chart must be available and it would be nice to have at list one-year scale.
  • Does the historical stock chart available and how far can you scroll?
  • Can you see the volume on real time stock chart together with price?
  • Does the stock chart have moving average of price and volume moving average?
  • Does the percentage view of price is available on your stock charting?
  • Can you zoom in and zoom out in time?
  • Can you easy navigate the stock chart? Does it have navigation lines? when you move cursor does it trace values of Open Price, High Price, Low Price, Close Price and Volume?
    Is an alert system available on your stock chart? Is it sound or email alert?
  • How many stock market charts can you open at the same time?
  • Can you print your stock chart for analysis?
  • Does the chart demand an upgrade your hardware or software?
  • Can you access your stock market chart from anywhere where the Internet is available or you can do it only from your working computer?
  • Is it easy to use this stock chart? Does the provider of chart support you with chart school, chart help or some kind of other information how to use it?
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Technical Analysis Tips

The professional investor looks at the same stocks and only buys when there is a SALE going on. He doesn’t care about analysts or market hype. So when everyone has given up and sold, he is buying. After a month or two the stock rebounds and Wall Street loves the stock again. Analysts hope on board and upgrade the stock to a strong buy, raising estimates and new fools come in and buy the stock at the all time high. The professional investor then dumps his stock and looks to find the next stock that is at a bargain price.

  • Technical Stock Analysis doesn’t look at income statements, balance sheets, company policies, or anything fundamental about the company. Instead it looks at the actual history of trading and price in a security or index.
     
  • Every technical analyst knows the importance of charts and indicators. But if these were all it took to make profitable trading decisions, everyone would be a winner.
     
  • With most indicators it is possible to detect buy and sell levels. The sport is to detect them before everybody else.
     
  • Analyze market data in real time. Plan your own Market Timing strategy to make money, regardless of upward or downward trending markets.
     
  • Every technical analyst knows the importance of charts and indicators.
     
  • Study charts often (daily if possible).
     
  • Minute-by-minute trading volume shows the reversal points of the market, and therefore when to buy and sell!
     
  • “The trend is your friend” is the motto of technical analysis
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Stock Market Timing

Market timing is any attempt to use past prices and other market-generated data to accurately forecast or prophesy future prices of securities or indexes, whether long-term or intra-day, consistently and persistently. It is based on various economic or stock market indicators, for deciding when to buy or sell securities. Other words Market timing recommendations are based on a Technical analysis of market data.

Timing Includes asset allocation, technical analysis, charting, momentum investing, and quantitative analysis using neural networks, genetic algorithms, artificial intelligence (AI), fuzzy logic, chaos theory or other non-linear techniques. Precisely because market prices are efficient integrators and anticipators of information relevant to security valuation, they also serve as high-quality inputs for reliable market timing models.

“Market timing has shown itself to be futile in every study ever conducted. The idea of market timing and the reality are night and day. The idea is very compelling. It presupposes you can be on the sidelines when the market goes down and in when it goes up. If you could do that you’d be richer than Warren Buffett. The reality is it leaves most people in the market when it’s going down and not in when it’s going up.”

Forecasting asset prices is a problem that has fascinated investors since the very advent of financial markets. Accurate predictions of the market movements imply fast and substantial capital gains. Attempts to forecast stock prices are numerous.

Timingstrategy provides investors with the opportunity to avoid major market price declines at the same time many argue that using any market-timing tool is a waste of time.

Every investor has his own market timing theory when it comes to making money in the stock market. Many technicians attempt to improve their performance by timing the market and adjusting their portfolio according to predictions about the market or specific sectors. Obviously, if investors can avoid weak periods in the market and participate in the strong, they can also experience superior returns over a buy-and-hold strategy. What is surprising is that studies show that investors can still outperform a buy-and-hold strategy, even if they don’t participate in the strongest times – as long as they escape major market declines.

Very often market timing sounds fine in theory but it seldom works in practice.

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Why to trade Indexes

Advantages of Trading Index Securities: 

  • Less Capital Investment: You won’t need to purchase a mutual fund or an assemblage of stocks to get the performance of an index. You can buy the index directly and as easily as a stock, with low commissions, and no need to worry about load!
     
  • Less Volatility: By their nature the indexes are much less volatile than the stocks they represent, as they are an ‘average’ of many stocks. Therefore one doesn’t need to worry about the news and fluctuations of many individual stocks.
     
  • Many Derivatives: When trading an index, you not only get the ability to trade index shares ( SPDRsQQQQDiamonds) but you can also trade index options and index futures. Index options and futures carry far more risk, and of course more gain, but are not as volatile as an individual stock.

Index Share Highlights:

  • An entire portfolio of stocks in a single transaction
  • Long-term investments
  • Buying or selling throughout the trading day
  • Lower costs for investor affordability
  • Margin eligibility
  • Opportunity for dividends
  • Tax efficiencies
  • Ease and convenience
  • Simplify market timing
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ETFs – All about Index Shares

SPDRs, DIAMONDS , QQQQ or WEBS. Whatever you want to call them, they are grabbing an increasing share of interest and resources from sophisticated investors. The first index shares created by Amex were SPDRs, or Standard & Poor’s Depository Receipts.

Separate SPDRs were created for the S&P 500 and the S&P Mid-Cap 400. Trading in S&P 500 SPDRs was introduced in 1993, and the S&P Mid-Cap 400 began in 1995. Seventeen World Equity Benchmark Shares (WEBS) began trading a fixed basket of country securities in 1996. DIAMONDS, an index product based on the Dow Jones Industrial Average, began trading in early 1998.

Once created, the depository receipts trade just like common shares of stock. They can be traded in round or odd lots, and trade between the hours of 9:30 a.m. and 4:15 p.m. They pay dividends, but unlike stocks, can be shorted on downticks, which enhances liquidity.

The annual expenses on SPDRs are lower than expenses on most mutual funds, and the index shares are more tax-efficient. They appeal to short sellers because they can be shorted in falling markets when downticks occur, which can’t be done with individual stocks. They are highly liquid, and can be traded intra-day when sharp movements can occur, rather than only at the end-of-the-day price provided for mutual funds.

ETFs (also called index shares) track a specific basket of securities and trade continuously on the major exchanges like an ordinary stock. The pioneering big daddy of ETFs was the Standard & Poor’s Depositary Receipts (AMEX: SPY) — also known as SPDRs, pronounced “Spiders” — which appeared in 1993. These were followed by the Dow Diamonds (AMEX: DIA), a basket of the 30 Dow stocks, and the Nasdaq 100 Shares (AMEX: QQQQ) — a.k.a. Qubes — which track the Nasdaq 100 stock index. Even though they’ve only been around since March 1999, Qubes are so popular, their daily trading volume rivals the companies on the New York Stock Exchange. (Today, only three companies on the Big Board traded more briskly.)

Another advantage is that ETFs can be shorted and bought on margin. We don’t think that borrowing money to buy stocks is a smart way to invest, although in limited amounts by experienced investors it can be useful.

Perhaps the greatest benefit of ETFs is that they bring investors instant exposure to a diversified portfolio of stocks.

For many investors with a long-term vision who can embrace the benefits of ETFs without falling into the trading traps that accompany it, investing through ETFs can be quite rewarding to the pocketbook, and a superior alternative to mutual funds.

By trading the index, you eliminate concerns about picking the right company, balancing industry weightings, or incurring the cost of trading individual stocks. Best of all, you eliminate the traditional bias to the upside, so you can profit from both bull as well as bear markets.

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Common Stocks

Common stocks represent a degree of ownership in the corporation. They may vote on questions affecting the corporation in proportion to the number of shares held. Common shareholders have rights to elect the directors of the corporation. However, some common stocks have limited voting rights, or no voting rights at all.

No matter which type of common shares is owned, the investor may still profit from an increase in stock prices or through dividends. Most stock traders are based on the expectation that the purchased stock will rise in price, and the investor’s profit will be the difference between price paid and price sold.

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Preferred Stocks

Preferred stocks are more like a fixed investment in a corporation, rather than an equity interest. They have a started rate of dividend, which is payable only if the corporation’s finances permit.

Owner of preferred shares receive a fixed dividend (not always guaranteed).  They do not have voting rights at annual meetings or on company matters. If the company is wound up preferred shareholders have a claim, up to a fixed amount, over assets after creditors (including holders of bonds) have been paid. This claim takes precedence over those of common shareholders.

Most traded preferred stocks are cumulative. When the dividend is not paid it accumulates and must be paid in full before payment of dividends to holders of common shares. If a preferred share is non-cumulative, omitted dividend do not have to be paid. Dividend payments do not guaranteed.

There are other types of preferred shares:

  • Retractable Shares
  • Participating Shares
  • Variable Rates Shares
  • Redeemable Shares
  • Convertible Shares
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Stock Overview

Securities can be divided into two basic groups:

  • Stocks (shares) – represent a degree of ownership.
  • Bonds – represent debt obligation of the issuers of the bonds.

There are two main type of stocks:

  • Common shares
  • Preferred shares

“Stock Certificates” are the paper representation of en equity ownership interest in an incorporated company.

  • Private Corporation – the stock is usually owned by a small group of person and is not traded with members of the public.
  • Public Corporation – the stock is usually available for sale to the general public, via a stock exchange or the over-counter-market.

All corporations are authorized to issue stock (shares) and may be also authorized to issue debt-type securities, such as bond.

Authorized stock (capital stock) is the maximum number of shares the corporation may issue or sell. Any authorized stock that was not sold is commonly referred to as unused stock, or treasury stock. Issued stock is authorized stock that has been sold to an individual person or other corporation. Individuals who buy shares of stock are known as shareholders.

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Over-the-counter Markets (OTC Markets)

The shares of publicly traded companies that are not listed on a stock exchange may still be traded on an OTC market. An over-the-counter stock market is a network of brokers and dealers that trade stocks and bonds that are not listed on an Exchange. Sometimes companies prefer to be listed on an OTC market instead of listing on a stock exchange. There are some of the reasons why:

  • unwillingness to abide by the information disclosure rules of an exchange
  • low volume of share trading
  • low investor interest
  • inability to meet the listing requirements of an exchange

The OTC market ha s role to play in the primary market. Many new stock issues are sold over-the-counter initially. Large block of outstanding shares offered for a sale by a single investor, whether listed on an exchange or not, are sometimes sold in the OTC stock market.

The disclosure standards for the OTC market are not as stringent as those imposed by a stock exchange. Corporation whose shares are listed on an exchange are generally not allowed to list or trade on the OTC market and vise versa.