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Gold or the Stock Market? Where to Invest?

Gold is set to become more popular than the stock market for many investors. The recent stock market rally which began in March 2009 will shortly be seen for what it was – a rally in a bear market. But many are holding back, uncertain if gold really is the answer. After all, it is a commodity, and commodities, including gold, have suffered in the recession more than stocks. So where to invest – gold or the stock market?

It was the failure of the banking sector in the US and Europe that started the recession. The bail-outs by western governments, borrowing astronomical amounts of money from who-knows-where, euphemistically referred to as “the taxpayer”, made matters worse by way of triggering the crash in stock prices.

Gold, on the other hand, relished this situation, and rose to nearly $1,000 an ounce for a while. But then came the rally, which dampened gold down to the $910-$940 range. That’s the thing about gold – it does well when stocks are depressed but less well when stocks are rising.

On the other hand, gold is a commodity like any other commodity, and commodity prices, like most other prices, have tended to stay depressed since the start of the recession. So we have to consider whether gold can be differentiated from other commodities in the present situation.

The obvious difference between gold and other commodities is that gold is not just a commodity – it’s also a perceived store of value. Other precious metals like silver and platinum are also used as investment vehicles, but gold is the most popular, against which currencies are measured.

Currencies have in nearly every country declined steadily over the last hundred years or so. Inflation may not be the beast it was in the 1970s, but it’s still there, and it always has been since modern banking and finance evolved. Now we have a situation where both the US and the UK governments have borrowed billions to bail out the banks, and engaged in “quantitative easing”, i.e. money creation, in order to try and spend-borrow their way out of the recession.

What is this going to do to the price of gold? Gold is scarce, which is one of the reasons that it is perceived as valuable. Nearly all the gold currently mined goes into industrial uses and personal ornamentation. Very little is added to the coffers of national exchequers.

The price of gold therefore has to rise from its present level. Most other things will also rise in price over the forthcoming months and years as the increased money, with no increase in production to justify it, comes into circulation. With all the stock trading charts showing depressed prices, and inflation reborn, gold, the traditional refuge of capital in times of uncertainty, will most likely at least double in value over the next few years.

In summary, gold will almost certainly out-perform the indices of the world’s stock markets in the short to medium term future. As you’ve seen from our home page, we made 70 per cent on gold recently in less than a week. Make sure you get your free mp3 interview with Vince Stanzione, Secrets of Successful Trading.

Philip Gegan

Stock Trading Charts – 5 Secrets to Profiting from them

Stock trading charts are used all the time by traders, but few know how to get the most out of them. Here are five tips on how to use them properly.

1. Don’t skip on research – use charts for confirmation only

Few traders can look at a chart and tell what’s going to happen next. The rest of us have to work at it. And often the price of a stock can take off in either direction at any time, regardless of recent history.

Using a chart without researching the stock you’re considering is dangerous. Even traders who use charts extensively have their ear to the ground to keep informed of developments affecting the price of stocks they have a stake in. Learn everything you can about the stock you’re interested in trading.

Research the company, what it produces, what its main markets are, what problems it is facing, and what projects it has in the pipeline. This isn’t too difficult as most of this can be found online. Once you’ve discovered stock that is under or over valued then consult the chart.

2. Interpreting chart patterns

If you see a pattern make sure it isn’t just in your imagination. Don’t try and see any that aren’t there. If there is one it should jump off the page at you. The main pattern to look for is a trend – higher lows or lower highs. If you can find just one or two established trends each week that you profit from then you’ll do well.

Other patterns include the “head and shoulders”, the “double top” and the “double bottom”. If you see either of the first two on a recent chart then there’s a strong probability that the current movement is generally downwards. The “double bottom” indicates that the price has probably reached as low as it’s likely to go prior to moving up again.

3. Establishing resistance and support levels

These are imaginary lines on stock trading charts indicating where the price cannot seem to rise any higher or fall any further. They aren’t necessarily horizontal – sometimes they can be shown to slant up or down. If the price is moving rapidly towards such a line it will probably breach it and move into a new trading range. Often the line breached becomes the opposite of what it was, i.e. resistance becomes the new support, or support becomes the new resistance.

If the price is moving slowly towards such a line it’s a sign that the price will probably not move much further in that direction and is more likely to reverse.

4. Deciding on your stop loss and profit taking levels

This is where a chart really is essential. If your stock market graph shows a clear trading range outside of which the price rarely goes, then you can set your stop loss and profit taking levels with confidence. This works with medium to long term trading only, where you have sufficient capital to afford sufficient stop loss levels. It can’t be relied on in day trading, where stop loss margins are necessarily narrow and quick profits are sought.

5. Accept your charts’ limitations

If you accept that charts don’t provide a fail-safe way to see into the future, but are simply an aid to making trading decisions, then you will avoid making many of the mistakes that unsuccessful traders make. Those mistakes are usually caused by greed and fear, the two primary factors fuelling price movements in the stock market.

In short, stock trading charts are a priceless asset to any successful financial trader provided you know how to use them and don’t substitute them for doing your homework.

Get started with your financial trading career now. Just go to our home page and complete the form for your free mp3 interview with Vince Stanzione, Secrets of Successful Trading.

Philip Gegan

On Line Stock Trading – 7 Ways to an Unfair Advantage

On line stock trading is now one of the most popular ways for people to make money on the internet. But the stock market does not generate wealth – all it does is redistribute it. Around 90 per cent of traders, mostly newcomers, end up transferring their money to the other 10 per cent. So how can you avoid being one of the 90 per cent and become one of the 10 per cent?

Probably the most important thing for you, as a new trader, to realise is that making as much money as possible in as short a time as possible is not the objective. If that is your aim you’ll probably fail. It’s far more important to develop a successful trading strategy, even if you only trade in tiny amounts until you’re satisfied that it works.

It’s very difficult to do this if you trade over the short term, for example as a day trader. Concentrate on the medium to long term. Most stocks move slowly. Only on rare occasions do they have rapid price movements. If you can learn to accept that and work on ways to leverage the price movements that do occur then you have another distinct advantage over all the others.

There are far more ways of trading than simply purchasing stocks and waiting for their prices to rise. What if there is a predominantly bear market? Suitable stocks would be very hard to find. Consider commodities, bonds, futures and options. Consider covered warrants and exchange traded funds. Learn as much as you can about all these financial instruments and how you can use them to make profits, even in a falling market.

Don’t be mesmerised, as so many are, by the charts and indicators that abound on stock brokers’ web sites and in various stock trading software packages. These have their uses, but you may come to consider them as simply control levers to assist the timing of a trade that you’ve selected on the basis of your own knowledge of what is going on in that market sector. It’s far more important to focus on one particular segment of the market and become familiar with everything that’s going on in it. Your charts can then be used to confirm your belief of what has been happening and what is most likely to happen in the near future.

Accept that you are probably never going to get in at the bottom and out at the top. This is another pitfall for the unwary newcomer. Don’t look at the stock market graph later and wish you had traded differently so as to have made the maximum profit from any particular price movement. None of us are blessed with second sight. You can only do your best, and if you can ride part of a price move, and do that with a majority of your trades, then you will be very successful.

Be aware that the market is driven by fear and greed. When something happens that injects fresh optimism into the market prices shoot up beyond what would have been the right level for the new circumstances. When everyone realises that, the prices drop sharply, but, again, beyond the point where they should be. There is then a reversal once more towards the “correct” level, and so on, until something else happens to affect the price. It’s the same, though in reverse, if a development causes panic and a rapid fall in prices. Once you realise that fact then you can avoid making many mistakes that you otherwise may have made.

Finally, the biggest unfair advantage you can give yourself in on line stock trading is to find a mentor who will teach you how to trade successfully. Make sure he trades successfully himself and doesn’t just make money selling trading information or courses to other people. This is absolutely vital. Once you’ve found such a mentor grab his coat-tails and don’t let go.

Find yours right now! Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan

How To Use A Stock Market Graph System

You can easily learn how to use a stock market graph to determine in which direction a particular financial market is likely to move. But if you seek regular, profitable trades (and who doesn’t?) it’s quite evident that graphs alone are not enough.

We know that higher highs and higher lows mean a bull market. But how do we know from the chart that the trend will continue? We can calculate the resistance level, but these can be and often are broken. What if it has already been breached and the chart shows no sign of the upward movement ending?

Are you going to invest your money on the basis that the bull market will continue? Or stand by and risk missing out on easy profits? Perhaps you’re a swing trader and decide to go short. At this point you’re probably going to turn to fundamentals (unless you are a die-hard technical analyst) for further guidance.

So what I’m saying is that there’s a problem with using charts and graphs alone, even allowing for all the indicators that go with them. Because what ought to happen seldom actually happens, or at best happens but at a different time from that indicated by your graph.

However, provided you use your charts and graphs strictly to supplement other stock market trading systems that are based on market information, or fundamental analysis, then your chances of success in any given trade increase dramatically.

Take the commodities market. If you know that production of aluminium, for example, has recently been reduced, and you also learn that a number of government-backed projects consuming large amounts of aluminium have been or are about to be announced, then it is fairly safe to say that the price of aluminium will be going up sharply in the near future as production facilities have to be re-opened and further investments made.

Going long in aluminium or the stock of a major aluminium producer in such a case gives you an excellent chance of profits. But in order to maximise those profits it is prudent to consult your graphs, or charts. It may be that aluminium is still near a 50 day high and hasn’t yet reacted fully to the news of production cut-backs. This is how you can use a stock market graph system to cover yourself against defective trades, or alternatively give you more confidence that your trade is a good one.

In summary, information is king, but in the financial markets it pays to check it against what your charts are telling you to ensure that not only have you taken the correct position but that also your timing is not too soon or too late. That’s what the most successful traders tend to do. And now you can follow one of them and trade your way to riches.

Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan

Discount Online Trading – Making A Success Of It

Discount online trading has become so popular that it almost dwarfs everything else on the financial markets. It has brought the concept of trading on the stock market to the masses.

And that’s actually the problem. We all know how it happened – computer technology, the internet, automation, and so on. But when you cause complex and potentially risky activities to fall within the grasp of the masses then the outcome is usually far from happy.

So instead of having a new class of successful, wealthy stock market traders and investors, using all the information available via the internet to make mostly successful trades with minimal brokerage fees, we have a new generation of online financial traders who are at best struggling to make any decent profits. Why should this be?

It’s not that there is insufficient information. The internet is awash with it, though regrettably much of it is misleading and sales oriented. The problem lies in finding reliable information and genuine help. Both of these commodities, generally speaking, were available before the internet and discount trading came along. The full service accounts that are still available (at a price) at most stock brokers, online and offline, provided help and advice for newcomers and old hands alike. The chances of successful trading were therefore much higher.

Now the average new trader finds himself alone and often confused, in a business that uses unfamiliar terms and practices, and in markets the behaviour of which seem strange and often illogical. To make things worse, he is often using more of his available capital than he should on each trade, and is finding that trading online can be addictive, risky and close to pure gambling.

In order to succeed in online trading whilst using discounted services you must disassociate yourself from the “herd mentality”. Most new traders see the opportunity presented to them not as a business but as the chance to get-rich-quick (or get-out-of-debt-quick). They’re encouraged in this attitude by the mass of sales pages selling information and software to do with trading the financial markets, especially forex, the graveyard of many hopes of online riches.

You, however, must see it strictly as a business with which to make regular profits. You won’t succeed with every trade you make, but you can take steps to ensure that you succeed in more than half and that every profitable trade more than wipes out the losses of several losing trades.

Investing in your online trading education is essential. But you have to discriminate in the type of information you act on. Learn where the most reliable information is. Experiment with demo accounts, where you can practise trading without risking real money. Take advantage of the discounted fees of your broker by investing in a reliable stock trading package such as Sharescope.

Finally, find a mentor – someone who actually trades the markets himself, rather than just sells information on how other people can do it. He will have been where you are and taken the hard knocks already. He can short-circuit the learning process for you, and you may even be able to simply copy his trades to start off with. The internet and your computer put the world at your fingertips, so make use of that power to succeed in your online trading career.

Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan