Tuesday, October 2, 2007

How to Invest In The Stock Market

The stock market is simply a term for the overall market or industry that is concerned with buying and selling company stock, both private and publicly traded securities. It is designed to allow companies to raise money by selling stocks or shares to individuals.

The stock market is the general name for the various different stock exchanges around the world. In Canada, the main stock market is the Toronto Stock Exchange. In the US, the New York Stock Exchange. In the UK, the London Stock Exchange.

The stock market is focused on the short term, and fluctuates wildly in response to company news and events, its single quarter's earnings, external economic events, even rumours.

The stock market is an indicator of investors’ beliefs about the state of the economy. Some experts say the stock market is actually a leading indicator of about six months.

One of the many things people always want to know about the stock market is, "How do I make money investing in the stock market?”

There are many different approaches to making money in the stock market. Two basic methods are classified as either fundamental analysis or technical analysis.

Fundamental analysis refers to analyzing companies by their financial statements, financial health, management and competitive advantages, competitors and markets, business performance and trends, and general economic conditions.

Technical analysis studies price actions in markets using charts and quantitative techniques to attempt to forecast future price trends regardless of the company's financial prospects. In its purest form, technical analysis considers only the actual price behaviour of the market or instrument, based on the premise that price reflects all relevant factors before an investor becomes aware of them through other channels.

Investing in the stock market can be difficult. There are those who say the stock market is unpredictable. Novice investors should always seek out help from fiscal advisors and stock market forecasters before investing with their cash. Investing in the stock market requires patience, time, knowledge, and experience.

Trading in the stock market using trend following, trend reversals, Elliott wave counts, Fibonacci ratios,and timing indicators works very well for my trades. Trade the trend, short term or long term, until a trend reversal shows up.

The extent or duration of the new trend, the potential profit in trading with the trend, and the occurrence or timing of the next trend reversal are somewhat unpredictable. However, trend reversals do occur, they can be traded, and they can be very profitable on a regular basis.

For example, by following closely the TSX, one can trade the XIU (IShares Cdn S&P/TSX 60 Index Fund) using the trend reversal signal that occurred on August 17th.

Follow the trend until a new trend reversal shows up.

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