To novices and experts alike, the stock market can sometimes be erratic and enigmatic. We can erase the mystery that clouds the topic and let you know how the market can be unpredictable, and how you can take advantage of this trait.

The words ‘stock market’ bring to mind a collage of institutions, long calculations, jagged graphs, stacks of paper, harried traders and bright screens. When a new corporation is established capital can be generated in many ways. One possibility is for the entrepreneurs to contribute. Another possibility is to get banks and venture capital investors to invest in your company. Or one could issue bonds, which is a way of selling debt. The most advanced method is to issue stocks i.e. shares of the company’s ownership. This gives rise to trading opportunities in the stock market.

To see how the stock market works is go to any website financial page and click on the name of this index. Next is to set the time frame for months. When you are viewing the stock market over the last 12 months with the month to month price rather than the day to day price you will find all the zig zags are gone.

Today stock markets can be found in every developed and most developing countries. The United States of America, England, Japan, India and China are some of the biggest stock markets in the world. The value of the world stock market was estimated as staggering US $36.6 trillion in October 2008.

While some stock exchanges function as non profit corporations, for example the New York Stock Exchange (NYSE), others are profiting businesses that earn money for the trading services they provide. Such examples include the National Association of Securities Dealers automated Quotation (NASDAQ) and the Toronto Stock Exchange (TSE).

To see if the stock market is leveling out and not going down is to look at its 1 year average. The 1 year average is the average price over the last 12 months. As long as the stock market is above its 1 year average this means the stock market is rising and you are making money in your IRA and 401K.

There are a lot of articles that write about a mutual fund investment strategy and but none will tell you why or how the strategy works.

Do keep a positive attitude. Remember that a good player will always expect and accept losses gracefully. Those who brood over losses will always miss the next profitable opportunity. Always accept failure as a step towards victory. Don’t be afraid. When you enter the market you need to be confident and firm with your decisions. Remember that in trading, there are ‘the quick and the dead’! A strong strategy will be your first step towards building the confidence you need

Don’t get in and out of the market. If you have made mistakes and suffered losses, be strong, learn from your mistakes and improve. But if you decide that the stock market is not really the thing for you-leave and leave forever. You don’t want to lose more than you already have. Do remember… “It’s just business- nothing personal! Have you taken a loss today? Forget it. Have you taken a profit today? Forget it even quicker! As an investor, don’t let your ego, fear and greed come in the way of clear and rational thinking. To be a successful investor you must always practice patience, determination and rational thinking in the face of challenges.

Don’t trade against the trend. As a novice, it doesn’t make sense to trade against the trend. If you look at any stock in an uptrend, you will see that it is met with very weak pullbacks. This means it is not a good situation for shorting. On the other hand, any stock in a downtrend is met with very weak rallies. This is possibly the worst situation to buy stocks. Therefore, it is wise to always trade with the trend.

Here is one way of calculating your chances of success. It is known as the Average Profitability per Trade (APPT). APPT measures the average amount a trader can expect to win or lose per trade using a simple mathematical formula. It is based on historical trading results. The formula is as follows: Average Profitability per Trade = (Probability of Win x Average Win) – (Probability of Loss x Average Loss).

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categories: Financial Planning,retirement