July 27, 2011

Stock Trading Virtual Practice Account
Cash Prizes Awarded to Top Performers

A free virtual stock trading account is given by a pretty cool website that provides an opportunity to practice trading the Stock Markets. The site is called Wall Street Survivor and linked to here. You can sign up for free, without even having to use your real name. Once you have signed up, your Virtual Account start with funds of $100,000 with the ability to have $200,000 when using the full margin amount, that is allowed. During the trading day, You can place trades that include, buying, selling, short-selling, to try and get the best possible returns. What is especially cool, is that prizes are given for the best performing virtual accounts in one week and one month time frames. For example, if your portfolio has the best return (percentage gain) in a week, the prize is $100. If it has the best performance in a one month period, the prize is $500.

I thought this was pretty cool, and I signed up for a virtual account yesterday. There are a couple of things I would mention for those who want to try this out. When you first sign up, you will be asked whether you want to receive notices from the Wall Street Survivor. I read in some reviews for Wall Street Survivor it was wise to uncheck those boxes otherwise you could get more emails than you really want. I made sure to do this when I signed up. The other thing I would mention, is there are ads placed throughout the website, but you don't need to click on them, unless you are interested in seeing one of course. I am not, so I tend to ignore them, because the virtual trading account is where all my energy and focus is on. I want to test my own skills and try to win that first place!

Opened a Virtual Trading Account

When I started Trading in the virtual account today, I was glad to see how easy it was to perform the various Trading Actions and how the virtual account does all the calculations for you based on what trading decisions are made. It is also possible to practice using a virtual account to trade options. My absolute favorite thing so far about the experience was that you can see where you rank with all the other traders by selecting "see my ranking." Based on your performance, you will see what place you rank among the virtual traders participating. I was shorting stocks today in this account since the markets were generally trending down and when I checked my ranking, it said 636 of 6,500. I guess this meant there are about 6,500 traders participating!

I like the incentives of trying to rank in the top 3 because of the cash prizes that are awarded. I will admit however, that for new investors, this site is a great learning and practicing opportunity, and to win the top prize means you are up against some pretty good competitors that you need to outperform. Although this was my first day, ranking 636 is still a ways away from 1st, 2nd, or 3rd place but the winners are awarded after a week AND a month for best performance. I found it competitive, challenging, and fun. If you don't rank well, keep practicing and it can help you rank higher, while developing skills for trading in the Stock Markets.

July 26, 2011

Venezuela Has More Oil Than Saudi Arabia

The Biggest Proven Crude Oil reserves are not in Saudi Arabia, but in Venezuela! I first learned of this in a New York Times Article about Hugo Chavez (Venezuelan President). What I find interesting, is the article was about Mr. Chavez and his recent treatment to remove a large tumor, and towards the end of the article, it is mentioned that OPEC has recently identified Venezuela as the country with the most proven Crude Oil reserves in the World! I would have expected this to be front page news, but somehow, it was tucked inside the newspaper on Page A5! Up until this time, I had always believed that Saudi Arabia had the largest proven reserves, but according to OPEC's figures, Venezuelan reserves are 296.5 Billion Barrels while Saudi Arabia has 264.5 Billion barrels. This information was reported last week in the Organization of Petroleum Exporting Countries (OPEC) annual Statistics report (I linked to the report which I found on OPEC's website, it is a PDF 108 page report).

According to an article that was released about a week ago by msnbc about this, the amount of Venezuelan reserves recognized by OPEC, has increased by 40 percent from the end of 2009. Part of the reason for Venezuela surpassing Saudi Arabia, are a result of what the New York Times Called, Huge deposits of heavy crude found in the Orinoco region. I find this report fascinating because that means the western hemisphere has a lot more oil than originally thought!

Now a Change in U.S. Relations?

The relationship between Venezuela and the United States has been at times rocky over the past few years, and this new revelation of Venezuela containing the worlds largest oil reserves, could make the relationship even more interesting. I have always found that the United States seems to tolerate the society in Saudi Arabia which has often been accused of human rights abuses, and systematic repression such as the laws that don't let women drive vehicles, or those that say a woman must be accompanied by a husband or male relative when going out in public spaces.

The large oil reserves and OPEC contributions that Saudi Arabia makes, seems to keep the pressure off of their government for reforms to a more democratic and free society. This type of pressure has been exerted on other countries by powerful and influential institutions such as the United States government. Saudi Arabia seems to get a pass in this category and their large oil supplies seems to be the reason why. It makes me wonder if U.S. Corporations and the U.S. government is now going to cozy up to Mr. Chavez now that they know he is holding a major trump card which literally translates to, holding the world's largest oil reserves! I read the newspapers everyday and this story seems to have been marginalized. I haven't seen many articles written about it, but I have a feeling we will be hearing more about it in the very near future.

July 25, 2011

Debt Ceiling Debate Goes On

President Obama Just gave a speech appealing to the American people on putting pressure on their congressional leaders to find a compromise in Washington to find a debt deal that is fair, balanced, and timely. About two minutes after the President's speech, the rebuttal came from Republican speaker of the house, John Boener. As an American, I think John Boener needs to be fired. This guy is a terrible representative and its repulsive to me that he claims to speak for the "American People." It is very obvious that who he is referring to are the wealthy elite and people who donate to his campaign. My immediate thoughts about Obama's speech was that he is absolutely right. The wealthy need to pay their fair share.

Closing tax loop holes (for companies that ship job overseas or subsidies to oil and gas companies for example) is something Obama campaigned on when running for President, and it needs to be done! Raising revenues at this stage is absolutely necessary and Obama should not back down on this point. I get the sense that in this country, Billionaires and Millionaires don't have the stature that they once held. After billions of dollars of tax payer money went to bail out large banks and insurance companies, there is a reason the United states is so in debt. Having to borrow an additional 700 billion so the wealthy can have their tax cut extension along with paying for two wars that have become the longest in U.S. history, should not come at the expense of people receiving medicare, and social security checks. After all, retirees paid into these funds for most of their lives, now getting that money is suddenly called "entitlements?" These are NOT entitlements, this is money that is owed to them because it was deducted from their paychecks during their working careers! To cut these programs is nothing short of robbery! I'm hoping People in America wake up and realize how they are being played.

Republican Speaker of the House John Boehner's rebuttal would have been appropriate several years ago to denounce invading Iraq, a costly war that has put the country deeper in debt, while enriching private contractors (and shareholders) like Lockheed Martin or Raytheon. Where was the discussions about, "maybe we cant afford this?" Of course they were no where to be found, as John Boehner and his Republican allies heavily voted to invade a country that the U.S. could not pay for. This banking crisis that just passed, had everything to do with lax regulation which was empowered by legislation coming out of Washington that made it possible for loans to be made to just about anybody! Asking the Republicans for their plan to solve this problem reminds me of that old but visual saying, "Its like asking the fox to guard the hen-house!" To decimate the middle class and claim that the way to fix the budget problems is by decimating it even more, is not only irresponsible, its ridiculous. When John talks about "the American People" he is not talking about me. As a matter of fact, he is not talking about anyone I know. So, let me guess who he is talking about....Republican campaign donors.....hmmmm..... We do need cuts in this country, we need to cut the Speaker of the House from his job, and replace him with a more competent leader.

July 24, 2011

The First Dow Jones Average

The first Dow Jones Average has had several name changes over the years. Today it is known as the Dow Jones Transportation Average and is often referred to as the Dow Jones Transports. When it was first created by Charles Dow in 1884, It tracked the combined performance of eleven companies. Because the railroad industry was so large and prominent in the United States at this time, nine of the companies were in the railroad industry. This composition to the Stock Index would change over time as new industries such as the Automobile and Airline Industry groups, sprang up and become important parts of the U.S. Economy. Currently, the Dow Jones Transports contain only four railroad companies (a big change from when it was first introduced!). Other notable companies in the Index today, include Delta Airlines, FedEx Corporation, United Parcel Service (UPS), and Union Pacific Corp.

Investors follow this stock Index because it is considered to be the best overall measure of the transportation sector in the United States. Market Analyst and Economist have observed that when the economy is coming out of a recession, the performance of the Dow Jones Transports will usually outperform the other two Dow Averages, the Dow Jones Industrial Average and the Dow Jones Utility Average. As manufacturing and production increase, shipping, railroad, trucking, and airline companies begin to increase their profits resulting from moving more goods than were moved during recession time. Because of this important attribute, investors closely monitor the performance of the Dow Jones Transports especially during recession times - looking for clues to a growing economy and the signs that the end of a recession is near. To see the charts and stock quotes for each company in the Dow Transports, the Investing for Beginners website has a page titled, Remembering the Rails, the Formation of the First Dow Jones Average. There is also information for how to trade the actual index itself. This is done through a security called an Exchange Traded Fund. Live charts of the performance of the actual Dow Jones Average itself, is also included on the page.

July 22, 2011

Importance of the Dow Utility Average

Watching the Dow Jones Utility Average has become an everyday occurrence for me. The important Utility Average was the third Stock Index introduced by the Dow Jones Company. It was first introduced in 1929, and started off as a Utility dominated Index consisting of 18 Companies. This number was changed in 1938 to what it currently stands at today, a total of 15 companies. Most of them belong to the electric utility industry although several of the companies are considered to be "Diversified Utilities." This term is given to a company that belongs to more than one Utility industry. For example, a company may belong to the Natural Gas industry group, and the Electric Utility industry group. Following this Stock Index is important because its performance can often be attributed to investors expectations for future interest rates. Because utility companies often borrow heavily for expansion and operational purposes, profits for these companies are often higher during times of low interest rates. the same is true in reverse, when interest rates are rising, borrowing becomes more expensive and often leads to a decline in profits. For this reason, many investors, economists, and market analysts follow the performance of stocks belonging to large utility companies. The Utility Average makes tracking this sector easier, by combining the performance of 15 of the largest utility companies in the U.S.

I recently created a page on my investing for beginners website titled, the Utility Average where I wrote more about the history and use of this particular Stock Index. On that page you will find a table that lists the names of each company in the Index. I also wrote about how investors could Trade the Dow Jones Utility Average as a single stock throughout the day. This of course is done through an Exchange Traded Fund, or ETF for short. Like most other major indexes, the Utility Average also has an ETF that investor can purchase which tracks the performance of this Dow Average. To make tracking the various companies in the index simple and easy, I embedded live charts for each one of the companies. At the end of each trading day, I visit the Utility Average page myself, to get a sense of how the Average and the companies inside of it, performed for the day.

July 7, 2011

DJIA or Dow Jones Industrial Average

Click Here For The Wall Street Journal
When properly analyzed, the Dow Jones Industrial Average, or DJIA for short, helps investors determine the Stock Market's overall direction (known as the trend) and the strength behind it - measured by trading volume. Proper interpretation of these factors assists Stock Traders in identifying proper entry or exit points to purchase or Sell their stock positions. For example, when the Dow Jones Industrial Average has been consistently falling, buying stocks long, would not be advisable. Waiting until the DJIA has started to rise again, gives an investor a much better chance of entering a stock position which is profitable right from the start and will turn into a profit if sold at the right time (before the DJIA begins to fall again). These cycles occur and will continue to occur. The Dow Industrials gives a general measure of not just stock market direction, but of general business and economic conditions as well. For example, a falling DJIA is unlikely to be occur at the same time the economy is booming.

In fact, many investors and economist believe the stock market reveals economic conditions about 6 months in advance. This means a rising market, reflects collective investor optimism of near term improvements of economic conditions. The reverse of course is also true. Falling markets may reflect investor pessimism for improvements in the economy, in the near future. These characteristics gives the DJIA even more value, using it to as a barometer to measure the performance of the general market, and economic conditions. These combined characteristics, makes the Dow Industrial Average a powerful forecasting tool for any investor. Below are the companies in the Dow Industrial Average. The list is sorted in alphabetical order by ticker and includes Sectors and Industry Groups, each company belongs to. I have also created a table and embedded live charts of the Dow Jones Industrial Average on my website as well as live updating charts of the Dow Diamonds, an ETF that is designed to track the movements of this Index.

July 5, 2011

Studying the Tape In Stock Trading

Buying and Selling Stocks and operating in the stock market, takes skill and proper timing. One of the most revealing clues and strategies I use, is following the tape. let me give some Example of the Time-Stamp (“The Tape”) That I follow and how it helps me determine when to buy or sell a stock. When I watch stock, I begin following the tape of those that I’m interested in. They show the last Execution price, date and time, and Number of shares. These orders are what make up the charts themselves. I rarely follow charts anymore, because the tape is much more revealing. For example, if an institutional buyer, hedge fund, or big investor is taking a big position in a stock (or selling a big position) they won’t do it all in one day. Usually they do it in the course of a couple of days or even weeks. This is because they don’t want to raise the price on themselves buying all at once or vice versa. I watch orders coming across the tape, and they give me a clearer picture (than a chart) about what’s happening with that company’s stock. The orders of 100, 200, 300’s are usually the public buying. When orders come across that are in lots of 5,000, 10,000, 20,000 and anything larger, that is a strong clue that a big investor is taking up (or selling off) a position. When I see this, I watch VERY carefully and make notes to myself on a notepad. Watching the tape helps me decide what to buy or sell and helps me with timing (when to get in and when to get out).

Learning from the Best Investors

I first learned about studying the Tape from studying the life and career of famous Wall Street Trader, Jesse Livermore. He was famous for Reading the Tape which basically meant that he watched the Time and Sales of each company that he followed. This graphic is an example of a Time Sale of Alcoa and Ford Motors. There are three columns, execution price, number of shares sold (middle) a time the execution was made (left column). The green means the price was higher or the same as the the last execution price, whereas the red means the execution price was lower than the previous one. When institutional buying occurs, big orders can be seen coming across the Tape (the time stamp) and likewise when they are selling. In this example, it looks like investors are buying up Ford and selling Alcoa. The keen investor learns what is happening, watching the orders that appear. Jesse Livermore always said that it is not what investors say that he's interested in (like rumors or opinions), but what they actually DO! This, meant watching the buying and selling and interpreting the execution of orders. Did investors just say they liked a stock or were they actually buying it - this is what Livermore wanted to know. Eventually, he perfected this skill and it ended up making him rich!