First off here is a formal definition for a Stop Loss Order. An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor’s loss on a security position.

So if you place a stop loss order 15% below the buy price that would limit your loss to 15%.

Using a stop loss is a little more complicated than just placing an order. Blindling placing a stop loss 5-10% your buying price is useful in some situation but could cause you to take uncessary losses at time.

The first thing you must determine is daily range the stock makes, if a stock usually has a tendency to drop .50 each day and come back up you will want to place your stop loss below this price so that you’re not prematurely stopped out.

Second you must look at the the resistance and support level on a stock. If a stock has bounced off a certain level 2 times it’s possible it will bounce off this level again. You will want to place your stop price slightly below this level, so that if the support level fails you will get out of the stop. Read the rest of this entry »

If you’re a day trader there are certain times in the day that give you the highest probabality trade as demonstrated with the two charts below. The first is 30 after the market opens, if there is a reversal in trend it will most likely happen here.

The second is at 12pm EST, this is when traders go to lunch in NY so the market will slow down, trade sideways or trend down. The 3rd reversal point is at 1:30pm and you can see from the charts below they turn exactly at this time. These patterns are not written in stone but they happen very often.

By Aaron Kater

Rich people: fortunate, lucky, selfish, and arrogant? Or highly educated, caring, brilliant individuals? Becoming rich isn’t hard, but it does require a bit of time and knowledge. Having time to get rich, educating oneself, and buying assets are the three key factors in attaining untold wealth.

Rich people usually either have or make time to get rich. Most people that now own huge mansions, have wonderful riches, and drive the nicest cars usually begin taking the road to riches in their spare time. One plan, the most common, is to work at a low-risk, steady job until one has enough money to invest in something that will feed one for the rest of their life. But before one can invest in anything, one first has to educate oneself. Read the rest of this entry »

By Charles O’Melia

For a successful retirement investment plan to work in the stock market, some ‘reasonably sure’ assumptions would have to be made:

The retirement investment plan must take into consideration the one prevailing constant in any stock market security – risk and uncertainty. Understanding that risk and uncertainty are the key factors that propels the return on investment in the stock market far beyond the returns of Passbook Savings Accounts, CD’s or Bonds are a start. The plan’s key factor would be to use the risk and uncertainty of a stock market security to its advantage. Read the rest of this entry »

By Al Thomas

You are 55 years old (or somewhere aroundthere) and your company is going to force you toretire at 65. You have $35,000 saved in your401K and that’s all. The house will be paid forby then so you will have a place to live. Thecompany pension will pay about $1,000/month andso will Social Security. What will my life stylebe like at that time?

Let me give you a clue. You are going to needjust about as much as you are making now evenwith the house paid for. If you are lucky youmight have health insurance with your pension,but don’t count on it. You hope Uncle Sam willhelp out. But don’t count on it. Read the rest of this entry »

By Rick Hoogendoorn

For most people, there is a direct correlation between how worried they are about retirement income, and how much they can actually do about it. This is because the more worried you are, the closer you probably are to retirement, and the less time you have to do anything – like save up. Effective ’saving up’ requires time. Time so your money can grow. Save an extra $200 a month, three years before retirement (at age 62), and you’ll amass a grand total of $7,887 (averaging 6% growth). Not likely to have a big impact on your retirement lifestyle.

But what if you invested for retirement when you were NOT worried about it? What if you, say, quit smoking a pack a day at age 45 and took the money and invested that instead? (For the purposes of this illustration, let’s assume a pack costs $7.00 and you smoke a pack a day so you invest, for easy figure’s sake, $200 per month. Again, average compound rate of return is 6%.) Read the rest of this entry »

1. OMITTING APPROPRIATE ASSET CLASSES AND ASSET SUBCLASSES. Numerous landmark studies have concluded that how you allocate your portfolio, rather than which investments you select or when you buy or sell them, determines the majority of your investment performance over time. As a result, make every effort to allocate your portfolio to all appropriate asset classes and asset subclasses.

2. SELECTING INAPPROPRIATE ASSET CLASS WEIGHTINGS. By selecting inappropriate asset class weightings a portfolio may earn a lower return and experience greater risk than expected. Consequently, be careful not to over or under weight any asset class, thus enhancing your portfolio’s risk and return trade-off profile.

3. UNDERESTIMATING THE IMPACT OF INFLATION. Inflation can erode the real value of your portfolio over time, thus placing your future financial security at risk. As a general rule, the longer your investment time horizon, the more you should allocate to equity investments. For shorter investment time horizons, emphasize fixed-income and cash and equivalent investments.

4. NEGLECTING THE EFFECTS OF PORTFOLIO MANAGEMENT EXPENSES. Over time, the compounding effect of portfolio management expenses can be quite large, thus depriving you of better returns. For this reason, you should focus on minimizing portfolio management expenses, specifically trading costs, advisory fees and taxes.

5. MAKING INACCURATE RETURN FORECASTS. Forecasting is the single most difficult task with designing portfolios. Although not a perfect solution, using historical returns rather than making forecasts is generally considered more appropriate for individual investors.

6. OVERESTIMATING THE LEVEL OF PORTFOLIO DIVERSIFICATION. Diversification is one of the ten cornerstone principles of asset allocation and is key to reducing risk, namely company-specific risk. To properly diversify, you should hold sufficient quantities of not-too-similar securities with comparable risk and return trade-off profiles. Consider broad-based index funds for a quick and easy solution.

7. MISJUDGING THE IMPACT TAXES HAVE ON NET RETURN. Taxes can have a severe negative impact on your net return. As a result, balance tax and investment considerations, but remember that suitability and appropriateness of an investment take precedence over tax consequences. Never hold an inappropriate investment.

8. CONFUSING DIVERSIFICATION WITH ASSET ALLOCATION. Many investors mistakenly believe that a properly diversified portfolio is a properly allocated portfolio. This is the leading misconception of asset allocation. Properly allocate your portfolio among the different asset classes first and then diversify the investments within each asset class.