Liquidate Stocks

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Liquidating a stock is the process of selling shares to another buyer or shareholder for the current market value. The simplest and most common way to go about this process is by simply contacting a broker, who will handle the entire procedure for you. However, a broker’s fee can often be hefty, so if the desired amount of shares to liquidate is small, it may not Knowledge of stock liquidation provides a key concept for market investors. Liquidating stock includes investment planning and also may create federal tax consequences for the investor. Several considerations must be examined when exploring liquidation options.

Liquidate Stocks 1. Individual Voluntary Liquidation

Stock investors work with a brokerage house or operate independently online as their own stock advisor. Stock investors set perimeters for price margin limits, which mark a specific price to trigger selling the stocks. When the price of a stock falls to that mark, investors can signal automatic liquidation of identified stocks to prevent personal losses. Investors may also telephone or use online trading to trigger liquidation of the stocks.

2. Individual Forced Liquidation

Investors relying on brokerage houses to recommend stock purchases and sales may enter into a forced liquidation when the brokerage house determines that the stock is dangerously close to major losses. The brokerage firm will then force liquidation of personal investment accounts that become delinquent as a result of the market loss. This forced liquidation protects the investment firm’s interests. Investors have the option of adding money to the investment account to retain the stock in this situation.

3. Time Stop & Liquidation

A “time stop” trigger liquidates stock based on the investor’s defined perimeters. If the stock fails to reach a particular place on the market by a set amount of time, an automatic trigger liquidates the stock. Jack D. Schwager, in his book “Stock Market Wizards: Interviews with America’s Top Stock Traders,” cites the importance of using time stops to liquidate under- or non-performing investment stocks to increase investment dollars.

 

4. Corporate Stock Liquidation

The book value of a company refers to the amount received if the company liquidated, or sold, all stock assets. Bankrupt corporations holding public stock may liquidate the stock without approval of investors. General Motors Corporation, traded as GM stock, underwent formal forced liquidation as Motors Liquidation Co., traded as MTLQQ. If the company debts and liabilities total less than the liquidation value, stock investors receive a return on the liquidation. When the company has extreme debt and the liquidation fails to cover the debt owed, stock investors receive nothing from the liquidation process.

4. Partial Stock Liquidation

Corporations may also order a partial voluntary or forced stock liquidation. This process happens when corporations order a specific amount of stock to be liquidated. Investors in the corporation receive cash distributions based on the amount of liquidation.

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Trading Money Management

Trading money management is all about setting rules and guidelines that minimize the risk at a level that one is comfortable with. According to experts, the secret to winning in a stock market is to lose the least amount of money incase of a miscalculation. By doing so, the investor is able to elude chances of getting into financial strains.

The question in most people’s mind after this understanding is; how do I manage to do this? The first step lies in trading money management. This is an option in which a person is able to trade carefully while at the same time lying within personal financial reach. There are a number of things that one can do to achieve the most in risk management.

The first thing that has to be done is to never risk more than 2% of personal trading stock. This has been known to be the main cause of frustration for many people. When it comes to trade, people tend to double their investment after the first or second success. What they fail to understand is that the chances of winning are directly proportional to those of losing.

Trading Money Management For a reliable trading money management, one is highly advised to never exceed his personal financial reach. This is a common problem that most people face when trading online. Having a budget in place could be of great help. Another thing that one can do in risk management is to always counter the manageable loss incase of a miscalculation. This is the most important step when it comes to trading money management.

Every investor knows the total amount of money that he can lose without getting into financial strains. The amount should therefore be considered before making an investment. By so doing, a trader is able to elude chances of spending more than he can afford. It is only through the identification of the manageable loss that one manages to avoid getting into financial strains in the end. As the technology continues to advance, various systems have been designed to help in risk management.

A reliable system that one can acquire is the money management calculator. This is a program designed by professional traders to help new investors learn how to elude chances of getting into financial problems. It has various provisions which help in determining the affordable amount that one can manage lose without consequences.

The investor is required to enter accurate details on the given fields and the program will process the right amount that one can afford to lose. The system gives reliable trading signals which help elude chances of exceeding personal financial risk.

In conclusion, it is important to understand that the main reason why people get into financial problems is greed. After making a simple investment which results in success, many investors tend to invest more without considering the risks involved. This is what leads in financial problems. To achieve more in trading money management, one has to keep his greed at bay. Progressive investment is the key to succeeding in this niche. Additionally, to get reliable trading signals, it is imperative that one conducts a market research to learn of the new trends embraced


Day Trading Secrets

Millions of people involve in day trading every day and it has become like horse-racing now. Since a trader has only few hours of time to book his profit or loss, the day trading is too sensitive to play Day Trading Secrets reviews the patterns which are better captured with the human imagination. The imagination can better integrate research results from proven trading systems and patterns to improvise optimal trades.

Some of the day trading secrets has been listed as below:

Day Trading Secrets 1. Markets will react to each other:

World markets will react to each other every day. That means, if the U.S Markets fell yesterday night, as a chain reaction, the Asian Markets may also fall today, and vice versa. So, before your market opens, you have to check how the markets on the other side of the globe closed last night.

Though your Market indicators are good, always check what happened last night in the globe.

2. Market bounces after every fall.

There is a 80% chance that the fallen market may bounce on the very next day. Suppose, if you buy a stock item today and it went down so worse, and then don’t sell it by booking loss. If your stock is listed under BTST (Buy Today Sell Tomorrow) or ATST (Acquire Today and Sell Tomorrow) in BSE or NSE (India), then you can sell your stock the next day, instead of selling on the same day.

2. Short-sell at big Market Fall

Usually, traders stay away at Market falls. Actually, it is the great time for Day Traders. If you are very sure that the Market will start falling throughout the trading session, then go for short selling. That is, in the morning, you sell your stocks (without actually holding them) and in the evening, you buy them. The difference is your profit.

3. Use very less % of your portfolio for Day Trading.

To say the truth, the market experts advise not to do Day Trading. Because, they leaned that there are always huge number of losers in Day trading than beneficiaries. Even, Portfolio Experts advise that 50% of your portfolio money should be allotted for long term investment. 25% of the money should be invested for short term. Rest, 25% money should go for very short term trading like Day Trading. Because, the risk in short term and day trading is higher than that of long term investment.


Handling Major Crashes

Handling Major Crashes A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles.

Basically, stock market crashes are social phenomena where external economic events combine with crowd behavior and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. Generally speaking, crashes usually occur under the following conditions, a prolonged period of rising stock prices and excessive economic optimism, a market where P/E ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants.

There is no numerically specific definition of a stock market crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of several days. Crashes are often distinguished from bear markets by panic selling and abrupt, dramatic price declines. Bear markets are periods of declining stock market prices that are measured in months or years. While crashes are often associated with bear markets, they do not necessarily go hand in hand. The crash of 1987, for example, did not lead to a bear market. Likewise, the Japanese Nikkei bear market of the 1990s occurred over several years without any notable crashes.


Understanding PEG Ratio

The market is usually more concerned about the future than the present; it is always looking for some way to figure out what is going to happen in the company’s future. A ratio that will help you look at future earnings growth is called the PEG ratio. You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

PEG = (P/E) / (projected growth in earnings)

For example, a stock with a P/E of 30 and projected earning growth next year of 15% would have a PEG of

30 / 15 = 2.

Understanding PEG Ratio Technically speaking: The lower the PEG number, the less you pay for each unit of future earnings growth. So even a stock with a high P/E, but high projected earning growth may be a good value. In other words, one is interested with stocks that have a low PEG value.

To figure this out, you look at the PEG ratio. Now, if the PEG ratio is big (or closes to the P/E ratio), you can understand that this is probably because the “projected growth earnings” are low. This is the kind of stock that the stock market thinks is of not much value. On the other hand, if the PEG ratio is small (or very small as compared to the P/E ratio, then you know that it is a valuable stock) you know that the projected earnings must be high. You know that this is the kind of fundamentally strong stock that the market has overlooked for some reason.

A PEG ratio of 1 is normally seen as fair valuation and anything above that is expensive. However, one of the biggest drawbacks of PEG is with respect to the surety of the growth in earnings in the long-term. What if the expected earnings growth does not materialise? Also, one cannot use PEG for all sectors. Take the case of the steel sector. The industry is cyclical in nature. In times of a downturn, the P/E ratio gets inflated due to lower earnings. As a result, the PEG ratio may not accurately reflect as to whether the investment is attractive or not, particularly if the markets expect the company’s earnings to remain subdued, going forward. Similarly, in an upturn, the P/E ratio tends to be lower due to considerably higher earnings and accordingly, the PEG ratio may seem lower if the markets expect the company to maintain strong earnings momentum.


Reading a Stock Quote

Reading a stock quote is important in the sense that one must give importance to both the volume and price provides little real information about a stock. As one needs to look at the price change compared to the volume that day. If the stock trades on heavy volume and the price are increasing, the trading that day is buy dominated and shows that investors were willing to pay higher and higher prices for the stock. If the stock trades on heavy volume and the price decreases, then the trading that day is sell dominated meaning sellers are trying very hard to get rid of their stocks selling for lower and lower prices. If volume is high without an appreciable change in price, it could be a sign of a turn around in a stock’s current price movement.

Reading a Stock Quote This is known as churning and is a sign that investors cannot really figure out what the price of the stock should be – i.e. whether or not it should continue to move upwards (if there is an upward trend) or whether or not it should continue to move downwards, in case, if it is a downward trend.

The basic idea behind volume is that it is a way of being able to accumulation or distribution of the stock during trading. That is, are investors buying (accumulating) or selling (distributing) the stock that day. To do this, one must look.

Beside from looking for above average volume days, price and volume can be used together in a plethora of other ways. There is a whole branch of stock analysis, which is known as technical analysis and specifically volume and price patterning that is based on the idea that certain chart patterns can be found in all stock movements when looking at price and volume charts.

The use of these patterns can then be used to predict future stock price movement. Some basic things to keep in mind while trying to value some stocks right now are:

• Stocks that are making big gains with low volume or non-increasing volume are a signal that the gains are not going to continue for long so don’t buy into the hype.

• Similarly, price declines on low volume are often a sign of people who are weakly holding their position selling off and one can assume either a rebound or flattening out of the price chart is going to follow after those investors have sold their holdings.

• After a period of relatively stable prices (3 months+), a large price gain on high volume can be a sign that the stock is on its way to new heights – this is known as a break out.

This now ends our basic look at Reading a Stock Quote. At this point, we are able to make some decently well informed guesses as to the general value of a given stock and its current trends (up or down) with respect to its price and trading interest (volume accumulation/distribution). It’s not all the information that is necessary to make consistently winning stock picks, but it is a solid foundation from which to begin experimenting with making some stock picks and tracking their performance which I do recommend to anyone interested in beginning to invest.


Know About Stock Market Indexes

A stock market index is a method of measuring a section of the stock market. A stock market index is a bunch of stocks grouped together to measure a certain sector (utilities, banks, tech stocks, etc.) of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds. Alternatively, an index may also be considered as an instrument which derives its value from other instruments or indices. The index may be weighted to reflect the market capitalization of its components, or may be a simple index which merely represents the net change in the prices of the underlying instruments.

Know About Stock Market Indexes A ‘national’ index represents the performance of the stock market of a given nation—and by proxy, reflects investor sentiment on the state of its economy. The most regularly quoted market indices are national indices composed of the stocks of large companies listed on a nation’s largest stock exchanges, such as the American S&P 500, the Japanese Nikkei 225, the Russian RTSI, the Indian SENSEX and the British FTSE 100.

The concept may be extended well beyond an exchange. The Wilshire 5000 Index, the original total market index, represents the stocks of nearly every publicly traded company in the United States, including all U.S. stocks traded on the New York Stock Exchange (but not ADRs or limited partnerships), NASDAQ and American Stock Exchange. Russell Investment Group added to the family of indices by launching the Russel Global Index.

More specialized indices exist tracking the performance of specific sectors of the market. Some examples include the Wilshire US REIT which tracks more than 80 American real estate investment trusts and the Morgan Stanley Biotech Index which consists of 36 American firms in the biotechnology industry. Other indices may track companies of a certain size, a certain type of management, or even more specialized criteria — one index published by Linux Weekly News tracks stocks of companies that sell products and services based on the Linux operating environment.

Portfolios of individual stocks or mutual funds are often compared to a stock market index to see how well they are performing. For example, a number of retail stocks such as Old Navy, Macy’s, etc. will be grouped together to create a retail stock index. This index will then be used to track the “general” performance of the retail industry.

As the stocks in this retail group change value, the index also changes value. If the index goes up by 1% then that means the “total value” of all the securities (stocks) that make up the index have gone up in value by 1%.If you’ve purchased a retail stock such as Macy’s, then you would compare Macy’s performance against the retail index. Ideally you would want the performance of Macy’s to be better, or at least keeping pace with the index.

An index is also how people keep track of how well their investments are doing. Mutual fund managers and individual investors will find a stock market index similar to the portfolio of stocks they hold.


Shorting Stocks

Short selling is a marginable transaction and that means that you must open a margin account to sell short. This is the same account you would use if you want to use your stocks as collateral margin to trade in the markets. When you open a margin account, you must sign an agreement with your broker and this agreement says you will maintain a cash margin or offer your stocks as margin.

Shorting Stocks In other words, shorting stocks enables you to sell stock that you do not own and buy it back at a later time, ideally at a lower price. In order to begin shorting stock, you must open a margin account with your brokerage firm. One will have to pay an interest on the borrowed funds as well as subject to several rules and regulations that govern shorting stock .After taking these factors into consideration, shorting stock is not a financially fattening activity in most cases.

How can you sell a stock that you do not own? You borrow it…but as is the case with anything that you borrow, you are obligated to return it at a future date and you do this by buying it back (this is called covering your short) and returning it to it’s original owner. If you are able to cover the short (buy the stock back) for less than it cost when you sold it, this difference in price becomes your profit. The original owner is “none the wiser” because it is all handled electronically and anonymously. In summary, a short sale reverses the order of a typical stock purchase: stocks are sold first and bought later.

Unlike a purchase transaction, which involves two parties (the buyer and the seller), shorting involves three parties: the original owner, the short seller, and the new buyer. The short seller borrows shares from the original owner, and immediately sells them on the open market to any willing buyer. To finalize the short sale transaction, the short seller must then go out into the market and buy the same amount of shares as he/she sold so that the broker can return them to the original owner.

While your short sale is outstanding, your account will be charged interest against the value of the short position. If the stock you shorted goes up in price, or the value of the stock you are using as collateral goes down in price, so that you’re collateral is less than the “maintenance” requirement, you will be required to add money to your margin account or buy back what you sold short. Short sales, like any trade, should be planned well before executed and should be managed with carefully chosen stops to reduce risk


Analyzing Stocks that Go Up

There are different ways of analyzing the stocks that go up. One of them is through the Efficient market theory, and the other is the Fundamental Analysis.

The Efficient market theory states that Stocks are always correctly priced since everything publicly known about the stock is reflected in its market price. However, there are certain concepts which one must know about the stock market that are mentioned below:

Analyzing Stocks that Go Up ? -Price is set by the stock market.

? -Value is determined by analysts who weigh all information known about a company.

? -Price and value are not necessarily equal.

? If the efficient market theory were correct, prices would instantly adjust to all available information. However, stock prices move above and below company values for many reasons, not all rational. An example is the irrational influence news has on the market, both national and global.

The Fundamental Analysis attempts to forecast the future value of a stock by analyzing current and historical financial company strength. Analysts try to see if the stock price is over or under valued and what that means to its future. There are dozens and dozens of factors used for this purpose. Before we launch into this task of valuing, or putting a reasonable price on a stock, we must understand the following categories or “viewpoints” through the eyes of investors:

• Value Stocks: Those undervalued by the market, the bargains where one pay 50 cents for a dollar of value.

• Growth Stocks: Those with earnings growth as the paramount consideration.

• Income Stocks: Investments that provide a steady flow of income, usually through dividends. Bonds are common investment tools used to produce income.

• Momentum Stocks: Emerging growth companies whose share prices are rapidly increasing.

Besides, the following concepts, we need to consider the following factors sufficient to make sound fundamental decisions. How they are used will often depend on investor bias, outlined as “viewpoints” above:

1. Earnings: Company earnings are the bottom line, they are the profits after taxes & expenses. The stock & bond markets are driven by two powerful forces, earnings and interest rates. The flow of money into these markets is ferociously competitive, moving into bonds when interest rates go up and into stocks when earnings go up. It is a company’s earnings, more than anything else that creates value.

2. . Earnings per Share EPS: The amount of reported income, on a per share basis, that the company has available to pay dividends to common stockholders or to reinvest in itself. Earnings Per Share is probably the most widely used fundamental ratio.

3. Price/Sales Ratio (PSR): This is similar to the P/E ratio, except that the stock price is divided by sales per share rather than earnings per share.

4. Debt Ratio: This ratio shows the percentage of debt a company has relative to shareholder equity. That is, how much a company’s operation is being financed by debt. Smaller is better. Under 30% is good, over 50% is bad. A company’s debt load can suck the life out of what might otherwise be a successful operation with growing sales and a well marketed product. Earnings are sacrificed to service the debt.

5. Equity Returns (ROE): Return on equity is found by dividing net income after taxes by owner’s equity. Many analysts consider ROE the single most important financial ratio applying to stockholders and the best measure of a firm’s management performance. This gives stockholders confidence their money is being well-managed. What is important with this number is whether it has been increasing from year to year.

6. . Price/Book Value Ratio (aka Market/Book): A ratio comparing the market price to the stock’s book value per share. Essentially, the price to book ratio relates what the investors believe a firm is worth to what the firm’s accountants say it is worth per accepted accounting principles. A low ratio says the investor’s believe the firm’s assets have been overvalued on its financial statements.


Market Value of Equity

The Market value of equity is basically a synonym for market capitalization. It is used to measure a company’s size and helps investors to diversity their investments across companies of different sizes and different levels of risk. It is calculated by multiplying the company’s current stock price by its number of outstanding shares. A company’s market value of equity is therefore always changing as these two input variables change. A company’s market value of equity differs from its book value of equity because the former does not take into account the company’s growth potential.

Market Value of Equity In other words, the Equity value is the value of a company available to owners or shareholders. It is the enterprise value plus all cash and cash equivalents, short and long-term investments, and less all short-term debt, long-term debt and minority interests. The Equity value accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity.

From a mergers and acquisitions academic perspective, equity value differs from market capitalization or market value in that it incorporates all equity interests in a firm whereas market capitalization or market value only reflects those common shares currently outstanding.

The Equity value can be calculated two ways, either the intrinsic value method, or the fair market value method. The intrinsic value method is calculated as follows:

Equity Value= Market Capitalization + Amount of money in the stock options +value of equity issued from in the money which is convertible securities-proceeds from the conversion of convertible securities

The fair market value method is as follows:

Equity Value= Market Capitalization +fair value of all stock options (in the money and out of the money) calculated using the Black-Scholes formula or a similar method +value of convertible securities in excess of what the same securities would be valued without the conversion attribute

It is said that the fair market value method more accurately captures the value of out of the money securities.


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