Many people would like to invest in stocks or Forex but are not really sure of the difference between the two and don’t know which is the right choice for them. There is little doubt that there are many options out there for you. But, it is hard to say which the right choice is until you gather some information about them and then make the right choice.

Stocks? Forex?

Stock trading is similar to owning part of a company or organization. You purchase the stocks so that the company can then use this money to reinvest to increase their profits. Most people know about the stock trading market and have a basic understanding of how it works.

On the other hand, though, not many realize what Forex trading actually is. Forex trading is a type of investing that deals with currency trading. In its basic form, you cash in US dollars for the currency of another country. You cash out when you make a profit or to cut your losses short. The Forex market is a truly global marketplace where billions of dollars are traded everyday. Here, you can make a lot of money and lose a lot of money fairly quickly.

Making The Choice

Forex trading is a relatively new method of investing. It is a good choice for someone who is willing to take greater risk for a greater reward. In stock trading, you can make smaller profits in the short-term and only in the long-term can you make a significant profit.

It is often wise for the beginner to dabble in stocks trading before looking at Forex trading. It is an excellent way to get your feet wet without a whole lot of risk.

Nevertheless, it is important to note that anyone that is a beginner in the field of investments should pay close attention to details here. It is important for both types of investments that due diligence is paid in order to make any money. Study both forms of investments and do some paper trading. This simply means you make decisions to buy or sell but don’t put any ‘real’ money down. The key here is to track results like you would do for a ‘real’ trade. Initially, you will make mistakes so, go easy on yourself. With experience you will start to make profits on a consistent basis. When this happens, start putting some money on your trades.

Good luck with your investment efforts.

About the Author

Mike Singh is a successful webmaster and publisher of financial websites. He provides stock market help and articles on how to read forex charts .

The classic image of the stock market is that of a place where fortunes are made and lost throughout the course of the day, and where those who take the biggest risks are rewarded by a hefty payout when all is said and done. Of course, this is the movie version of the market… no matter how thrilling the day-to-day dramas of investment trading become, they’ll never compete with the images of the stock market that have been created for the silver screen.

There is a small grain of truth to those images from the movies, however… those individuals who choose to deal in high-risk stocks can make a lot of money if they handle the risks correctly. If they don’t, however, then there’s a good chance that they could lose their entire investment.

Below you’ll find more information on the world of high-risk (and high-yield) investments, including ways to help insure yourself against major losses when dealing with higher levels of investment risk.

Defining High-Risk Investments

The first thing that needs to be covered when talking about investing in high-yield, high-risk stocks is exactly what is meant by the terms “high-risk” and “high-yield.” The risk of the investment is usually due to the very fickle nature of that particular stock… though it may be growing in value rather quickly, it’s obvious that the growth is going to stop soon and a very rapid and severe descent is going to begin.

The yield of the investment, on the other hand, refers to the money that could potentially be made by buying stocks early on in the increase in price, and then selling just before the value starts to plummet. Fortunes have been both made and lost (sometimes in the same day) with high-risk trading; the key is knowing exactly when to start buying or selling.

How to Trade High-Risk Stocks

When trading high-risk stocks, it’s almost essential that you have access to your brokerage account and that you’ll be able to buy or sell shares as soon as the price begins to fluctuate in one direction or the other. This can be done online, via the telephone, or in person if you don’t use an online brokerage firm.

You can also usually set up hold orders which will start buying the stock when the price reaches a certain level (up to the amount that you’ve specified) and that will begin selling shares as soon as the price drops below a certain point. Many online brokers allow these types of hold orders, and they can allow you to go about your regular day without having to watch the market ticker the entire time.

Guarding Against Loss

Of course, even with hold orders or a dedicated broker you can still end up losing money when dealing with high-risk stocks… that’s how they earned their name. In order to minimize this potential for loss it’s important to have a well-diversified stock portfolio to fall back on.

If your high-risk investments begin to fall in price too quickly and you end up losing money by the time the shares have been sold, the relatively stable value of some of your core portfolio stocks and indexes will help to even out your losses.

The fall of the higher-risk stocks might even stimulate some other portions of the market, causing an increase in other stocks in your portfolio. This will help take some of the sting out of your loss, and may end up giving you a greater long-term gain than you might have had from your short-term investment that went sour.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About the Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.

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It s all about the Dollar (again)
But the Dollar like all other markets doesn t fall continuously (even if it should fundamentally) and when it rises, however small, it sucks back a portion of the value it has given off, causing stock markets, commodities and even …

I will not guess at who will be the next US president, or what the stock markets will do, but here are my thoughts on the development of computer security products. Existing trends will continue. There will be fewer stand alone products …

I will not guess at who will be the next US president, or what the stock markets will do, but here are my thoughts on the development of computer security products. Existing trends will continue. There will be fewer stand alone products …

It s all about the Dollar (again)
But the Dollar like all other markets doesn t fall continuously (even if it should fundamentally) and when it rises, however small, it sucks back a portion of the value it has given off, causing stock markets, commodities and even …

But the Dollar like all other markets doesn t fall continuously (even if it should fundamentally) and when it rises, however small, it sucks back a portion of the value it has given off, causing stock markets, commodities and even …

Predictions for 2008
I will not guess at who will be the next US president, or what the stock markets will do, but here are my thoughts on the development of computer security products. Existing trends will continue. There will be fewer stand alone products …

Stocks: Reduce Risk Yet Maximize Profits

by: John Lux

It is important to note that every smart investor wants to minimize risk while maximizing profit potential. Yet conventional investment theory tells us that in order to increase returns, you have to increase risk.

You may be surprised to find that this conventional wisdom is not always true.

When I was a professional stock trader, I made most of my profits from appreciation in my portfolio, not in short term trading. In other words, I was a position trader. Any losses in my stock positions were taken out of my paycheck at the end of the month in fact, I had to pay back any loss. If you are in this position, you desperately want to learn all the techniques to make large profits without risking much. I became an expert out of necessity. So while my trading account had virtually no losing months, my gains were as much as 300% per year.

In my stock picking, I first looked for stocks that were so cheap they could not go down. If they did go down, I was happy to buy more because at those prices, you could buy the whole company and sell off the assets for a profit.

From this group of safe stocks, you select the ones most likely to have large appreciation.

A stock is cheap in my book if it sells below the liquidation value of its assets, and most cheap if it sells anywhere near the net amount of cash it has on hand. So the first two measures of value I looked for were book value per share and cash per share.

Book value is the value of the shareholders equity carried on the books of the company. Generally, since you are buying a share of stock, you will want to know the book value per share.

The one caveat to looking at book value is that companies often have intangible assets on the books, goodwill and the like. You have to take these intangible assets with a grain of salt. The safest thing is to look for tangible book value.

Book value per share is often calculated for you in the various Internet financial stock search programs available.

The next indicator to look for is cash per share or working capital per share. Working capital is current assets minus current liabilities. These assets are near to cash or will generally be turned over in one year: receivables, inventory and the like.

To measure the health of working capital, divide current assets by current liabilities to get the current ratio. A current ratio of two to one or better usually indicates a solid company. As long as the company does not have any long term debt, or at least none coming due in the near future, the company is solvent and should be around for a while little or no bankruptcy risk.

Next, we look for low price-earnings (P/E) ratios. In my opinion, buying high P/E stocks to chase growth companies is inviting real risk. If the company disappoints in earnings, not only will the stock drop from lower earnings, the P/E ratio will deflate as well, giving you a double hit.

OK, so you have found a company that is selling at or below book value with a current ratio better than 2:1, and a low, low P/E. It may be that the stock will not go down, but will that stock go up?

Picking growing industries and growth companies is more than I can tell you here, but there are two simple things you can look for first: (1) Is the company buying its own stock, or has it bought its own stock at about this price, and (2) are the insiders making hefty purchases of their stock?

Next, you can look at the ratio of revenues or sales to market values or the dollar amount of sales per share. Generally speaking, the company with a relatively high amount of sales per market value or sales will have more action on the upside. That company has more revenues to make profits from.

After you have narrowed the field using the above techniques, there will be no substitute for intense homework about company prospects to find which of those cheap stocks that truly give you superior returns, what I call my Home Run Stocks.

This warning goes out to newbie investors, and more times than not, it falls on deaf ears. But I’ll repeat it one more time just for posterity’s sake: if you’re new to investing, be very careful of making investments in penny stocks. You will undoubtedly be very attracted by the potential returns due to the deflated share prices, but keep in mind that things are usually not what they seem to be, and sometimes penny stocks really are “too good to be true.”.

Why do pennies pose such a risk? In a word: reporting. Or more accurately, lack of reporting. Since Over the Counter (OTC) stocks are not listed on any exchange, they don’t have to follow the stringent reporting criteria which we’ve all become accustomed to for major exchange traded stocks. What this means is that these companies generally offer very little financial guidance, and tend to rely much more on hype than exchange traded stocks.

Penny stocks usually have very small floats (the amount of shares actively traded) and for this reason, coupled with thin capitalization, the stocks can be manipulated quite easily by several buyers or sellers, and some news or rumors. Many penny stock companies use spam email to promote their products. They send out to large groups of internet users who end up becoming interested in the stocks. As the emailed people start buying, the price goes up, and the investment starts to look like a great deal. At this point, the pump and dumpers will start selling all the shares they can, and the investment will come back down to Earth. The pump and dumpers make the money, and the investors who come in later are left holding the bag.

These pump and dump schemes are extremely common, and penny stocks are almost always what are used for the promotion. Particularly vulnerable to this ruse are small and new investors who have tiny amounts of capital. Most of these types of investors want to accumulate a large amount of shares with the hopes of turning a meager $200-$500 investment into a retirement nest egg. Most end up losing their capital.

These warnings might seem obvious, but it’s amazing how often people lose their head when dealing stocks. Most people feel that the number of shares is their best chance for making profits. They feel if they can but 100,000 stocks for 0.001 that somehow they’ll get rich if only the stock hits 1 cent! This is true, of course, but almost never happens. Most stocks that sell for fractional pennies are more likely to stay in that neigborhood rather than to rocket to even $10.

Remember that the only metric you need concern yourself with as it relates to investing is total returns. The higher your percentage return, the more money you have. You will never end up concerning yourself with share price if you are a studious investor. It’s meaningless in the final analysis. For savvy investors who do a ton of research, finding a bargain in the penny stock heap is possible. Once you’ve done a few trades of “normal stocks” give it a try, but lay off the pennies until you have a very good understanding of what makes share price move.

About the Author

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