A lot of people think that investing in the stock market is risky. And it is – if you don’t know what you are doing. Because the truth is anything is risky if you don’t know what you are doing. With the world wide recession going on today the stock market is seen as an even greater risk. Stock prices have been fluctuating like crazy. Companies are going bankrupt left and right. Why put your money at risk? The bank is safer, right? Wrong. Despite the craziness that has been going for quite sometime now, the stock market is still a very good investment vehicle. Here are 5 reasons why you should invest in the stock market.

The stock market has good interest rates. I have nothing against banks – except their low interest rates. You only get about 2% tops if you put your money in the bank. Time deposit gives you around 6 or 7%. The stock market, on the other hand, has an average interest rate of 18% per annum. Now that’s a lot better than 6 or 7%, don’t you think?

Leverage. When you invest in the stock market you get to make use of the most powerful form of leverage in the word – compounded interest. Compounded interest is when the interest is added on the principal amount and it starts earning as well. In a way, your money starts earning you more money.

Diversification. The stock market allows you to diversify. A good investor knows better than to put all his eggs in one basket. You never know what’s going to happen. So play safe and invest in several good companies. Of course, don’t diversify too much or you won’t be able to enjoy good returns. Invest in good stable companies and you can be sure that you will end up with a comfortable nest egg to retire on.

You can grow your wealth slowly but surely. Investing is not like winning the lottery. It’s a process that takes time and effort. The revenue your get from your stock investments can increase over time. The market may fluctuate and there may be times when you hit negative, but as long as the companies you have invested in are good companies they’ll rise back up.

When it comes to investing in the stock market, time is your greatest ally. The earlier you start the better. However you should also watch the companies you invest in. The current market conditions make investing in the stock market a bit risky – especially if you don’t know what you are doing. So the best thing to do is to study the market so you can take calculated risks.

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Risk lies at the very core of trading. Without risk profit would not be possible. On the flip side of the coin, because of that risk there is the danger of big losses befalling you. However, as necessary as taking risks is if you’re to turn a profit, by using stop losses intelligently, you can protect yourself from the nasty surprises that compromise an unavoidable part of trading.

Indeed, employing stop loss orders properly is a function of having the right mental attitude to be a successful trader; knowing that you cannot and will not win every time. Putting on a seatbelt when you step into a car isn’t something you do because you are expecting to crash, or because you doubt your own abilities as a driver. You do it (aside from the fact that it’s illegal not to) because you are acknowledging that out there on the roads there are forces which are simply beyond your control.

Give Yourself a Safety Net

By using stop loss orders cautiously and tightening them when things look uncertain you can make sure your losses are minimised. Furthermore by using a stop loss order, ahead of time you reduce the chances that you will succumb to the trader’s great enemy; hope. Whilst hope could cause you to keep a losing position open longer than necessary, a stop loss order can act as a signpost definitively telling you when to get out.

This has a double benefit, in that big losses hurt you not just financially but psychologically, which can lead to more problems further down the line. Making money trading is about consistency, not making one off miracle trades. However, if you have big losses to make up you are much more likely to be drawn into bigger gambles or “revenge trades” where you try and get your own back on your misfortune.

The core of a good trade plan is to pick your exit point at the same time as you decide on an entry point that you’re happy with. Stop loss orders help you stick to such a plan. This may sound limiting given how fast markets can move, but using a trailing stop loss order, you can automatically have your exit point move up behind the price as it rises (assuming that it does!).

Exceptions Prove the Rule

Of course, there are some trades where you may have a decent reason to leave a stop loss out your strategy. If for example you’d picked up an extremely volatile stock due to a conviction that it would, overall, go up in price over a period of years, you’re going to be ignoring month by month fluctuations in price, even if they do take a considerable tumble. In this scenario, given the risk you’ve taken on, a stop loss is unlikely to be much use to you.

However, unless this is your mindset from the very outset, before you even by the stock, you shouldn’t adopt such a tactic. Don’t babysit a bad trade out of pride or frustration at the way prices are going in the vain hope that the situation will soon be reversed.

One of the most important mental attributes a good trader needs is the ability to take a (preferably minimal) loss, learn from it and move on. Stop losses can help you do just this, by alerting you early on to a trade that just isn’t working out.

Daniel Steel writes extensively on a range of trading issues over on Trading-Talk.

Over the last few years, gold has experienced a sudden price spike, similar to what occurred in the 1980′s. As of today (Nov 3, 2011), gold sits at $1762 an ounce, which is down $134 from an all time high of $1896 (on September 2011). Experts are mixed as to whether gold is teetering on the edge of a bubble, or if it will continue to gain value in the long term. If we look at past events which contribute to increases and decreases in the price of gold, we may be able to determine its future value by examining these “predictors”.

Predictors of Gold and Precious Metal Prices

Inflation – Stimulus programs are currently propping up the economy and have been introduced in many other countries to fight the global recession. As more money is printed, paper currencies tend to be worth less. The inflation of currency makes commodities like gold and silver, real estate worth much more valuable. In this case, commodities can be seen as a hedge against the loss of value in paper currencies. The more gold becomes seen as a safe investment, the more its price will inherently rise.

Not all experts agree with the concept that inflation rates and gold prices are linked. From the 70′s to the year 2000, gold prices and inflation rates followed each other quite closely. But, during the last 10 years, the rate of inflation and gold have diverged.

Demand – Demand is growing due to higher wages in developing countries like China and India. In 2009 East Asia, India, and The Middle East accounted for over 70% of the world’s gold demand. These countries along with China are experiencing a boom in wages and changes which will lead to increased demand. The Chinese government also encourages their citizens to invest in gold and has begun allowing the import of gold from foreign markets. The high demand for gold from China and the rest of the world market, exceeds the available supply.

Discovery – Gold is not being discovered through mining at the rate that it once was. The rate of discovery of new gold has consistently failed to hit expectations in recent years. Some experts believe in the theory of “peak gold”, which predicts that the rate of discovery will continue to fall as the worlds gold supplies are depleted. If discovery rates decline, prices will continue to rise.

Economic Uncertainty – Currently, the United Sates and many other countries are struggling to recover from a double dip recession. The global economy has been hit hard and the EURO is teetering on the verge of collapse. This confusion and uncertainty about the economy means investors will look to gold as a safe place to store their money. If this uncertainty remains, prices will remain high.

Crisis And Precious Metal Prices

In addition to financial difficulties, conflict continues to rage across the globe. The “Arab Spring” has changed the political landscape in the Middle East. The world is still waiting to see if the outcome will be positive or lead to more conflict. An increase in the price of oil has contributed to higher gold prices in the past. A new political order in this region will affect prices.

As the price of gold sits at $1762 an ounce, it mirrors a situation in the 1980′s where gold prices hit the equivalent of what would be $2000 an ounce today. A similar spike occured due to dramatic oil price increases, a gas shortage, unrest in the middle east, and a change of leadership in the oil producing country of Iran.

Summary

The rate at which gold prices increase or decrease, depends on a variety of factors including: the state of the world economy, the wages in countries that have the highest demand for gold, volatility and conflict in the world, and the rate of discovery of new gold. Currently the price of this precious metal has experienced a spike which does not seem sustainable. But, in the long term, all the ingredients that are necessary for increasing gold prices to exist. After a correction in the over-valuation of gold takes place, it will be seen as a safe place for investors to store their money. Due to this fact, i believe that gold will continue to maintain its value even if the economy becomes more prosperous.

Ross runs the website Great Credit Score which contains tips on how to repair credit, invest in the market, and understand this volitile economy.

However, one important point about the martingale strategy must be mentioned – it is only possible in case the trader is very well-funded. And. What is more, one missed trade can sweep away the whole trading account. In addition, the amount of risk is far greater than the prospective gain. In other respects, in case of a winning transaction, the profits can be enormous.

If the forex traders are not scared off by the potential risks involved in martingale strategy and ready to read further, here are the basics. Martingale strategy was devised in the 18^th century by Paul Pierre Levy, a French mathematician and developed further by an American mathematician Joseph Leo Doob who wanted to discredit the possibility of 100% profit. The essence of a martingale strategy lies in the fact that every time the bet loses the wager is doubled. One winning trade could exceed all the preceding losses. As for gambling, it resulted in just two possible outcomes of the bet: either wining or losing. As a result, in order to diversify the gambling process, to make it not so straightforward and, what is more, to reduce the efficacy of the martingale strategy to minimum, 0 and 00 were introduced on the roulette.

As far as forex trading is concerned, it is important to remember that currencies are likely to trend and these trends can last very long. When martingale strategy is applied, the trader’s average entry price is lowered considerably due to “doubling down”.

In fact, martingale strategy is quite popular in the forex market, since currencies go to zero very seldom, in contrast to stocks, for example. It means that a currency can depreciate, but not to a zero. One more possibility that a martingale strategy provides for the forex market is that while trading currency pairs, a trader can buy a currency with a high interest rate and sell a currency with a low interest rate. If the amount of traded lots is large, the interest income can be quite sufficient.

However, it should be mentioned that forex traders willing to practice martingale trading strategy have to be very careful, despite its attractiveness. The underlying danger of this strategy is that it cam blow up the whole trading account in a single trade before bringing profit, actually. That’s why many forex traders consider martingale strategy to be very risky.

Article was written by Collins Alexander. Who is a founder of ForexEAsystems – vendor of forex trading systems that work. If you want to make extra money on Forex, join their forex affiliate program. Also follow them on Twitter and Facebook.

Virtual Trading for Beginners

First tool I would like to recommend to beginners is to set up a virtual trading account, where they can paper trade and this way examine different trading strategies and ideas without risking real money. You can set up such account for FREE at WallStreetSurvivor.com. Not only you can learn trading for free, you can even win prizes while doing it.

Understanding the Market Moves

If you would like to be in the 1% group of those traders and investors who actually understand market moves, consider joining the Elliot Wave International, world largest market forecasting firm. You can join the Club EWI for free and get access to their library and exclusive trading tutorials and market reports.

Buy, Sell or Hold

Did you ever wanted to have a tool, where you could enter a symbol and after clicking the button you would receive back a short, medium and long-term idea what to do with this stock? I bet you do. Such a trend analyzing tool can be useful before you enter new position and for examining the existing positions in your portfolio. Join the market club today and start enjoying all the benefits for members.

Going Active: Follow the Pros

As you can imagine, the more you shorten your trading period, the more dangerous the stock trading game becomes. Short term trading often involves trading on margin account in order to earn out the market’s volatility, breaking news have a much more powerful short-term effect on stock markets than on long-term, and fear and greed can also be more extreme on short-term. That is why it is often better to follow experts in active trading, especially if you are not experienced enough and your head is not cooled. Mike at MPtrader.com has great statistics with trading ETFs and stocks for the last few years. He had 162 winning trades out of 260 in 2010, resulting in +125% yields (sum of trades).

Real-Time Data for Serious Traders

Serious traders cannot be successful in today’s environment without real-time data and news feed and advanced trading platforms. It is like a pilot without a plane, or an architect without AutoCAD. Yes, these things cost something, but look at this cost as an investment on your way to financial freedom. Without sufficient tools, chances are you will end your trading or investing carrier loosing part or whole of your capital. Try real-time tools provided by EquityFeed for one month FREE.

Written by Goran Dolenc, author of Stock Market for Beginners Guide to Investing, where you can learn how to build a perfect investment portfolio: from stock market basics to advanced stock trading strategies.

However after you have invested and your money is largely gone and lost you sit down and ask how could I be so wrong? The answer is that you fell victim to ignoring the silent witnesses. This is how it works.

Take the names and addresses of 10,000 people. Mail 5,000 saying the market will rise and 5,000 saying the market will fall. Next month repeat the 50/50 split but only mail those who got the letter which made the correct prediction in the previous mailing. Repeat monthly until you have a much reduced list of people who have always received the correct forecast. Basically when you sit down having received the correct forecast for the last 6 months then out of the 10,000 which were mailed initially there are now 312 who like you are thinking they are onto something good. The other 9,688 are the silent witnesses. They all received a letter where the forecast was wrong but you don’t know about them. They are the silent witnesses.

This problem also goes under the name of the survivorship bias and was highlighted by Nassim Nicholas Taleb in his highly provocative book “The Black Swan”.

So where else does this crop up in life? Well in his book he argues that this is one of the main drivers which brings the problem of Black Swans and unexpected disasters into our lives. But on a more mundane level he also suggests that this lack of insight, so that we only see what we want to see, also impacts on areas as diverse as the nature v nuture debate and the illusion of skills in many professions.

These are powerful arguments and we will investigate them in further blogs.

Written exclusively for financewand by Mike Holly. Mike lives and works in Northumberland, United Kingdom. Referring you my friend’s site on  Currency trading strategy