Monday, July 19, 2010

Stock Investing Today

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Every now and then I call my friend up and we discuss the current state of stock investing today. Mostly it's in disgust at the out right manipulation we see in the market every day. Whether it's analysts downgrading stocks they have a short interest in or the governments outright disregard for setting any kind of trading rules that would make the market fair for all. Meanwhile, the SEC who sets most of the rules puts the Martha Stewarts in jail while the Bernie Madoffs bilk everyone out of their money. We also don't see financial reform doing much to correct the sorry state of the markets today.

I think the real problem with the market is the fact that basic premise behind free markets is supply and demand. Yet, we have these market makers that provide liquidity to investors so that there always buyers and sellers. This seems to me to create artificial demand and if that's the case, it must prop up prices to some degree. I also think that because these market makers are sitting on this liquidity, it's my theory that they sit in a room and figure out how to make money with this idle money. And that's where the little investor gets screwed. Now I'll admit that I don't know much about "market making" and it may very well be required, but it seems a little too casino 'ish if they are just acting like the house taking all bets.

In the end, stock market investing today is what it is and it still provides investors with one of the best opportunities to make money than just about any other out there. The rules as those who invested before us are not the same and so it's important that you have an investing strategy that will help steer you clear of those out to just capture your capital.

One such strategy that I think works well today is CANSLIM. In particular, the most important part is what it teaches about using charts to be able to tell when big money is getting into and out of the market and likewise into and out of individual stocks. From my experience in the market so far, I will tell you that the media will just pass on what the big money wants us to believe so they can profit. The media will do no real research to see if what they say is correct. Cramer on CNBC confirmed this tonight on his show when he said that no one checks into economist forecast to see if they are accurate. They just accept it.

That's where the technical analysis of charts comes in handy because you can look at a stock chart just like an x-ray. You can determine if the demand is increasing or decreasing for the stock you are looking for. From day to day, these price and volume clues that the charts can't lie about do more to provide you the insight you need the media does.

Because of this you need to devote your study of the market to those that help you create your own opinion rather than relying on that of other.

Continue your study and good luck!
Ty

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