Stock Market Information

The hardest part of getting started with investing in the stock market is the sheer amount of information available at your finger tips. From complex quantitative analysis to Jim Cramer blaring his latest recommendation on CNBC, it can be hard just to get things straight and form your own opinion. With that in mind I’ve compiled a short list of 5 books that would be a welcome addition to any beginner’s repertoire.

• The Only Investment Guide You’ll Ever Need by Andrew Tobias: Tobias presents a lot of information in an entertaining and witty writing style. While most people fall asleep trying to read an investment book, you’ll actually be able to breeze through mutual funds, bonds, and treasury bills. A great all around introduction to the subject of investing.
• The Random Walk Guide to Investing by Burton Malkiel: If you want to talk about someone who shares my hatred for debt, this author is your man. He also likes to keep things simple: Establish an emergency fund, make regular investments to a diversified portfolio of index funds, and utilize patience.
• The Bogleheads’ Guide to Investing by Larimore, Lindauer, and LeBoeuf: John Bogle is one of the most well known index investors of all time (and founder of the largest mutual fund company that encourages index fund investing too!) These authors follow the Vanguard’s founder enthusiasm for investing and help the average investor understand things like mutual fund investing and asset allocation.

I’ve never, ever been a big fan of debt. From living mortgage free to my refusal to take out loans if at all possible (though I have for some things when necessity dictated, such as my education). I’m a fiscal conservative at heart, and it really racks my brain to see how tolerant people are of borrowing, both at the consumer level and in the government as well. The U.S. government has run the country into more debt than ever before, and eventually it’s all going to have to be paid back. Not now, certainly, but future generations. We’re taking out a mortgage on our own future, and no one’s going to be pleased when it’s time to pay the piper. A recent article at Yahoo! Finance echoed these thoughts:

“Although interest rates remain historically low, Brusuelas says deficits definitely do matter from an economic perspective. The U.S. current account and fiscal deficits (a.k.a. the twin deficits) have directly resulted in “reduced purchasing power of the U.S. dollar” since 2002, meaning “higher inflation and a reduced standard of living for all Americans,” he says.”

Of course take that with a grain of salt, given that it’s only one economist, but lets just stick to the facts. The current account deficit is up 426% in the past 10 years. The dollar has taken a serious plunge in value, inflating commodities that are pegged to the dollar like oil. This in turn has cause pain at the pump for Americans across the country as more of their discretionary income gets devoured by things like gas and food. Directly deficit related or not, it’d be hard to make a case that it’s had no effect at all. It also doesn’t prove that we the country can possibly continue running a deficit without severe consequences of the future.

In our previous post we covered a general outline as to what the Foreign Exchange Market is, how it operates, and why some savvy investors can profit from it (albeit with a significant amount of risk). To continue along that track, we’ll cover some additional methods and terminology for getting started with Forex Trading:

All About Dealing Spreads

When beginning to trade on the foreign exchange, you’ll be quoted a dealing spread. The dealing spread offers you a buying and selling point for your trade. If you decide to accept the price that’s offered, you’ll receive confirmation from your dealer and the trade is complete. Live streaming prices are available so you can keep track of fast-paced markets. You’ll be able to follow your trades and know whether your order has been filled or not based on your specifications. Under most circumstances, a dealing spread is typically 3-5 points.

Interest Rate Differentials and You

Depending on the currency, each will pay a different interest rates. This is an important factor to consider when gaging foreign exchange trends. In most cases, it’s attractive to buy a currency that pays a high interest rate or short a currency that has a low interest rate.

Utilizing Stop-Loss

Given the inherent risk of the foreign exchange market, many traders will use stop-loss positions to prevent unfavorable positions from moving against you for too long. Since there are no daily limits on foreign exchange trading, many traders react to moves in the markets very quickly.

Hopefully our basic Forex Trading Guide gave you some insight into the operation and strategies employed by traders on the market. I recommend doing quite a bit of research and due diligence before engaging in trading, however, given the high risks involved and constant volatility in the markets that could see 20-30% swings in a short period of time. Good luck!