Stock Market Preview For The Week Of Jan 5, 2015

Many of us develop cold feet at the mention of carrying out banking transactions, all this because of the confusing technical terms associated with banking and finance.  The advantage of investing with these companies is that they are stable organizations %link% with a global reach and their stock price fluctuations tend to be less, also, they provide good dividend income. Such advantages are known as economies of scale and allow the companies to create profits from the sheer volume of sales they generate.

Trading sense is often overtaken by herd behavior, when a rumor or irrational speculation pushes or lowers prices of the stocks %link% in a drastic manner. Volume information for a stock can usually be obtained from most sites that give stock prices.

Stock valuation is the method used to calculate values for company stock, and thereby predict a movement in these values, or in the short term, the stock prices, so as to profit from the change.  Stocks considered undervalued - whose true value has not yet been recognized by the larger market - are purchased, and the overvalued ones are sold, in the anticipation of a drop in prices.  The most popular and frequently used method of valuation is the DCF or the Discounted Cash Flow technique of stock valuation.  Another very popular method of valuation of company stock is the Earnings per share formula, which gives you the net income of a company in relation to every unit of stock it holds.

Trading in stocks gives solid returns in the long term, do not expect to blaze a trail in your first week, the stock market is not a Hollywood flick, no matter how exciting the connection seems.  Quick trading is fun, you can buy and sell on the go, study economic trends and change your portfolio accordingly and also make a profit.

Although the pricing mechanism in stock markets works extremely well, it is often prey to sentiment and investor emotion.  Despite all %link% the research you may have done, the future is uncertain and it's always prudent to keep a margin of 15 - 20 % on the stock price.
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