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How to Use  FREE Websites to Increase Your Trading Profits

The World Wide Web (abbreviated as "www," the beginning to most web addresses) is better known simply as the Internet. But there is nothing simple about the information that is available absolutely free to traders around the world. In fact, traders today have access to newer, better, and certainly more timely information over the Internet than the richest investors of only 20 years ago could buy.

There are literally thousands of websites offering "free" services to traders and investors of every type from novice to the most experienced. Many of these websites charge substantial fees for access to their information. Typically the most expensive websites are those promoting the latest "hot" trading tips. There are other quality pay sites which offer detailed information, timely fundamental or technical data that is of interest to select groups of traders.

But one of the phenomenon's of the Internet is the vast array of websites that offer high quality, timely information for that best of all prices - FREE. It is not our purpose to review for pay websites in this essay. Rather we are focusing on only the three best out of many hundred websites that provide financial information in one form or another to all of you who simply have access to a computer and the Internet.

Remember, you don't even have to own your own computer to take advantage. Almost all public libraries now provide some type of access to the Internet to their patrons. One big advantage of a public library, especially for those of you who are a bit timid about taking the big step of "surfing the Internet" for the first time, is that the library staff will help you get started.

Getting Price Quotes

The most basic piece of investment information for every trader is prices. You have to know what the prices are on a regular reliable basis to know if you are making or losing money. It is the whole point of the business.

One of the most notable advantages of Internet access is the ability to get price quotes in a much more timely manner. If you try to trade the stock, option or futures markets by watching price quotes in your daily newspaper, you are putting yourself at a distinct disadvantage in more ways than one.

Most daily newspapers do no more than cover a relatively small selection of stocks. If you are looking to find that undiscovered gem, that next Microsoft, then it is likely that your local daily newspaper is not going to cover the stocks that you are really interested in trading.

Second, even the very best financial newspapers, the Wall Street Journal and Investors' Business Daily¸ carry the daily price quotes for only a very small segment of the total number of stocks and options traded. Remember for every stock that is traded with options, there are many series of options reflecting different strike prices and different expiration dates. Your daily newspaper would have to be about the size of an encyclopedia simply to cover all the possible options. And guess what, that one option that you want to follow, will not be among the option prices quoted everyday in your newspaper.

But even if your newspaper carries the price for that option on the stock, option, or futures contract that you happen to need, the price appearing in today's newspaper is already a day old! It is yesterday's prices. Today's trading action will not appear until tomorrow's paper comes out. That's no way to trade.

One of the most valuable free websites you will ever find is www.pcquote.com. Pcquote carries today's prices today for every New York Stock Exchange, American Stock Exchange, NASDAQ, and many other Over-the-counter and foreign stock prices. Its free service provides these quotes with a 15 minute delay. You can pay extra and eliminate that 15 minute delay, but there is little reason to incur that additional expense for most traders.

15 minutes after the market closes - that's 1:15 pm out here on the West Coast - you can find out today's closing price as well as the total price action (the opening, high, low, closing price and volume) for virtually any stock you need. No more waiting for tomorrow's newspaper. But remember, you don't have to wait for the closing price to find out what is happening to your stocks during the day. The site continually updates price quotes on a delayed basis throughout the day.

But even more exciting than the great coverage for stock prices is the comprehensive coverage that www.pcquote.com provides for option traders. No newspaper carries every option. It would be impossible. But on www.pcquote.com  you can find the current price quote for any option that is currently being traded. Like stocks the prices are 15 minutes delayed, but that is sure better than being 24 hours delayed like in a newspaper.
One of the most confusing things about option prices is the vast number of possibilities that every active stock that has options makes possible. At www.pcquote.com  you simply type in the symbol of the stock that interests you and it will show you an option "chain" or a list of the most commonly traded options for the stock. But never fear, the website carries the prices for all the options available if the one that interests you does not happen to be among the most commonly traded.

We like pcquote's clean interface and the ability to easily get current prices. It has many other features that are valuable to traders. For any stock you can get not only the latest quote, but a chart showing price history, or even the latest news on the stock of interest. But that is not all. The site features lists of the most active (highest volume), the biggest percentage gaining or percentage losing stocks, and many other valuable pieces of information. You can even find out which stocks are being upgraded or downgraded by the leading brokerage firm analysts.

And that is not all. Click on the screening button on the first page and it takes you to a page that automatically sorts through all stocks to find those that meet pre-set parameters. This page alone may save you literally hours of research.
Serious investors know that www.pcquote.com  is one of the most valuable financial websites you will find at any price. And its price is free.

Unearthing Information on Stocks

Microsoft provides one of the best financial websites of all: www.investor.com.
This site is also known as www.moneycentral.com.   It used to be a pay site - getting about $35 a month for subscribers. But a few years ago it went free. It was a bargain at $35 a month - now it is unbelievable!

Want to find out details about what a company does, how well it does it, how it handles its money, how fast it is growing, how it compares to other stocks in its industry or any of hundreds of other questions? Then this is the place for you.
On the home page for this excellent site, you can easily go to a number of valuable pages. This one site provides one of the best overviews of daily market action. Want to find out what industry groups are drawing interest, what stocks are in the headlines, what the latest economic report means to you and your investments, it is all here one simple mouse click away.

Type in the symbol of a stock you are interested in researching (or type in the name of the company and it will find the stock symbol for your). You will be taken to a multi-page report on that company. At a glance you can find out trading information like average volume, 52 week high and low, percentage price change for the last day and much more. The very first page includes a summary of key fundamental data such as PE (price earning) ratio, dividend, dividend yield, number of outstanding shares, and market capitalization (stock price times the number of outstanding shares).

Click on stock history and get an easy to understand capsule summary of the company and more information on the stock. Want to know the company's latest news, click on the news tab and it brings up things like earnings reports, management changes, new product announcements, all of which can be viewed in detail with another click of the mouse.

It will also give you earnings from the past, and importantly, analysts' projections of earnings to come. Earnings tend to drive stock prices. This is valuable information.

If research is your forte then www.investor.com  is the site for you. It is too comprehensive to detail all its features here, but take the time to visit this site and we are willing to bet that you will be going back time after time. It has everything from commentary from some of the leading minds in the investment business, to tools for screening for stocks that meet your parameters, on-going education for not only stock investing but financial planning. Learn about all aspects of your financial life from investing to insurance to retirement planning.
www.investor.com   is a great site that should not be missed by serious traders.

The Best Price Charts Available Anywhere!

One of the most popular financial websites features comprehensive charting services: www.bigcharts.com.. When you first arrive at the www.bigcharts.com
site, the very first things you see are charts with current prices (15 minute delayed) for the Dow Jones Industrial Average (DJIA) and the NASDAQ Composite. Left click with your mouse on either chart and it takes you quickly to an expanded chart of the index you chose.

Charts are critical to the success of most traders simply because they tell you at a glance what the stock price has been doing for the past 6 months, or year or 2 years or longer. You can draw charts for virtually any time frame you want.

The great thing about www.bigcharts.com  is that you are not limited to a single chart type or time frame. There are three different types of charts. A "quick" chart is just what it says. Very quickly you can see an expanded chart of whatever stock or market index you want to see. You can spell out the time frame in a quick chart from 1 day all the way to 1 decade.

But you will quickly move on from "quick" charts because the other types offer you more possibilities for customizing the charts you want to see. Click on "interactive" and you are offered a wide range of choices for what charts you can draw and what studies you can put on each chart. You can spell out the time frame, but you can also include a wide variety of technical studies (things like On Balance Volume, MACD, RSI, moving averages and much more). One of the nice features of the interactive charts is that you can save your favorite chart template with just those things that you want to see on a chart. Then each time you go to the website it will draw the chart exactly the way you want it. You don't have to go through all the steps of designing the components for the chart every time you visit the site.

Then all you have to do to quickly review the charts of a number of stocks is type in the symbols (or the names) of each stock when you are finished reviewing each company. You can quickly review 5, 10, 15, 20 or even more stocks every night in only a few minutes.

The last type of chart is a "java" chart. This is the most sophisticated of all the charts. Once again like, the interactive chart you can specify what you want to see. For example, many people prefer to use "candlestick" charts instead of the more common bar charts. You can even look at a chart of just the closing prices if you are not interested in the high and low range each day.

One of the advantages of the java chart is that you can see the exact prices for all the days, weeks, or months on the chart simply by moving your cursor over the chart. As it passes each day it tells you the date, the open, high, low, and closing price. For example if you pull up a six month chart, you can easily see the exact prices for each trading day for all six months. You can draw daily, weekly, monthly, quarterly and even yearly charts that give you exact prices and provides a long term perspective that goes back up to 10 years.

The java charts enable you to easily draw trend lines between key chart points. You can zoom in and out on key chart areas to get better detail on dates and price action that are important to understand a stocks behavior. The java charts even include icons that highlight up or down earnings dates, stock splits, and dividends.

The www.bigcharts.com website includes many more features too numerous to detail here. For example, one of the most widely employed analytical tools used by successful investors is to concentrate on those industry groups that are outperforming the market averages. It is said that 70% of a stock's direction comes from the market direction. Another 20% comes from the stock's industry group. The last 10% comes from the stock itself.

At www.bigcharts.com  simply click on the "industries" button on the home page and it takes to a comprehensive review of not only how different industry groups are performing but the names of the individual stocks that make up each industry group. Take it from us, professional traders monitor industry group relative strength far more closely than the average investor. Professional traders make more money than the average public trader. It makes sense to do what the very best traders do! Watch industry group rotation to spot stocks that are early in their cyclic upturns.

In the investment world, even more than the art world, a picture is indeed worth a thousand words. Chart reading is critical to trading success and www.bigcharts.com  features free access to the most modern state-of-the-art charts available.

All three of these websites provide invaluable information at a price that can't be beat. If you have access to the Internet, check them out today. If you don't have easy access at the moment, take the time to go to a public library, armed with this essay and take a look at all the information you can access quickly for free! The Internet can indeed make you a more successful trader, but you need to know how to be able to separate the wheat from the chaff. And make no mistake. The vast majority of financial websites are pure junk and hokum. These three sites are the cream of the crop.

Visit the three sites listed here. Learn to use their best features. They can make you a more profitable trader without spending another dime!

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Four Big Mistakes that Traders Make
and How to Avoid Them

The definition of insanity is doing the same thing time after time and expecting different results. Unfortunately beginning and even experienced traders, who have not progressed to making money on a steady basis, tend to make the same mistakes time after time.

And those mistakes are not related to fundamental research, chart reading, interpretation of technical indicators, or specific buy and sell techniques. Rather they stem from a trader's mental approach to trading.

The practical tools: fundamental research (sorting through a company's financial data, its earnings and cash condition, and its future growth prospects), technical analysis (reading charts, interpreting indicators like volume, relative strength, momentum etc), and understanding what type of orders to use and when (limit orders to enter a trade, stop loss orders to protect a trade, and market orders to exit with profits) are simply tools.

Every mechanic has a set of tools but we all have known one of more who were able to perform virtual "magic" on our cars while others with the same tools plod along helping sometimes, but only making things worse other times. They just don't have the skill or abilities of that great mechanic.

The same goes for traders. Now with home computers and easy access to the Internet we all have access to the same basic tools that in days past were thought to give significant advantages to a select few. But surprisingly enough, the widespread availability of timely information and analytical tools that only 20 years cost so much that only the very largest institutions or the very wealthiest of individuals could afford, has not resulted in a greater percentage of profitable traders. The reason why is that traders today make the same mistakes as traders did long before the PC or the Internet. Better tools do not make for better traders.

During the late 1990s the roaring bull market combined with the stunning technological advances to give all too many traders the illusion that times had changed forever. Most of you know people who made huge profits in a few short years. These same nouveau traders were suddenly "experts" willing, in fact all too willing, to share their so-called "wisdom" with the masses.

The rise of day trading on home computers was the final stage of this speculative bubble that was building up to burst mightily. You remember the ads: "You can make a great living trading while sitting in your underwear trading with your computer in your own home!"

Of course the market topped in March 2000, and over the next 3 years the NASDAQ, where the biggest gains had been made, crashed 75%. Many stocks did even worse. And all too sadly, most traders caught up in their own feelings of invincibility wound up not only losing their profits but often much more.

Successful traders know that the business of trading is part art and part science. If science alone was enough, then all you would need would be a computer program to pump out buy and sell signals based on back testing of stock data back to the beginning of the market. But such a program does not exist regardless of what you may read in wild eyed advertisements. If it did, the developer would already have won most of the money in the world and wouldn't need to sell it to you for $1,000!
In the pages that follow we detail the four biggest mistakes that traders make. This is based on over 30 years trading experience in the trenches ourselves as well as extensive interviews with many traders from the stock to the options to the futures markets. What is amazing is the consistency that these traders exhibit when asked to decipher what mistakes a trader must avoid to be consistently successful.

Mistake #1 Failure to have a consistent trade selection method

Most traders, most advisories, most Internet chat groups talk about profits Few ever take the time to point out that profits are actually relatively easy to handle. Losses are the hard part of trading. And yes, they are an inevitable part of trading. Until you learn, understand, and live with this fact of trading you will never succeed over the long term. A good case in point are all those big talkers in 1998-1999 who you never hear from anymore.

The key to separating yourself from the mass of losing traders is developing a consistent method for selecting your trades. Your trade selection plan should be written out. It should spell out the factors that MUST be present to buy (or sell short) prior to taking action.

Factors to base your trade on could consist of things such as earnings. For example many successful traders will only buy stock in companies that show an annual earnings growth rate of 25% to 50%. Earnings are reported quarterly. If a company shows two consecutive quarters of decelerating earnings, that may be the signal to sell the stock or even consider going short.

It is not the purpose of this essay to detail every possible trading plan. We recommend that you take a look at William O'Neill's How to Make Money in Stocks, as one good starting point, though there are many others. Earnings growth is only one factor and not necessarily the most important one.

Other traders like to concentrate on technical factors. For example, they only want to buy stocks which are going up faster than the market as a whole. This is called relative strength. It is common to compare a stock's rise in price to the S&P 500 index. If it is rising faster than the S&P Index, then it is outperforming the market. That is has a strong relative strength. It is strong relative to the market as measured by the S&P 500 index. It stands to reason that stocks that outperform the market averages will be the biggest winners over time.

In another report of ours: How to Use Four Free Internet Site to Increase Your Profits, we detail for you the exact web addresses where you can locate information on earnings, growth rates, cash flow, relative strength, chart patterns, and a myriad of other potential inputs.

The most important tip we can give you here is to keep it simple. Don't get caught up with developing a 30 point checklist. You will never make a trade then. Include parameters that make sense to you. If buying high relative strength stocks does not make sense to you, then don't do it.

One of the most successful investors of all time, Peter Lynch, based his whole investment philosophy on buying only those stocks that made sense to him. He got some of his best ideas from his wife who would come home and tell him about a great new store or product she discovered while shopping the mall. He'd do a bit of research and sometimes that company would be in the early stages of a great growth cycle.

The Internet with its flood of information makes it all too easy to create trading plans that are so convoluted and complex that they may be great in the world of theory but useless in the real world of trading.
Pick out a checklist of 5 to 10 things, combining fundamental factors like earnings cash in the bank, cash flow etc with a few technical inputs such as relative strength, chart formations, timing signals, and/or seasonal tendencies (80% of all the profits in the history of the stock market occur between November and March).

Mistake #2 Failure to Have a Profit Target

Once you know what you want to see to buy a stock, determine a reasonable price target. It doesn't make sense to buy a $10 stock that has the potential to go to $11 over the next year. That is only 10%. If you buy 100 shares of five $10 stocks and they all go up $1 in a year you just made $500. But it wouldn't take much to wipe that out. If you bought 100 shares of a sixth stock at $10, and it dropped to $5 in a year, you would have lost $500 on that stock, and wiped out the gains on your five profitable stocks.

Look for home runs and settle for singles if you must. You want to buy stocks that have real chance to double, triple or quadruple (a four bagger in floor trader parlance). There are many ways to calculate potential upside price targets.
One widely used approach is to check the historical PE (price/earnings ratio of a stock). Let's say that the historical PE for XYZ is 10. Current earnings are $2 per year. The stock would be selling at $20 ($2 multiplied by the PE ratio of 10) if it was selling near its historical average. You then look at analysts' projections for future earnings for XYZ and they project $3.50 a share next year. If the stock sticks with its historical PE you could expect that stock to run up to $35 next year ($3.50 X the 10 PE).

Other traders prefer to base projections on chart formations. History shows that prices move in waves. If the last wave up was $10 from high to low for XYZ, and it was selling at $8 and forming a bottom, a technical analyst might project $18 for the next upside target.

There are many ways to project price targets and profit potentials. It is beyond the scope of this essay to delineate them all. But one thing you must do is to develop a method for projecting profit targets. Otherwise how will you know whether it is worth risking your hard earned money to buy the stocks that your selection method zeroed in on.

Mistake # 3 Trying to Follow Too Many Stocks

There are over 50,000 stocks traded in the United States alone. Add in the rest of the world and you have hundreds of thousands of potential stock investments. Unless you are superhuman there is no way to realistically monitor that many stocks. If you are trading short term where you plan to hold your stock anywhere from one day to 30 days, you need to focus like a laser on a select group of stocks that exhibit a consistent trading pattern that you can easily recognize and act on.
Short term traders should focus on high volume actively traded stocks. Some very successful traders focus on only the 30 stocks in the Dow Jones Industrials. Others look at the NASDAQ 100, a proxy for the technology sector of the market. Investors Business Daily newspaper publishes a list of top 100 stocks based on its proprietary stock selection method every week. The list is available in spreadsheet format on its website.

For intermediate to long term traders, your horizon can be larger since you will not be under pressure to develop new trading ideas on a daily basis. But even here, we caution you against trying to do too much. The S&P 500 index is a selection of the top 500 industrial companies in the country. Its stock components do change periodically though not usually more than once a year. That is a good starting point.
Some traders prefer to buy low priced stocks. "Penny" stocks are stocks that sell for $5 or less per share. Penny stock trading has a bad reputation for a very good reason. There are many charlatans in the business who hawk stocks solely because the underlying companies pay them "marketing" fees. If you like the low priced sector, we recommend that you stick with stocks that are listed on the New York Stock Exchange, the American Stock Exchange, or the NASDAQ. Stay away from the OTC Bulletin Board (BB) and "pink list" stocks. An occasional gem does pop up out of the OTC BB, but the very high risk nature of these stocks outweighs the profit potential for the average investor.

Mistake #4 Failure to Control Your Risk

The single biggest mistake made by traders both new and experienced is the failure to control your risk. In Mistake #2 you learned how important it is to set a reasonable target. If you don't have some idea of the profit potential it makes no sense at all to invest in a stock.

But likewise, if you do not set strict risk parameters and stick with them with unfailing discipline, you will never make money consistently in the stock, option, or futures markets.

The old Wall Street saying is very easy to remember: "Cut your losses and let your profits run." But it is very difficult to carry out. The reason for this is simple: no one likes to admit they are wrong. We all get a little stubborn when it comes to admitting error.

Many traders became investors in the late 1990s when they bought high tech stocks at $100 or more per share, then held those stocks as they fell all the way to $25, $20, $10 or even less. A couple years of dropping stock prices wiped out the profits of most individual non-professional traders. The pros knew enough to cut their losses. They understand that if you run out of chips (money), you can't trade anymore. If you can't trade anymore then you can't make money anymore.
The number one goal must be preservation of your capital. If you are able to preserve your trading capital, then you can always make another trade. That next trade may just be the one that makes you a big winner. But if you lost all your money, you will miss out on that winner!

The secret of trading success is so simple that it is derided by all the high priced experts peddling expensive advice or trading systems. The secret to success is to avoid the disasters - the big losing trades.

It is easy to say but difficult to do. One of the most difficult aspects of the stock market is that it is an accumulation of human frailties being played out on a big stage. Traders quickly learn that the market will do what is necessary to separate them from their hard earned cash.

One of the first things that every trader experiences is to see the stock they bought drop down to their stop loss point. They sell at the stop loss in order to "cut their losses" only to see the stock turn on a dime then shoot higher, doubling or tripling. The first thought that leaps to mind is naturally: "If I only would have held on a little longer, I would have made a fortune."

Trust us, the market will do this time and again. Most traders finally give in and decide that "this time I'm not going to be knocked out just before it turns." Of course what happens "this time" is that the stock does not turn on a dime. It continues to fall. Pretty soon that $10,000 investment has shriveled to $1,000 and you have little realistic chance of making that money back anywhere nearly as quickly as you lost it.

Consider the math. If you buy a $30 stock, and it falls to $15, you have lost 50% or half your investment. But in order for you to get back to "even" the stock doesn't just have to go up 50%, it must run up 100% or double, just to get you back to where you started.

It is far better to take a series of small losses. William O'Neill recommends that you never risk more than 8% on any single stock position. If you buy a $20 stock, that means you should be selling it if it drops 8% ($1.60). That cuts your loss and leaves you with the capital to buy another stock that your selection method ferrets out for you.
Other successful advisors advise that you divide your trading capital into 20 equal parts and never risk more than 5% on any one trade. It would take 20 consecutive losing trades to wipe out your capital. Hopefully you will recognize a problem with your approach long before 20 straight maximum losing trades! There are many money management techniques. We can't say that one is better than another because the best will depend on your capital, your trading temperament, and your profit goals. But it is critical that you adopt a disciplined risk control plan that you adhere to with unwavering fervor.

Harry Browne, the well known investment advisor, once observed that it seems like the goal of most investors was to "get out even" because he heard that mantra so many times. Remember the market does not care at what price you bought. Getting out even is the mantra of a perpetual losing trader. If your goal becomes getting out even, you are lost. Why trade?

Your goal must be to get out with huge profits. Otherwise the wear and tear of trading is simply too much work. You won't always achieve that goal. But if you manage to avoid these four mistakes you will improve your odds of success substantially.

By avoiding these four mistakes, you will move to the upper echelon of all traders. By now you probably understand that stock trading is really simply a test of yourself. Your opponent is not the market, it is you! If you discipline your trading approach to incorporate reasonable investment selection methods and don't make these four mistakes, you will make money consistently regularly over the long term. Don't be fooled, you don't need to invent or buy anything new or revolutionary. You simply need an approach that makes sense to you, that you believe in, and that you can and will apply consistently.

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