Are You Benefiting From A 401k Retirement Savings Plan ?

If your employer offers a 401k plan then you should undoubtedly start subscribing to it. For anyone who is already making contributions to a 401k retirement savings plan should be sure of getting the best of it.

Many people contribute without fully utilizing the group retirement savings plan that is available to them. It’s important that you understand how to do this so that you can get put away a comfortable sum for your retirement.

401k Retirement Savings Plan: Matching Contributions

When you contribute money to a 401k retirement savings plan your employer will match your contribution. Different employers will have a different matching program. There are usually annual limits on the amount of money your employer will contribute to your 401k retirement savings plan.

For example your employer might match your contribution dollar for dollar up to 5% of your annual income. This means that once your contribution reaches 5% of your annual income your employer stops making contributions. Until that happens however your employer will match your contribution dollar for dollar.

Check what type of matching program your employer has and make sure that you contribute the full amount that your employer will match. If you contribute less that that you will lose out on important contributions that could really help to cushion you in your retirement.

Smart Investments

When you are part of a 401k retirement savings plan a big part of making sure you have enough money is to invest intelligently. The way you invest should change as you get older. For example when you first get started and you should acquire stocks, some companies will allow you to buy company stocks as part of a 401k plan.

However when you get older and near retirement age you should have less of your retirement money tied up in shares. Remember this as a general rule of thumb when you are thinking about how to invest your savings. It’s also a good idea to enroll in a 401k plan as soon as possible to maximize your savings.

Benefits Of A 401k

An IRA is another way that you might want to save for your retirement. However if you have a chance to save with a 401k retirement savings plan then you should concentrate on a 401k. A 401k retirement savings plan has same subscription from an employer while an IRA has different subscription. However once you have reached your contribution limits in a 401k plan you can start to look at an IRA.

The Rising Popularity of Day Trading: How to be a Financial Cowboy : Part 3

Penny Stocks Can Equal Big Dollars for the Day Trader

Day trading is risky, that point cannot be made often enough. There is the possibility of not only doubling up your risk but your profitability as well. Trading penny stocks can be satisfying, and because the price per share is lower than more traditional or established stocks, there can be a bigger buys in. Penny stocks are those stocks that have a price per share that is less than a SEC or market defined amount, usually a small market cap and traded only on certain markets. Penny stocks are very unpredictable, but can be highly profitable if you choose the right one. Day traders that seem to have that inherent sixth sense of what stocks are moving in what direction can make huge profits from trading penny stocks. Blocks of these shares can be profitable enough to fund other, bigger buy ins for more established company stocks, but not always. In fact, with penny stocks, the loss cap has to be adhered to more strictly because they are so volatile.

Penny stocks are good for the day-trader, as the more traditional traders often overlook them. In fact, many financial professionals will refuse to trade a penny stock because of the work entailed in tracking them, and because they feel they may be beneath them. Because of the floating definition of what a penny stock is, some smaller, but still very solvent company’s stocks will go largely untouched. Some pros will define a penny stock by market cap alone, which makes some of the strongest performing, but still growing companies prime for investment. This is one place where careful monitoring of a stock or a company’s progress or lack thereof will put you at a huge advantage over other traders. Think about it, a small company that is growing in leaps and bounds is probably flying under the radar of most financial firms as they watch the action involving the larger corporations.

That small company offers its stocks at a bargain basement price, and you, the savvy day trader buys as much as possible in one trading day. The next day, that same company becomes famous because of a news report, and suddenly your so-called penny stock trade has made you a huge profit. On the down side, that scenario could go in the direct other direction. You buy up a large block of stock from this small company and then the next day you wake up to find that the entire company has closed because of some bad luck or simply because of the economy. You have now lost every cent you put into those shares of that company.

When dealing with these penny stocks, the day trader must be aware that the smaller the market cap usually equals a small company. Unfortunately, it also means the smaller the company, the larger the risk of total business failure, however being able to buy blocks of an unproven company and watch it grow and thrive can be more than profitable, it can be very rewarding. In some small part, you can walk away feeling that you helped that company to survive, and from an investment standpoint, you might have.

Even Shorter Than Short Term: Intraday Trading

Day trading is fast action, of that there should be no doubt, but sometimes that action gets to be even faster. Intraday trading is even faster. These trades are done within the same day frame- often several times before the end of the business day. Intraday trading can see the same stocks being bought, sold and re-bought by a single day trader all within the day’s open trading. There are many reasons that intraday trading occurs, but it comes down to the market itself. If the market is not moving well, there might be a need to buy and sell the same block of stocks to possibly get things going again, or to keep from holding onto bad trades.

Intraday trading can lead to issues however, because it changes the trade account- and can lead to SEC regulation violations if the trader is not careful. This type of trading can keep a trader from being caught on the bad side of a trade, and still allow him to meet his trade equity account minimum. Because of the risks that are involved, intraday trading requires vigilant stock monitoring, regulation education, and a well planned, and strictly adhered to, stop loss plan. Knowing how to exit gracefully is almost as important as knowing how to get into the market in the first place.

Using Cash to Buy Currency to Make Cash

The day trader may also want to dabble in the currency trading market, known as Forex. Unfamiliar with the term? Don’t be embarrassed, this largest of the financial markets has remained largely un-traded by the smaller, “retail” traders, including the day traders. Currency trading has gained popularity in recent years, largely because the Internet has not only opened the market up, but made it faster to trade on as well.

The Forex market is no different from any other market in that you absolutely need to educate yourself before you begin. Know the terms and the jargon. Know what rules or obligations exist that you must follow. And, as always, know your own limits.

The day trader may like the currency trading market for one relaxed rule: inside information is not against the rules in this market. If you know something about a country’s economy, whether it has become common knowledge or not, you can use it to make the most beneficial trade for yourself. Of course, not only does this mean that you can use this information, so can all the other traders.

The Forex market is huge- to the tune of two trillion, US dollars per day. That size alone makes this a fast moving, and potentially hugely profitable enterprise. But, what exactly does a trader buy or sell when dealing on the Forex market? Basically, contracts are what are bought or sold- everything comes down to some computer entries and nothing more.

One last thing to keep in mind with the Forex market: the currencies that are traded are always traded in pairs. You must know the meaning of long and short when relating to these pairs and how to buy and sell your pairs at the maximum profit.

Day Trading as a Career, The Amount You Could Make (If you are Good)

So far, this guide has covered the basics of day trading and the risks that are involved. While it was mentioned that great profits could be made, there is even more potential money for the savvy and careful trader. A sample trade could look like this:
At the start of business, Danny Daytrade selects 100 shares of Youbetcha Inc. He knows from watching the trends that Youbetcha is about to make a big move upward, and he is right, the stock gains at least a 1/2 point by noon of that day. As a day trader, Danny wants to walk away with profit by close of business, so he sells off this upward moving stock and splits up the profits from the sale. Part of his profits goes into his day trader account to make sure that he will meet his minimum equity; the other part goes back into investing. He has had his eye on another stock that is set to make a nice upswing as well. Danny is successful, because he is careful and because he knows how to read the stock signs.

If the amount of profit that Danny Daytrade makes for this trade is $100 (obviously an amount simply for illustration) he would most likely use half as account cover capital, and half as re investment. Of course, no one in the day trading game is doing any investing with $50; again, this figure is simply for illustration. If he makes five similar trades for the business days, with equally similar results, he will have made $500 of profit. Keeping with that theme, trading five days a week would net Danny $2500 of profit per week. (Commissions, overhead costs and other business expenses, realistically bringing the amount down to $2000 or less would reduce this figure.) This is still a nice bit of profit, considering that this is only one stock’s trade performance. Danny Daytrader probably handles quite a few more trades than that in a day’s time.

Considering that not every trade will make a profit, let’s say that Danny handles ten stock trades per day, with the same profit margin as above. ($100) On the safe side, we will give Danny a win percentage of say, 30%, which means that for his ten trades, he sees that profitability factor on three of them ($300). Which will bring him to $1500 for the week, less the commissions and other expenses as mentioned above. Realistically, Danny can see a profit of slightly less than $1000. But, Danny is aggressive, so that amount will not satisfy him. He will hit the charts and study until he finds the right stocks that are about to trend upward. He will work until he gets his win percentage up near fifty percent or even higher.

The Wind-up, The Pitch, the Conclusion

First off, there is no pitch. There is only the winding up of this guide, trust me, there is nothing being sold here.

This guide covered the rise of the popularity of day trading, largely in part because of the computer and the Internet. With the click of a mouse, the entire world can come speeding down a wire (or without a wire) into your home. At the blink of an eye, you can buy a pair of shoes, Google a date, map out directions to your Aunt Susie’s, or you can buy or trade a block of stocks. No matter what time of day or night, no matter what you are wearing- you can choose a stock, check it’s action and put in an order to buy it. Trading was once the realm of the ultra connected, and the very wealthy, but those days and the Market have changed. Thankfully.

Of course, if you are looking to buy a pair of shoes, or even Googling a date, you really have to have some basic information to start with. The stock market is no different in that aspect. You know that if you are looking for athletic shoes, you have to go to the right company’s website to look at them. It is the same when buying stocks or other financial products and services. You have to know what kind of trading you want to be involved with. Do you want to buy traditional stocks in a certain type of market? Do you want to be more aggressive and trade blocks of penny stocks? There are many choices that must be made before you begin investing.

We covered the amounts that could be expected as investment and other expenses that need to be covered before you can begin a career as a day trader. These expenses can include a computer upgrade, computer software and then the initial investment amount. According to the day trading regulations, there is a minimum equity amount ($25,000) that you must meet and continue to meet to keep your day trader account open.

Day trading can be hugely risky for a number of reasons. First off, the movement of the day trader is rapid-which does not leave a lot of time for market research and does not allow time to monitor for trends that might be forming. Careless trading can lead to a fall below the minimum account trade equity, which in turn will lead to a day trading call. Losing too much money will lead to the loss of confidence and may cause a day trader’s career to be at risk as well. Not knowing or going over their loss cap can put a day trader at huge risk for financial ruin.

Along with the risks, there are many rewards to be had as well. Because they are so risky, day trades can net quicker returns than more traditional trading activity that have to be allowed to have time to develop. Day traders may also take a bigger chance on a stock, also with the potential to make large profits.

Day trading and long term trading are not the only option. There is a middle ground between the two extremes, the swing trader. The swing trader may hold a stock’s position for several days, possibly a week before making a move on it, or may ditch it within hours. Swing trading is becoming more popular because it allows the flexibility to let a stock develop if it looks like it is going to, or to sell quickly if it becomes necessary.

Bad money management is just that: bad. If you cannot figure out how to handle the account that you are dealing with, you should not be in this line of work. Day trading is not the most forgiving career choice, and it can realistically only take a few bad trades to completely destroy a financial career. Incompetence and ignorance are no excuse for a failure to understand trading regulations, especially those that have the potential to lead to a SEC violation.

Penny stocks may become the darlings of the day trader. They are perfectly suited for the day trader’s personality, are bargain priced and therefore potentially more profitable. If you can buy a large block of a bargain basement stock, then you could see a large return in the matter of days when that company goes public. Or you lose your entire investment when the unproven company fails. Knowing and weighing the risks involved, penny stocks can still be fairly attractive to the day trader simply because of the relative ease of moving them. What constitutes a penny stock will vary depending on whom you are asking, but it will usually be based on price per share, the market it is traded on and the market cap of the company being traded. Some markets will consider market cap as the main determining factor for whether or not a stock is a penny stock or not, but that is not always reliable.

Along with day trading, there is the even faster moving, intraday trading. Simply put, this is trading that occurs within the same day for the same stock. Intraday trading can be used to stimulate sales of one stock if it has stopped moving at all, or it can pour life into an equally stagnant market.

Finally, there is the Forex market, where the day trader can use his account to move currency contracts between countries. This market has some interesting lingo, as well as some slightly more relaxed rules about certain aspects of trading. There is not an insider trading rule for instance, making it possible to use information that you have learned before anyone else to your own best advantage. The Forex market was once the mainstay for the big players, but has opened up dramatically in recent years, mainly because of the computer.

This guide said it early, and said it often: Know your risks. Know what you can afford to lose before you invest. Count every investment as a potential loss right from the start- and do not invest more than you can bear. Know how to use your profits to reinvest in the trading account as well as other more secure investments. Do not pump all of your money back into the market, especially if all indicators say that it is a bad idea.

Day trading can be rewarding, not only financially, but in other ways as well. Knowing how a stock is going to perform and being right about it can be quite a high. Seeing the signs that a stock is about to take a header and selling that stock, even at a small loss is better than sticking with it and going down with the ship. Educate yourself about the market, and what to expect. Know all of the regulations and keep in the know if new ones are in the works. Monitor your stocks, or watch for alerts if you have stock trading software that does your monitoring for you. And lastly, always, have an exit plan that you can turn to if things get really bad for you. Best of luck, and happy trading.

You Can Do it…