I usually practice making money by using a large amount of money in a short term stock trade and never hold a stock for more than one day.

However, now I was thinking using a LOW amount of money ($1000). I cannot trade as much as I want to because the 7$ commission actually affects my percent profit. What strategy should I go for so that the commission does not affect as much and still make a profit

Since you are saying its $7 commissions, I assume you are using Scottrade. The answer is simple, switch to a broker that charges less. I use Realfasttrader, they only charge $.39 per 100 shares traded, which is the lowest I am aware of for any online broker.

BY.-  http://www.ChatHotStocks.com

It’s no secret that online trading can be a very lucrative, yet highly competitive field, and the truth is that the stock market doesn’t care if you are an experienced or a beginner trader.

The rules and the opportunities are the same for everyone, so either you are going to make money when you pick a stock and make a trade or you are simply going to lose it in favor of the more seasoned ones.

It won’t matter if we are in a recession or we have a great economy. Gamblers and ignorants loose money consistently either way. While experienced and Profitable traders make money in good or bad times. The trick is to learn how to do it.

As a stock trader your homework is all about studying and testing different market strategies that can help you take advantage of stocks while at the same time protect your gains.

Just always keep in mind that a good strategy is simple and practical. Complicated stock systems will always make you slow in your decision making process or confuse you from the start.

A trader must always read as much as he can. There is simply no other way to prepare one self for this difficult yet incredibly rewarding activity, but to read and put into practice as much ideas as you can, at least by paper trading first.

The are a lot of books on the subject that pretend to help you, however many of them where written 6 or 8 years ago and that kind of makes them obsolete in this constantly changing field.

Fortunately there are some practical stock trading sites on the web where you can access proven trading strategies that are easy to implement. One of those sites is http://www.ChatHotStocks.com

They focus on Stock Trading methodologies that can help you identify and take advantage of certain stocks with momentum, while limiting your risk.

Visit them today and improve your stock trading potential in 2009.

Best Stocks
http://www.articlesbase.com/strategic-planning-articles/how-to-pick-stocks-in-2009-gt-recession-proof-stocks-trading-tips-727516.html

Many people are looking into the stock market in the hope to become an overnight millionaire. We can see from daily newspapers and other Medias showing stocks that have increase, earning considerable amount of profits for investors. Most of the time, it is this kind of fast profits that attracted new traders in coming into the market and hope to invest in one of this taking off stocks. Likewise, the profits from the trading options can be massive, but the risks are inevitably high. Although the stakes are raised when you do your investment, it is the basic that you should understand to trade like a winner.

As a beginner, you have to be very careful before you start you stocks trading. You may get so confused because there are hundreds to thousands of people out there trying to push “their” system to you that they considered absolutely trustworthy. Most of the time, beginners are easily trapped in such confusion state, thinking that there must be some code words that could help him or her to find those real winners in the market.

However, the bad news is that there are no such code words that could help you find a winner every time. Think about it, if there are such code words, there will only be winners in the market. If there is no loser at all, the market would have collapse long ago.

Now for the good news, although there are no code words, we have a few trading systems that are effective and work well over a period of time. You have to look at the picture as a whole and not just concentrating on the individual trades. This means that small part of your trades will not make money, but in the long run, the systems would consistently earn you profits.

There are a number of approaches that are use by the experienced investors across many systems. One effective approach is to take your profits early. After a certain percentage gain, take your profits out. You also have to bear some medium loss every now and then. One advantage of taking your profits out early is that your investment will not be at stake in the sense that a stock can rise and drop suddenly without any warning, thereby taking all your profits away. On the other hand, you may not earn as much as you should have been if the stock shoot upwards. Due to the fact that you have to have a number of small profitable trades to cover one of the losses, this system can be considered risky.

Another approach is to bear with small losses and continue to let you winners run. The little losses that you incur can be covered by one big gain. You need to have self-discipline as well as confidence in yourself to make this approach successful, as there are times when you see only little losses without a single winner and this might make you surrender.

If you are facing difficulties to choose a suitable approach, why not opt for more than one. You can split and invest your capital over a number of portfolios and at the same time apply different strategy for each of them. This way of trying out the approaches can take a long time but at least at the end of the day, you can easily compare and decide which of these approach worked best for you.

It is always important not to hop from one system to another too frequently. Inexperienced traders tend to switch from one system to another once they see losses. No trade will be a winner all the time. Find a suitable system that you foresee will give you a good return, and stick to it. This will give you a higher chance of gaining profits in the long run.

To be successful in trading is partly about choosing a good trading system. The main factor is you; do you have what it takes to be a successful trader. If you have the courage to face losses, the ability to view situation as a whole, the confidence, the self-discipline and the ability to control your fear and greed, you have the right characteristics to be a successful traders.

So before you start exploring in the market, make sure that you know the approaches and choose the right one for you. Also, observe and see if you have what it take to be successful in trading.

Timothy Stevens

 

 By.- http://www.ChatHotStocks.com 

 

 

In the stock market it’s not impossible to watch a stock move up dramatically in a matter of hours or days. Investors and traders can make great money and fatten their wallets every time this happens.

This seems great for every one that wants to try their fortune in the stock market, but the problem is that if you don’t know what stocks to look for and how to properly approach them you could end up wasting cash instead of making your profits grow. That’s why the most important aspect of Stock Trading is the knowledge FILTER you employ to make your buy and sell decisions.

 

 

There are many “fantastic” stock systems and trading strategies out there. Complicated stock trading strategies that rely on a “boat load” of technical analysis indicators can make you slow, and being slow when trading stocks can be as dangerous as not knowing what to do in the first place.

The worst thing that can happen to a beginner trader is to get information overload. It’s better to go step by step, and test a practical Stock Trading Strategy that can show you how to focus on concrete ways to make money while picking SOLID hot stock trading opportunities once at a time.

In essence, You can be sure that the trading method you employ to approach the stock market and pick stocks can make a big difference in your results as a trader.

 

 

Fortunately some sites on the web can show you how to take advantage of stocks in a practical way every week by minimizing risks. One of those sites is  ChatHotStocks.com  

 

 

They focus on picking certain stocks that can generate excellent gains on the same day.

Visit them today and learn how to take advantage of the market by picking the  hottest opportunities in 2009.

 

 

 

 

Stock Tips
http://www.articlesbase.com/investing-articles/small-cap-stock-picks-2009-gt-new-hot-stocks-nasdaq-amex-otcbb-plays-700161.html

Insider Trading

Introduction – Insider trading is a term subject to many definitions and connotations and it encompasses both legal and prohibited activity. Insider trading takes place legally every day, when corporate insiders – officers, directors or employees – buy or sell stock in their own companies within the confines of company policy and the regulations governing this trading. In simple terms ‘insider trading’ buying or selling a security, in breach of a fiduciary duty or other relationship of trust, and confidence, while in possession of material, non-public information about the security

Thus , in nutshell , insider trading is the buying , selling or dealing in securities of a listed company by a director , member of management , employee of the company , or by any other person such as internal auditor , advisor , consultant , analyst etc, who has knowledge of material inside information which is not available to general public

Examples of insider trading -

1. Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;
2. Government employees who learned of such information because of their employment by the government; and
3. Other persons who misappropriated, and took advantage of, confidential information from their employers.

Other persons who misappropriated, and took advantage of, confidential information from their employers.

Therefore, preventing such transactions is an important obligation for any capital market regulatory system, because insider trading undermines investor confidence in the fairness and integrity of the securities markets.

For instance, prior knowledge of a bonus issue would result in the insider acquiring a significant exposure in particular scrip, knowing that his holding would increase significantly after the bonus is announced.

The first country to tackle insider trading effectively however was the United States. In the USA, the Securities and Exchange Commission is empowered under the Insider Trading Sanctions Act, 1984 to impose civil penalties in addition to criminal proceedings. Most countries have in place suitable legislation to curb the menace of insider trading.

In India, SEBI (Insider Trading) Regulations 1992, framed under Section 11 of the SEBI Act, 1992, are intended to prevent and curb the menace of insider trading in Securities. Now SEBI has with effect from 20th February 2002 amended these Regulations and rechristened them as SEBI 9 Prohibition of Insider Trading Regulation, 1992. These Regulation have been further amended in November 2002

Rational Behind Prohibition of Insider Trading

The smooth operation of the securities market and its healthy growth and development depends on a large extend on the quality and integrity of the market .Such a market can alone inspire confidence in investors

Insider trading leads to loose of confidence of investors in securities market as they feel that market is rigged and only the few, who have inside information get benefit and make profits from their investments. Thus, process of insider trading corrupts the ‘level playing field’

Hence the practice of insider trading is intended to be prohibited in order to sustain the investor’s confidence in the integrity of the security market.

In Samir C Arora Vs. SEBI

It was observed that activities like insider trading fraudulent trade practices and professional misconduct are absolutely detrimental to the interests of ordinary investors and are strongly deprecated under the SEBI Act, 1992 and the Regulations made there under. No punishment is too severe for those indulging such activities.

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, does not directly define the term “insider trading”. But it defines the terms-

. insider” or who is an “insider;
. who is a “connected person
. What are “price sensitive information”.

Insider -According to the Regulations “insider” means any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access, connection, to unpublished price sensitive information in respect of securities of a company, or who has received or has had access to such unpublished price sensitive information;

Connected person – The Regulation defines that a “connected person” means any person who- (i) is a director, as defined in clause (13) of section 2 of the Companies Act, 1956 (1 of 1956) of a company, or is deemed to be a director of that company by virtue of sub-clause (10) of section 307 of that Act or (ii) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company whether temporary or permanent and who may reasonably be expected to have an access to unpublished price sensitive information in relation to that company;

Price Sensitive Information means any information, which relates directly or indirectly to a company and which if published, is likely to materially affect the price of securities of company.

American insider trading law

The United States has been the leading country in prohibiting insider trading and the first country to tackle insider trading effectively. Thus it is important to discuss insider trading in American perspective. While Congress gave us the mandate to protect investors and keep our markets free from fraud, it has been our jurists, albeit at the urging of the Commission and the United States Department of Justice, who have played the largest role in defining the law of insider trading.

The market crash in 1929 due to prolonged lack of investors confidence in the securities market followed by Great Depression of US Economy , led to the enactment of Securities Act of 1933 in which Section 17 of the contained prohibitions of fraud in the sale of securities which were greatly strengthened by the Securities Exchange Act of 1934The 1934 Act addressed insider trading directly through Section 16(b) and indirectly through Section 10(b).Section 16(b) of the Securities Exchange Act of 1934 prohibits short-swing profits (from any purchases and sales within any six month period) made by corporate directors, officers, or stockholders owning more than 10% of a firm’s shares. Under Section 10(b) of the 1934 Act, SEC Rule 10b-5 prohibits fraud related to securities trading. Further the Insider Trading Sanctions Act of 1984 and the Insider Trading and Securities Fraud Enforcement Act of 1988 provide for penalties for illegal insider trading to be as high as three times the profit gained or the loss avoided from the illegal trading. Much of the development of insider trading law has resulted from court decisions. In SEC v. Texas Gulf Sulphur Co, a federal circuit court stated that anyone in possession of inside information must either disclose the information or refrain from trading. (1966)

In 1984, the Supreme Court of the United States ruled in the case of Dirks v. SEC that tippees (receivers of second-hand information) are liable if they had reason to believe that the tipper had breached a fiduciary duty in disclosing confidential information and the tipper received any personal benefit from the disclosure. (Since Dirks disclosed the information in order to expose a fraud, rather than for personal gain, nobody was liable for insider trading violations in his case.)

The Dirks case also defined the concept of “constructive insiders,” who are lawyers, investment bankers and others who receive confidential information from a corporation while providing services to the corporation. Constructive insiders are also liable for insider trading violations if the corporation expects the information to remain confidential, since they acquire the fiduciary duties of the true insider.

In United States v. Carpenter (1986) the U.S. Supreme Court cited an earlier ruling while unanimously upholding mail and wire fraud convictions for a defendant who received his information from a journalist rather than from the company itself. The journalist R. Foster Winans was also convicted.

“It is well established, as a general proposition that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principle for any profits derived there from.” However, in upholding the securities fraud (insider trading) convictions, the justices were evenly split.

In 1997 the U.S. Supreme Court adopted the misappropriation theory of insider trading in United States v. O’Hagan, 521 U.S. 642, 655 (1997),. O’Hagan was a partner in a law firm representing Grand Met, while it was considering a tender offer for Pillsbury Co. O’Hagan used this inside information by buying call options on Pillsbury stock, resulting in profits of over $4 million. O’Hagan claimed that neither he nor his firm owed a fiduciary duty to Pillsbury, so that he did not commit fraud by purchasing Pillsbury options.

The Court rejected O’Hagan’s arguments and upheld his conviction. The “misappropriation theory” holds that a person commits fraud “in connection with” a securities transaction, and thereby violates 10(b) and Rule 10b-5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information. Under this theory, a fiduciary’s undisclosed, self-serving use of a principal’s information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of the information. In lieu of premising liability on a fiduciary relationship between company insider and purchaser or seller of the company’s stock, the misappropriation theory premises liability on a fiduciary-turned-trader’s deception of those who entrusted him with access to confidential information.

The Court specifically recognized that a corporation’s information is its property: “A company’s confidential information…qualifies as property to which the company has a right of exclusive use. The undisclosed misappropriation of such information in violation of a fiduciary duty…constitutes fraud akin to embezzlement – the fraudulent appropriation to one’s own use of the money or goods entrusted to one’s care by another.”

In 2000, the SEC enacted Rule 10b5-1, which defined trading “on the basis of” inside information as any time a person trades while aware of material nonpublic information — so that it is no defense for one to say that she would have made the trade anyway. This rule also created an affirmative defense for pre-planned trades.

In May of 2007, representatives Brian Baird and Louise Slaughter introduced a bill entitled the “Stop Trading on Congressional Knowledge Act, or STOCK Act.” that would hold congressional and federal employees liable for stock trades they made using information they gained through their jobs. The bill would also seek to regulate so called “Political Intelligence” firms that research government activities and sell the information to financial managers.

Insider trading in India

In India Regulation 3 of the SEBI Regulations seeks to prohibit dealing, communication and counseling on matters relating to, insider trading. Regulation 3 provides that no insider shall either on his own behalf of any other person deal in securities of a company when in possession of any unpublished price sensitive information on communicate, counsel or procure, directly or indirectly any unpublished price sensitive information to any person, who while in possession of such unpublished price sensitive information shall not deal in securities. However, these restrictions are not applicable to any communication required ordinary, course of business or profession or employment or any law.

Further 3 A prohibits any company from dealing in the securities of another company or associate of that other company while in possession of any unpublished price sensitive information.

Insider Trading Regulations have been tightened by SEBI during February 2002. New rules cover ‘temporary insiders’ like lawyers, accountants, investment bankers etc.

Directors and substantial shareholders have to disclose their holding to the company periodically. The New Regulations have added relatives of connected persons, as well as, the companies, firms, trust, etc. in which relatives of connected persons, bankers of the company and of persons deemed to be connected persons hold more than 10% .The definition of relative, under the New regulations is in line with that of the Companies Act, 1956, which ranges from parents and siblings to spouses of siblings and grandchildren. The term “connected person” is defined to mean either i) a director or deemed to be a director, ii) occupies the position as an officer or an employee or having professional or business relationship whether temporary or permanent, with the company. Thus, there are two categories of insiders:

Primary insiders, who are directly connected with the company and secondary insiders who are deemed to be connected with the company since they are expected to have access to unpublished price sensitive information. The jurisprudential basis for the ‘person-connected’ approach seems to be founded in the equitable notions of fiduciary duty.

The secondary insider, who would have traded with an unfair informational advantage, may escape from being caught simply because there can be no trace of how he derived this information in the first place. Insider by reason of his connection with the company. In reality, much of the flow of the price-sensitive information often does not operate by way of such established networks of relational links between individuals. Very often, such price-sensitive information is communicated and spread out through very loosely connected and informal networks of brokers, clients and even between friends and through electronic networks etc. or an elaborate nexus of company official, brokers, traders. These individuals are very often privy to strategic policy decisions or developments that may influence the valuation of a company’s scrip on the bourses

Duties/ Obligations Of the listed company under the SEBI (Prohibition of Insider Trading) Regulations, 1992

1. To appoint a senior level employee generally the Company Secretary , as the Compliance Officers;
2. To set up an appropriate mechanism and to frame and enforce a code of conduct for internal procedures,
3. To abide by the Code of Corporate Disclosure practices as specified in Schedule ii to the SEBI (Prohibition of Insider Trading)Regulations , 1992
4. To initiate the information received under the initial and continual disclosures to the Stock Exchange within 5 days of their receipts;
5. To specify the close period;
6. To identify the Price Sensitive Information
7. To ensure adequate data security of confidential information stored on the computer;

To prescribe the procedure for the pre- clearance of trade and entrusted the Compliance Officers with the responsibility of strict adherence of the same

The penalties /punishments can be imposed in case of violation of SEBI (Prohibition of Insider Trading) Regulations, 1992

1. SEBI may impose a penalty of not more than Rs 25 Crores or three times the amount of profit made out of insider trading; whichever is higher; or

2. SEBI may initiate criminal prosecution; or

3. SEBI may issue orders declaring transactions in securities based on unpublished price sensitive information; or

4. SEBI may issue orders prohibiting an insider or refraining an insider from dealing in the securities of the company

Conclusion -The new 2002 regulations in India have further fortified the 1992 regulations and have increased the list of persons that are deemed to be connected to Insiders. Listed companies and other entities are now required to frame internal policies and guidelines to preclude insider trading by directors, employees, partners, etc. In the past, it has been observed that insider trading legislation is ineffective and difficult to enforce and has little impact on securities markets. Low enforcement rates and few convictions against insiders have been cited as evidence of this ineffectiveness. Irrespective of whether or not the SEBI was bestowed with wide ranging powers, it has been a clear failure when it came to the task of administering the law.

The importance of policing insider trading has also assumed international significance as overseas regulators attempt to boost the confidence of domestic investors and attract the international investment community. So, SEBI now should take the role of a regulator only. Special Courts could be set up for faster and efficacious disposal of cases.

 

Ashish Gupta