Internet Trading Course: The complete course in online investment

353 Pages·2002·4.37 MB·English

by  Alpesh Patel

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THE INTERNET TRADING COURSE
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FINANCIAL TIMES
T H E I N T E R N E T
T R A D I N G C O U R S E
The complete course in online investment
Alpesh B. Patel
and Priyen Patel
London New York Toronto Sydney Tokyo Singapore Hong Kong Cape Town
New Delhi Madrid Paris Amsterdam Munich Milan Stockholm
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PEARSON EDUCATION LIMITED
Head Office: London Office:
Edinburgh Gate 128 Long Acre
Harlow CM20 2JE London WC2E 9AN
Tel: [phone] Tel: [phone]
Fax: [phone] Fax: [phone]
Website: www.financialminds.com
First published in Great Britain in 2002
© Tradermind Ltd 2002
The right of Alpesh B. Patel and Priyen Patel to be identified as authors of this work has been
asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
ISBN: 0273 65630 9
British Library Cataloguing in Publication Data
A CIP catalogue record for this book can be obtained from the British Library
All rights reserved; no part of this publication may be reproduced, stored in a retrieval sys-
tem, or transmitted in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise without either the prior written permission of the Publishers or a
licence permitting restricted copying in the United Kingdom issued by the Copyright
Licensing Agency Ltd, 90 Tottenham Court Road, London W1P 0LP. This book may not be
lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover
other than that in which it is published, without the prior consent of the Publishers.
This publication is designed to provide accurate and authoritative information in regard to
the subject matter covered. It is sold with the understanding that neither the authors nor the
publisher is engaged in rendering legal, investing, or any other professional service. If legal
advice or other expert assistance is required, the service of a competent professional person
should be sought.
The publisher and contributors make no representation, express or implied, with regard to
the accuracy of the information contained in this book and cannot accept any responsibility
or liability for any errors or omissions that it may contain.
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The Publishers’ policy is to use paper manufactured from sustainable forests.
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Contents
About the authors xi
Acknowledgements xiii
Introduction xv
Section 1 Getting online 1
Module 1 Essential hardware 3
What you will learn 3
The brains – computers 4
Modem 6
Monitor 7
Printer 8
Internet service providers and access providers 8
Browsers 10
Websites 11
Section 2 Trading online 13
Module 2 Do you really want to trade online? 15
What you will learn 15
Module outline 15
Don’t fall foul of misconceptions 16
The three golden rules 18
Practice makes perfect 19
Key terms 21
Mechanical or discretionary? 23
Your very own system: you just gotta have one 26
v
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Module 3 News – how to get it and how to use it 31
What you will learn 31
Module outline 31
General news 33
Types of news 33
Case study: getting sector news 40
The firm 43
What are we looking for in company newsflow 47
Key terms 50
Search engines 50
Summary 51
Section 3 Choosing stocks – technical analysis 55
Module 4 Tools and strategies 57
What you will learn 57
Module outline 57
TA: What? Why? 58
The tools and the strategies 59
Module 5 A little more sophisticated analysis 71
Momentum-based strategies 71
Module 6 The final instalment – nearly there 79
Stochastics 79
MACD (or Mac-D if you’re hungry) 81
A quick round-up of the tools and strategies 82
Technical sites and software 85
Section 4 Choosing stocks – fundamentals 93
Module 7 Key ratios and statistics 95
What you will learn 95
Module outline 96
Getting started 96
vi CONTENTS
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Price and volume 97
Growth rates 102
Valuation ratios 105
Module 8 Picking stocks based on ‘cash is king’ 113
Cash flow and net income 113
Share-related items 119
Module 9 Picking stocks based on dividends, management
effectiveness and profitability 123
Dividend information 123
Management effectiveness 127
Profitability 130
Module 10 Picking stocks based on what the experts think 135
Recommendations 135
Performance 137
Institutional ownership 139
Insider trading 141
Earnings estimates 142
Module 11 Fundamentals – web guides and tests 153
Web guides 153
Summary 159
Section 5 Making the trade 169
Module 12 Choosing brokers 171
What you will learn 171
Module outline 171
On or off? 172
Security: how safe is the process? 173
What to look for 174
The sites 179
Broker ranking tables 191
CONTENTS vii
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More and more lists of brokers 202
Summary 205
Module 13 Opening an account 207
Getting going: opening an account and all that jazz 208
Placing your first trade 212
Types of orders 219
Using your account 222
Summary 226
Module 14 Planning trades 227
What you will learn 227
Module outline 227
What works?Building a trading strategy 228
Journal keeping 235
Seven traders 236
How much risk can you tolerate? 238
How to manage risk 243
Ten-step trading analysis form for shares 245
Module 15 Monitoring 251
What you will learn 251
Module outline 251
Monitoring what? 251
Monitoring when? 252
How the internet helps 253
The sites 254
Summary 254
Module 16 Stay sharp – educate thyself 257
What you will learn 257
Module outline 257
Trawl the net: search engines 258
Market news and commentary 262
Recommendation pedlars: gurus and their newsletters 268
The sites 270
viii CONTENTS
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Discussion forums 273
Chatrooms and boards 278
E-zines 288
Summary 288
Recommended reading 291
Glossary 305
Index 315
CONTENTS ix