Unlike foreign currencies which trade in a huge, global marketplace, stocks of small companies can lend themselves to manipulation and fraudulent practices more readily. The primary reason for this has to do with the nature of the stock market and the comparative lack of liquidity which does not usually present an issue in the currency market because of its size and depth.

As a result, stocks tend to be more carefully regulated and monitored by agencies such as the Securities and Exchange Commission which was founded in the aftermath of the huge stock market crash of 1929. A variety of different fraudulent practices involving stocks are listed in the sections below.

Corporate Fraud

Corporate stock fraud usually involves officers of the corporation disseminating false or misleading information in order to increase the value of the company’s stock. They do this in order to later sell the stock at the artificially inflated price. Enron was a classic example of a corporate stock fraud.

Other ways that corporate executives perpetrate fraud to manipulate the stock market include: making large purchases amongst several colluding investors in order to make the stock appear to be under accumulation by third parties. This might then prompt other investors to buy the stock at inflated prices.

After taking the stock price higher through these pre-arranged transactions, the stock is subsequently dumped by the perpetrators at the inflated price. This falls into the general category of a “pump and dump” stock scam.

Churn and Burn

Another type of stock fraud involves unscrupulous stock brokers that overtrade in their customer’s accounts in order to charge an excessive amount of commissions. This type of fraud is widespread and is not particular to the stock market.

Any financial market where a broker performs executions of financial instruments, especially on a discretionary basis, is subject to this type of fraud. Unfortunately, many people have no idea their broker is doing this if they have given the broker power of attorney over their account and do not monitor it closely.

Pump and Dump

This form of securities fraud has become especially widespread since it now often uses the Internet for the pump part of the scheme to artificially inflate a stock’s price. Con artists employing this scam disseminate fraudulent information via chat rooms and by spamming people’s e-mail accounts.

The false information will typically produce a rise in the stock price. At this time, the fraudsters dump their stocks and the subsequent investors lose out. This type of stock fraud works best with thinly traded and illiquid stocks that have little public information available about them.

Insider Trading

This type of securities fraud is performed by the corporation’s key personnel, directors and holders of a large percentage of the outstanding stock or other corporate insiders.

Basically, the fraud involves such insiders who trade on information which is yet to be made public. This might include such things as a pending corporate takeover or a disappointing earnings report, for example.

Other Stock Fraud Situations

Corporations can sometimes “cook the books,” which involves the corporate accounting of the firm, making it appear the company is doing much better than it actually is, making the stock price reflect the distorted information and defrauding investors. This sort of fraud came to light recently in the huge Refco case that forced the company into bankruptcy shortly after its Initial Public Offering or IPO.

Shorting stocks, which involves borrowing stock in order to initiate a short position, can also be fraudulent if done with the intent to profit by subsequently disseminating false or misleading information to make the market in the stock drop. “Short and distort” is the common term for this sort of stock fraud.

For example, let’s say you have a very large asset base, let’s call it $10 million. You believe the market is incredibly oversold, as it was a couple weeks ago. You want to borrow money to invest in the market. You decide to borrow $2 million, paying 5% interest. You believe that you can make 15-25% on the money you borrow, well above the interest rate you are paying. In this case, borrowing the money on margin looks like it will make a good payoff.

As you can see, the three key factors here are the margin rate you are paying, the amount you can make off of the money you borrow, and your risk tolerance. The above example, however, is a very optimistic one. Most of the time, for people with average or small asset base, margin rates are very high, generally 8.5% or more and can easily be 10% or more. Furthermore, the market returns about 10% a year on average, so most of the time, borrowing on margin mean taking on a lot of risk for potentially very little reward.

What exactly are the margin risks? Well, besides the fact that you are betting more money, so you can lose more money, you also risk a margin call. Let’s say you have $50k and borrow $50k on margin. The market gets pummeled, and your $100k in total investments ($50k yourself plus $50k you borrowed) drop down to $70k. At this point, there’s a very good chance you’ll receive a margin call. The broker will demand that you sell securities (or put up additional funds) so that you reach a certain level. For example, the federal government requires brokers to have at least a 25% maintenence requirement, though most brokers have a higher number.

Let’s say your broker has a 30% maintenence requirement. Since you borrowed 50k on margin, you will need to maintain an overall balance of about $71k or more before receiving a margin call. If you get a margin call, you will need to put up more money from your bank account or start selling securities.

Let’s say, in the $50k +$50k example that you’re somehow forced to sell all of your secuirites after your balance dropped to $50k. Now, all you have is $20k minus what you paid in margin interest. Even though the market only dropped down by about 30%, you ended up losing over 60% of your funds since you leveraged yourself.

As you can see, margin trading involves a lot of risk. It should only be done by expert investors who know what they are doing and can get access to a decent margin rate. For average investors, margin trading is generally a bad idea.

There is no educational background needed to get in this industry. The basic qualification you need is an interest in the market. But if the reason for your interest is to simply gain more money, you may end up frustrated. The stock market is a fast-paced, tedious industry, where you have to invest hours and hours to get yourself ahead and to understand the market. You must invest your time to collect a firm set of clientele. But even after having a good understanding of the market and having a set of loyal clients, there can still be curve balls you need to prepare yourself for. This preparation can only be acquired through time and experience. That is what you’ll have to face when you get into the industry.

Before you actually get in the industry, you have to understand that normally, stockbrokers do not become stockbrokers right after graduation. To start off in the industry, you need to prepare yourself to acquire a license. To acquire your license, you have to find a brokerage firm. You need to be with this firm for at least four months to take the General Securities Registered Representative Examination. After passing that test, many states require you to also take the Uniform Securities Agents State Law Examination.

When you acquire your license, the conservative advice is for you to concentrate first on the industry that you are familiar with. If your background is in the computer industry, it is better if you start analyzing stocks from that industry. This will help you get a quick understanding on the behavior of the market.

About the Author:
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Tag: How To Become A Stock Broker

[tag]How To Become A Stock Broker[/tag]

At that time, shares were in physical paper format. This used to be a very time taking, cumbersome and risky process. The stock market trading was largely limited to professionals, stock brokers and some enterprising individuals.

However, with the advent of electronic trading after the shares were dematerialised in 1993, the constraint of being at the same place to trade has gone. It is during this time that a scam broke out in the country by a stock broker. Online connectivity has helped stock brokers to trade from any part of the country. The masses started actively participating in the securities trading since then.

Lately, the stock exchanges prefer corporate with good track record as stock brokers to individuals. Guidelines were laid out for selection of an individual or corporate as a member broker. Net worth, education and experience of the applicant are taken as criteria. The selected member broker has to pay a security deposit and also an annual membership fees.

A stock broker may operate on behalf of his client for a commission or even trade in securities for his own self. Normally shares are traded in two methods. One is cash trading and other one is day trading. In cash trading the shares are purchased or sold with an intention to deliver or keep the possession of the share and the value of the share has to be delivered on or before the settlement day. Therefore they need to be delivered on or before the settlement day. Where as in day trading method the shares are purchased and sold within the day and thereby squaring off their transaction.

Online stock brokers are mainly corporate or individuals who trade on behalf of their clients. The online stock brokers provide their clients with lot of data, information, researched and expert opinions on which stocks to purchase and sell. They send frequent newsletters on the happenings in the market, information about IPOs, mutual funds and NFOs.

An individual cannot go directly into any exchange and trade in securities. Therefore he needs a stock broker for him to transact. An individual before selecting an online stock broker should take the following factors into consideration: The track record and financial status of the broker over the years, the swiftness of the web site in responding to the queries, the rates and commissions charged by the broker in comparison with others, the services offered depending on our requirement and level of expertise and the authenticity of the website.

The advent of online stock brokers has made it easy for the retail investor to participate and invest in securities. The online brokerage firms offer customer care branches and personalised service. All the stock brokers are also registered with SEBI, Securities and Exchange Board of India. SEBI acts as a watchdog for investors and ensures that the rules are followed.

These online brokers operate by using the computer terminal in their office or premises. The online stock brokers also manage the portfolio of their clients based on their financial status, risk appetite and future goals. However, no online stock broker takes the responsibility for any loss incurred by the client by following their advice. There may be some stock brokers who are not qualified or not registered but still operating in the market. They may mislead you.

Therefore it is imperative for the individual to consistently monitor the stock market, track the performance of his stocks, set some targets for the returns and set a loss control limit to complete a great portfolio.

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Tag: online brokers

[tag]online brokers, stock broker, stock broker, stock market trading, stock exchange, stock brokers[/tag]

Stock broking is a career of great ups and downs. You need to have a triangular personality to handle people as well as moods of the stock index. A stock broker career means handling and advising clients on investment and risk strategy. You would need to buy and sell stocks on their behalf and manage their portfolio.

Managing a portfolio calls for interview with the clients to assess their requirements about income levels, capital growth and client hidden expectations. You may also need to make presentations to large or corporate clients. Nevertheless, even if your client is an individual you would need to present your knowledge and capabilities to convince him to invest in stocks. If you are looking at a stock broker career, you would also need to possess some presentation styles. After all, everyone is your customer, isn`t it?

You need to learn to study and consult share prices on computer terminal and obtain the best prices for your clients? Do I sound like being a travel agent and get the best and the cheapest deals for your client? Believe me, it is tougher than that. In air fare deals, at least market does not change in a span of thirty minutes. A strict vigilance and ability to predict market movements helps in the long run in a stock broker career.

Key skills required for stock broker career are strong communication skills and an ability of quick and accurate thinking. This is what trading is? Secondly, you should have great ability to absorb data and analyze it enough to give the correct information to your client.

A keen eye on every detail of the market as well as your client helps a lot in a stock broker career. Stock broker career means dealing with uncertain – market as well as client. You need to bond and attract clients and markets together. No one can predict movements of neither client nor the market! So keep a watch!

In the end, you should have enough stamina, judgment and confidence level to manage the portfolios and turn them into profit making profiles.

There are fine prospects for a stock broker career all around the world. If you are a qualified professional then stock index is the limit. You can reach even higher in a stock broker career. More than an education and a paper qualification you need flair and a personality to handle your career and profile of being a stock broker. You can find many opening in a stock broker career with domestic as well as foreign firms. All you need to do is to come to terms with real competition and ensure appropriate standards in your profile.

About the Author:
Ayna Miah knows the stock brokerage industry secrets both inside and out. Now he wants to share his profitable knowledge with you.Discover the Insider Tips, Techniques and Secrets That Will Turn You Into a Successful Stock Broker and Even If You Have No Experience Whatsoever. www.aboutstockbrokers.com
Tag: become a stock broker

[tag]become a stock broker,stock broker career, stock broker,stock market,online stock brokers[/tag]

Significant Role Of Online Stock Brokers

In the world of financial ups and downs, it has become a difficult task to know the best method of investing your money. Stock exchange has always acted as a platform between the stock traders and the companies in the form of buyers and sellers respectively. The invested money of the investors is always utilized by the company in further expansion of the business to increase profits.

In the traditional method of stock trade, the investors were assisted by the stock brokers in the process of buying and selling of stock and in building the financial portfolio of the investors. But since the discovery of internet, a new easy method of stock trade has come up which is known as online stock trade and it only requires the turning ON of your computer. The online stock brokers play a significant role in the market of finance by helping the online traders to hit their financial goals.

There are numerous online stock brokers in the stock market but the most commonly used ones are Ameritrade, ETrade Financial, Fidelity, and Schwab. These stock brokers work in a very systematic way as they estimate the financial condition of the investor, they execute the financial plan, and assist the investors in investing in the stocks.

Online brokers keep on updating the investors with the updated and latest news and information in terms of stock quotes, performances of each stock, and company’s financial status via online accounts created through online brokers. This information really helps the investors in investing and coming out with the profitable results.

How To Select Online Stock Brokers

The online stock trade has proved to be very much beneficial with the assistance of online stock brokers. But it is in your hands to choose the best stock broker in order to be on the bright side in the world of finances. Therefore, you should consider the following points while choosing your online stock broker.

1 – It is always recommended to begin with a full service broker for the beginners in order to become confident and knowledgeable in the market of finance therefore you should not consider “discount” as the standard requirement if you are a beginner.

2 – You should keep on checking the website performance especially during the peaks hours so that you should be very much familiar with the site in order to clear the confusions else it may lead to mistakes.

3 – You should always opt for the broker who can be accessed by some different modes other than internet. For e.g. via telephone, fax, etc.

4 – It is always suggested to have a proper survey of the finance market in order to get an apt stock broker.

5 – It is recommended to go for the brokerage firms that require a minimum deposit for opening an account. There are many firms that do not possess any minimum deposit at all therefore you can enjoy the liberty of depositing and withdrawing amount according to your wish but the account will remain open.

6 – You should prefer to open an account with the broker offering lowest commission cost.

7 – You can opt for the broker who not only deals in stock market rather offer other financial services like CDs, municipal bonds, mutual funds, gold or silver certificates, etc so that you can withdraw profits from these financial services also.

8 – You should confirm beforehand that the brokerage firm in with which you are going to deal with should possess 24 x 7 hours customer care service in order to assist you every time whenever required by you.

Therefore, anyone can enjoy the thrill of online stock trade but should always begin this business of finance with the assistance of a good brokerage firm in order to be on the profitable side of the stock market.

About the Author:
For more online stocks information please visit http://www.aboutonlinestocks.com – a popular online stocks website that provides tips and online stock resources. Don’t forget to check out our page on online stock brokers.
Tag: stocks

[tag]stocks, online stocks, online stock traidning[/tag]

1) If the brokerage firm gives a small number of assignments to each of its agents (for example, 5 per each), then it will definitely give its clients more attention and it will sell a high percentage of its listings. On the other hand, some businesses (for example, liquor stores and dry cleaners) will profit from a firm with many listings that will generate more buyers.

2) A broker should be able to understand your financial situations and lower your and your accountant’s uncertainties and skepticism.

3) A broker should be able to give professional material, summaries and presentations in order to present your business well.

4) A broker should be interested to learn about your business; such as, suppliers, the history of your company/ business, your financial situation, your products/ services and even your personal life.

5) Since bidding and negotiating multiple offers is always good for the business, look for a broker who is not afraid of such offers.

6) A broker should be able to successfully reach buyers whether through the mail, emails, advertisement in newspapers and/ or internet, multi-list services or telephone calls. Your broker has to know how to target buyers.

7) A broker must keep confidentiality safe during and after the sales process.

8 You have to be comfortable with the level of communication between your broker and yourself.

9) Check the percentage of listings the firm really sells; it varies from 20% to 90%.

10) Make sure your broker knows how to find the right buyer for you through a professional process.

[youtube]http://www.youtube.com/watch?v=9WPch6QnXSk&mode=related&search=[/youtube]

William O’Neil, the founder of Investor’s Business Daily is considered the pioneer of the pivot point in modern times. As Jesse Livermore explains in his book (1941), the pivot point can also be described as the point of least resistance. When a stock breaks the point of least resistance, we are presented with an opportunity where a stock has the greatest chance of moving higher in a short period of time, especially when volume accompanies the breakout.

The pivot point can be calculated as the stock is forming the handle on a cup-with-handle base. The ideal buy price would be $0.10 higher than the highest spot during the handle, also know as the top of the right side of the base. The intraday high can qualify at the highest point and does not have to be the closing price of the stock. If the stock closes at the high for the day, then we will use this number as the high point.

The exact methods used for finding pivot points vary depending on the base pattern that is forming on a daily and/or weekly chart.

When a flat base occurs, an investor should look for a move $0.10 higher than the top point on the left side of the base or the start of the formation.

A saucer-with-handle follows the same rules as the cup-with-handle and is described in detail above.

A double-bottom formation triggers a pivot point that will be $0.10 higher than the middle peak in the “W” shaped pattern.

Many investors will try to cheat the rules and place a position prematurely before the stock breaks out and passes the pivot point. I do not suggest buying until the stock triggers the pivot point on above average volume also known as qualifying volume. The area considered as the least amount of resistance is weighed so heavily because all overhead sellers are gone as we break into new high territory. The pivot point usually comes within 5% to 15% of the stock’s old high 52-week high.

Don’t chase a stock that is 5% or more above the proper pivot point. This does not mean that you can’t buy on normal corrections and pullbacks to support or moving averages, especially if the stock remains in an uptrend. This rule only applies to the pivot point area as the stock becomes extended. If you buy with the pivot point and sell when a stock falls 7-10% from the pivot point, I guarantee that your yearly performance will increase dramatically.

Chris Perruna – http://www.marketstockwatch.com

About the Author:
Chris is the founder and president of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don’t stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.
Tag: stocks

[tag]stocks, investing, money, invest, wall street, market, finance, money management[/tag]

Stock trading, an easy source of income, has attracted many investors to earn extra income. Many people have reveled on their fulsome profits and many have grieved over their losses. No matter what stock market has always been a luring hub for ambitious and adventure loving investors. The advent of Internet in this field has witnessed the birth of online stockbrokers. Those brokers offer the opportunity of cheap online stock trading to the investor, which is very helpful especially when you are new in the field.

The essence of the story is that when a newcomer enters the field, he is not generally prepared for investing large amounts for buying stocks. The person neither has enough money nor is he not mentally prepared to make heavy investments due to lack of confidence in this business. However, if he wishes to trade through a broker, he may be forced to invest a large amount so the discount stockbrokers can charge a handsome amount commission for their services. Hiring such an expert is no doubt expensive. Trading with this high commission rate will not let you earn a profit unless you make a good enough investment. You can imagine even an inchoate stock investor has to risk out a big amount from his pocket.

Online discount stockbroker is a different case. These websites provide online brokerage stock trading with an easy and helpful software program. Now, I can explain why it can offer low commissions. There are no real individuals serving you here but they offer day trader highly executive platform so, those online brokers can charge less commission per head and they are still able to gain big commission amounts by serving a large number of traders.

When you trade through an online stock brokerage firm, you can invest lower amounts and still earn profits because of the low commissions. Additionally, an online trading site offers valuable online stock trading information to the investor that helps investor in making the right investment decision.

Remember that stock trading is not that risky if you know how to choose a good online brokerage. It is our very own greed to earn huge profits, which turns it into a risky trade. Therefore, take my advice and keep your investments low until you gain some experience in the field. Enjoy the trading game but observe prudence while making your selections. There are many online trading companies claiming to be the best online stock trading company so you should choose carefully, read between the lines, and find a company that does what it claims.

About the Author:
New investors should be well informed on online discount stock broker trading (http://www.sogoinvest.com/) and choose a deep discount stock broker which suits you all the way.
Tag: online discount stock broker trading

[tag]online discount stock broker trading, deep discount stock broker, best online stock trading company[/tag]