Sunday, September 30, 2007

Diversify, Diversify, Diversify

Diversification, even in trading, is very important for risk reduction. Since you aren't going to be correct in every trade you make, diversification is necessary and important as a means to risk reduction and capital preservation.

The simple fact is this: if you put all your trading capital in one or a very limited number of stocks, you are just asking for trouble and increasing the risk you are exposing your money to. At some point, if you trade long enough, you will undergo owning a stock that drops like a rock for one reason or another. Most people who have traded for any length of time have been there, and it's no fun at all. Avoiding putting all of your eggs in one basket is the first step in limiting risk when it comes to both investing and trading.

It is important to avoid investing too much in a position. There is an old story on Wall Street where one trader asks another trader for advice. He says, "I've bought so much of this stock that I can't get any sleep at night... what should I do?" His friend says, "Reduce your position in the stock down to the sleeping point. This is not only very good advice, but very true. The smart trader takes up no position in such large quantities that it makes him overly nervous or subjects him to loss of sleep.

Trade at levels which you can afford, and you will generally feel much more comfortable in your trading. This will generally result in much clearer thinking and smarter decisions on your part. Too much risk will result in too much fear, and that will cloud your thinking and judgment.

Trade stocks that you know. Part of being confident about a position you take up relates to having some understanding of the company behind the stock. Clearly it is impossible to know every little detail about the day-to-day operation of every business you buy stock in. However, it does help if you have a basic understanding of the type of business they are in and how news (positive or negative) may relate to and/or impact a company and their stock. This will not only help you feel more comfortable about the position you take up, but it will allow you to more quickly evaluate news which may be released regarding the company.

Trade stocks you know or that are in areas you may have experience in. Warren Buffett is a good example of this philosophy. He has no problem telling share holders in his investment companies that he doesn't understand much about technology related companies and therefore steers clear of buying such stocks. Sticking to what you know is not only a good way to start out investing and trading stocks, but it can help you feel more confident and make better decisions along the way.

Another approach is to trade popular/liquid stocks. Stocks that are "popular" with the public and investment community have a very real benefit to your trading. Specifically, they tend to be very liquid. Liquidity is a measure of how much volume changes hands on a specific stock (typically on a daily basis). The more liquid the stock is (i.e. the more shares it trades) the more likely you'll get a fair price when buying or selling the stock. Also, the more likely it is that there will be a market to buy from or sell into.

Trading stocks which have very low volume (typically under 100,000 shares per day) can incur additional costs and can limit your ability to get in and out quickly when so desired. Often times if you try to buy or sell a large block of stock, there simply won't be a market at current prices. This can result in the market "stepping away" from you when you go to sell. Worse yet, you can drive the price up on yourself. While there are times when buying a little known stock may work out, for most of your trading, you should strongly consider sticking to actively traded stocks. This is true of options trading as well (i.e. stick to options on stocks which trade higher volume).

Trade stocks that are making money. The stock market is based largely on economics and business (with some emotion and perception thrown in). As a result, I personally feel it's a good idea to trade stocks on companies which are currently showing a profit, as opposed to companies which "might show a profit someday". Great ideas are a dime a dozen, as they say, and you don't have to look far on Wall Street to find stock in companies that are using other peoples' money to test out their "great" idea. In my personal opinion, I would much rather be trading stocks in companies that are currently profitable.

Additionally, keep in mind that even companies that are "making money" on the top line may not be "profitable" from a net (bottom line) profit standpoint. There are many companies out there that have racked up a tremendous amount of debt and/or have business models that, while they bring in quite a bit of cash, are unable to actually show a profit at the end of the year. Generally speaking, stocks which are currently showing a profit or are very close and very likely to show a profit in the near term, trade better and are somewhat less risky than stocks which are either in the red or struggling to show profits on their financial statements.

Part of this is because valuations are much easier to calculate from real earnings (i.e. using the company's P/E ratio) than trying to base valuations on "what might happen" down the road. True, sometimes stocks trade more actively or more wildly on news of potential profits, but at the same time, when a company announces they may not meet analysts' expectations or may experience an earnings short fall, it can get quite dangerous. Consider sticking to companies with tangible, consistent earnings when doing your trading as a further means to risk reduction.

Finally, avoid buying the Big Event. This idea tends to go hand in hand with the ideas presented above (regarding trading companies that actually are able to show a profit). In the stock market, there is always "some big event" that might take place for a company or the market. Buying or selling based on the possibility that this event may take place (or may not take place) or based on the how the market might react to such an event tends to turn your trading into a gamble more than anything else - and this is very risky.

Buying a stock ahead of what might be a "big event" can be quite risky and often times tends to delay your trading. Very often these big events (such as mergers, buyouts, etc.) get delayed for months and months. If you wish to hold a stock for weeks and weeks or months and months waiting for some big news flash, then that's perfectly okay. However, just keep in mind that generally stocks move up on news far before the average individual hears about even the rumor of the news. As a result, you often see stocks trade down on positive news (due to the fact that the news was already anticipated long in advance and largely priced into the stock prior to the release of the actual news). Generally speaking, buying the big event will tend to be not only risky, but also will tend to slow down and stagnate your trading. Avoid them when possible.

Good luck in the markets!

No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and hot links included.

Ray Johns is the founder and Senior Market Editor of, Proudly serving day traders & short-term investors since 1996, at is the publishers of the award winning Morning Stock Market Report and the home of the Internets finest real time trading desk. Ray has been on the forefront of trading and investing in the markets and has appeared as a guest on a number of radio and television shows including CNBCs Market Talk. If you would like a free trail of the newsletter and the live trading desk log on to Comments and questions can be sent to

Series 27

Financial and operations positions at an NASD firm usually require the Series 27 license. There are several areas and departments of a brokerage firm. People looking to become brokers will usually need to take the series 6 or series 7. Supervisors of brokers or sales people may need the series 24.

The Series 27 is an exam that covers topics consistent with working as a compliance officer or in another financial operations department. The exam is 145 questions and multiple choice. Like the other NASD tests, the Series 27 can be taken any day of the week at Prometric testing centers. You must register through your brokerage firm prior to arranging a test date. Once you are registered, a 120 day testing window is opened. You can take the Series 27 at any time during that 120 day period. If you fail the exam, you must wait 30 days before sitting for the test again. If you fail the Series 27 three times, you must wait 6 months.

Most of the exam covers rules, regulations and operations of an NASD firm.

Test Breakdown

The Series 27 covers several main topic areas, they include:

Balance sheet and net capital.

This section will cover computing a firm's net capital, understanding the rules and minimums of keeping minimum net capital, and understanding the balance sheet. It will also test the candidate on the effects of loans and securities on net capital and its effect on the balance sheet. This is the area that covers the most math on the test.


This area of the Series 27 includes purchases and sales of securities, transfer of securities, customer settlements and confirmations, and other items that require record keeping and reporting.

Customer Protection and Notification

This section of the exam will test you on notifications, delivery of securities, and activities in the accounts of the firm's customers.

Margin Accounts

A fairly large section of the Series 27 deals with lending of money and securities in margin accounts. The margin section will cover market values, equity, debit balance, SMA, hypothecation and the markets effect on margin accounts. There is some math in this section. You need to know basic calculation and the rules associated with margin accounts. Federal Reserve Board and NYSE margin rules are covered in this section.


The organization that oversees the municipal industry is known as the MSRB - Municipal Securities Rulemaking Board. Brokerage firms that sell municipal securities must abide by the MSRB. Students studying the Series 27 must be familiar with the rules and regulation that are covered by the MSRB.

Other areas include rules and securities acts.

Series 27 Career

If you are looking to break into the financial operations area of NASD firms, the Series 27 can be a big plus. If you are in between jobs or firms and do not currently hold the Series 27 license, you might want to consider studying for it and begin adding your process on your resume. Doing this can give you an advantage over other candidates not familiar with the exam. These are salary positions, which is the good part. Most jobs at brokerage firms (that are non-support jobs) are commission - or largely based on commission. The bad part is that firms do not hire groups of people for their compliance department. You need to keep a look-out for these openings. Most firms only need one compliance officer.

Good luck in your career!

Nick Hunter is the President of American Investment Training They offer home study courses for all NASD exams, including the Series 27.

A Modern Economist's Bartering System

Forex or foreign exchange is a growing industry in the economic market. Currencies are traded for another, thus making the foreign exchange market the largest in terms of cash. Because of trading between one bank to another, not to mention the trading between multinational corporations and government, between financial markets and institutions, cash is abundant and easily flows in foreign exchange trading.

Due to its various trading components (since there are a lot of foreign currencies in the international market over-all), the liquidity or easy cash flow of the market, huge bulk of traders and a 24-7 service transaction, the foreign exchange market is unique and is here to stay in the competitive world of business.

The foreign exchange market is not unified. There is no single dollar rate. Dollar rate varies from one country to another, this is due to the over-the-counter or OTC transactions that is practiced in most forex industries. There maybe different prices to a dollar, which is dependent on the bank, but generally, the rates are pretty much close.

The trading centers in Tokyo, New York and London are the centers of foreign exchange trading. However, all are interconnected. Tokyo may be the center for the Asian market, New York for the US and London for Europe but notice the chain of one to the other two. For example, the US session ends, then the Europe session begins followed by the Asian. It is a cycle and a change from one capital can affect the other two.

Foreign exchange can be considered as the modern economists barter exchange. A currency of one economy can be traded to another. The most heavily traded currencies are that of:

- the US dollar to the Euro
- the US dollar to the Japanese Yen
When the Euro became the official currency of the 12 of the 15 then members of the European Union, it was pitted against the dollar. The Euro enjoyed periods of ups and downs in comparison to the American dollar. As of most recent news, the dollar declined to a low as opposed to the Euro despite of the decline in the American deficit. The fact that well-established and developed countries have one currency as their official fiscal trading component, the Euro gets stronger than ever in the economic aspect.

Its not only the three forex capitals that play a part in foreign exchange trading. Markets of other economies are free to join. In fact, even their banks have a role to play in the big economic picture. Commercial turn overs and large trading are catered by international banks on a daily basis. Some of these banks trade their currencies for dollars.

Commercial companies also sought the assistance of the forex market to pay for the obtained goods and rendered services. Commercial companies may have smaller amounts of currency transactions as opposed to banks, but these trades and exchanges among commercial companies are still necessary for the trading market. For example, a multinational company that is based on various locations through out the world may have an impact in the economic picture as a whole when it stops participating in the trading market. This is the another example of the mentioned scenario: that one capital session can affect the other two, so does one multinational company in any location can affect the forex trading as a whole.

Another example proving that countries are interconnected. One economys gold is another economys gain as well.

For more information and tips about forex trading. Visit us at

Stock Chart Reading

As an investor you will want to check out any equity before you buy it. Many investors go to Morningstar which is one of the largest providers of mutual fund information in the world. It is assumed that their information is correct. After all that is what you are paying for.

Recently the SEC (Securities and Exchange Commission) called them on the carpet for not correcting an error within a reasonable time (whatever that is according to the SEC). Everyone makes errors and this was no big deal.

It seems that when you went to their site and drew up a chart or asked for statistics on Rock Canyon Top Flight mutual fund it failed to notify the potential buyer that the fund had issued a very large dividend of approximately 25% and the NAV (Net Asset Value) dropped from $15 to $11 to reflect the $4.00 dividend.

When you ask for a chart of this fund on MarketWatch, Yahoo, TheStreet or Bloomberg they only post the NAV and do not make any adjustment for the dividend or capital gains distributions. Looking at the chart it appears the fund fell out of bed. Because I look at so many charts I knew immediately that this was a distribution and not some calamity. It is best to call the fund to verify this.

Most funds that make dividend and capital gains distributions usually do so in December, some in November and very few at other times during the year.

Some nitpicker called the SEC and made a complaint about Morningstar. Not that I am a big fan of them (in fact I think their reports are worthless) they get their price information from other sources such as the above. If you are not familiar with the requirement of mutual funds to disburse their profit before year end you might be fooled when you see the price suddenly drop.

This is important for potential investors. I caution everyone to get a chart on the Internet of at least a one year performance of any mutual fund before buying. It is better to go back to year 2000 to see if the fund manager was able to keep from losing money during the last 4 years. Almost none of them could so they bamboozle about how they did better than the S&P500 Index which had a huge loss of 50% and remains down 25% from those highs at this time. Dont fall for that one.

Once again I caution that any purchase should have an exit plan. One of the basic rules of investing is never to lose a lot if you are wrong. Small losses will not ruin your portfolio, but big losses can ruin your retirement. Set your loss limit (5%, 10% or ?) and stick with it.

Charts can help you with buying/selling decisions, but check out their accuracy as charting is not an exact science.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at and discover why he's the man that Wall Street does not want you to know.

Saifun -- Is It The Little Flash Company That Could?


Do you think the market for smart phones, digital audio (MP3) players, consumer solid state drives (SSDs), portable media players, digital video cameras, GPS devices, multimedia and music handsets, memory cards and USB flash drives are growing? All these products provided a disruptive position taking away market share from their predecessors.

One market segment that could see even stronger growth than these separate products we mentioned, and include other growth products, is the flash memory market. Flash is a root component used in all the above products and more.

Based on history we are forecasting that flash is the memory medium of choice for a plethora of devices in the consumer electronics in wireless devices and that flash will grow faster than the wireless devise market. It appears that in the past, memory for computing devices has grown faster than the device that utilizes the memory. Memory of the Personal Computer (PC) and the Internet has grown faster than their supporting platform. With the PC creating tremendous growth and history as our guide the demand for both memory and disc drives for the personal computer was often the impetus of many upgrade cycles. The Internet with the many millions of new web pages created a tremendous growth in storage. Ive seen in many reports that forecasted storage of the internet has been one of the fastest growing subsets of the internet as a whole.

With a decrease in price per gigabyte (GB) of more than 80 percent over the past three years and with the high growth in wireless data the need for new and addition memory could exceed the growth of the hardware device market that uses flash for its memory. The current market in flash memory is about $25 billion annually and its forecast is about 40 billion by 2010.

With each new product cycle the advantages of flash have become more disruptive allowing it to become about 30-40% cheaper every year. Many experts are forecasting this disruptive curve to replace the disc drive market for PCs. Flash has already replaced hard drives in most MP3 players.

Currently the flash memory is designed to support two types of flash memory. One type of memory supports your machines internal usage or operating system, the other type is for more external storage needs. The internal memory often uses the architecture of NOR, which has been established for years and Intel (NASDAQ:INTC) considered by many as the market leader. The NOR technology is a more complex technology and is starting to see the market mature.

Often you will find both NOR and NAND in the same mobile device.

The much faster growing market is for external memory market needs or NAND and the one of the leaders is SanDisk. SanDisk Corp. (NASDAQ: SNDK), founded and managed by president and CEO Dr. Eli Harari. SanDisk and Toshiba jointly launched the multi-level cell (MLC). This technology made it possible to divide the cell and store two bits of data on the same piece of silicon (x2, as it were), which significantly improved the profitability of manufacturers and fabs, basically doubling the price performance curve.

This process has become the leader and allowed NAND MLC to become disruptive to the predecessor NOR architecture and in 18 months penetration has been so great that MLC is becoming dominate force in flash.

We believe that this new curve of double captivity on a single cell technology will become the single most important factor for next generation flash memory, and it will become essential as flash is staring to see possible limits in the reduction of its die size as many experts are starting their forecasting. If flash is going to continue on its curve of lowering the price of a gigabyte by 80% over the next three years, it is my opinion they will need an architecture thats designed specifically to establish this goal. There is a proprietary NROM architecture that has many advantages toward increasing capacity of bits per cell. The NROM is close to production of 4 bits of memory in each cell or quad flash.

The company we believe has a unique position and leads the NROM approach in the flash memory market is an Israeli based company called Saifun (NASDAQ:SFUN).

Saifun is an intellectual properties company which its revenues come in three forms: licenses, royalties and support. This type of model has been very successes for our model portfolios in the past. The three previous companies that had core business from intellectual property we investment into our portfolios were Qualcomm (NASDAQ:QCOM) in1997 at 3.31 per share and still holds a position. Arm Holdings (NASDAQ:ARMHY) in 9/29/1999 @ 9.60 and holds half a position and Rambus (NASDAQ:RMBS) in 1998 which appreciated about 350% in 2000 and we sold the position in the model portfolio when Intel stopped supporting the Rambus architecture late and 2000 and in 2001.

Even though it is very early is Saifun publicly traded history we are excited by its new form of flash memory architecture, it appears that Saifuns approach has many advantages over the more established NAND and especially NOR. The single most important part is their technology curve. They have the ability to double the bits per cell allowing for a second compounding curve. The other architecture they are working hard on is to shrink their size and increase density, but we believe that Saifun with its simpler model should achieve a smaller die than the others but the real advantages with Saifun is the ability to allow 4 bits of memory in every piece of silicon (x4). Doubling again the events of MLC while at the same time reducing their size thus possibly leading the new flash architecture. Another advantage is NROMs ability to work both as an operating system and memory component being able to supply both markets that individually NOR and/or NAND has target.

A second company has just announced that in 2007 they will start producing a 4 bit cell in NAND. The company making this announcement is M-Systems (NASDAQ: FLSH). They claim they will have a product on the market some time in 2007. Even though they have achieved this tremendous breakthrough we believe that because they use the whole cell instead of a fraction of the cell for this doubling process, the whole cells ability to double again may become geometrically tougher. On the last review M-Systems has not explained their business model to (make at own fabs or licenses) and delayed the secondary offering.

It is has been our opinion that companies that form successful royalty models resemble gutters and the fab companies have the appearance like shingles when looking at a roof. When it rains the gutter can create a stronger stream receiving income and achieve a much higher level of profitability. The delay of M-Systems secondary offing might reduce the chance of more fab developments.

Either way this looks like a marathon race and since this is such a very large market it will be about a $40 billion market when quad flash is widely available, that means that any of the top three or four should benefit.

Saifun already competes extremely well with NOR but early 2007 when it doubles the number of bits from 2 bits to 4 per cell it should be able to show advantages over MCL NAND currently the price performance leader. Saifun has a chance of repeating the same step that, in our opinion, allowed SanDisk to lead the last cycle.

There are many new technologies looking to replace flash but at this point there are a few that are close to achieving mainstream volumes. You should know the Saifun technology hibernated for about twenty years. This is very common, the Internet incubated for about 30 years and electricity for 100 years. New technologies often hibernate longer than people anticipate, and then it seems that they often almost explode onto the seen very quickly.

Even though Saifuns approach is about 20 years old, the technology they have just started to achieve is commercial feasibility.

The true advantage is since they only use points in the cell versus in the more convention approach such as NOR or NAND that uses the whole cell. This simpler usage allows for higher data retention and also provides a faster response time, and hopefully more density, and less power.

This is a tremendous advantage having 4 times the bits in competitive cells. Saifun also believe future that future cells could expand to possible to 8 or even 16 bits per silicon.

Possible risk

Saifun only has a handful of clients, if they loose Infineon Technologies (NYSE:IFX) Saifun largest client, they would impact their business tremendously. On a side note, it looks like it will pick up UMC out of Taiwan.

Saifun has basically signed many very large vendors like Sony (NYSE:sne) and Spansion (NASDAQ:SPSN) a spin off Advanced Micro Devices (NYSE:AMD) / Fujitsu (pink sheets) these based solely on the flash market are small in the market, since the production volume is small this could make it harder to be designed into leading volume products.

Even though we believe NROM offers a simpler cell structure with several layers, we believe it will be easy over time to reduce or migrate to a smaller form factor, but this has not been completed in high volume production. If and/or until they can compete in a smaller form factor this company will be, based on unit size, be at a significant disadvantage. Experts believe in 2007 this disadvantage should be at most minimal and Saifun believes in late cycles this will be come a true advantage.

To summarize

1) If Saifun continues to lead the flash market with more bits per cell with NROM flash architecture.

2) If Saifun if achieves the forecasting of smaller die than comparable flash.

If Saifun achieve either of these goals it could become an architecture leader in the flash memory market. If they are able to achieve both they would attain a real architecture leadership position.

According to several of our monopoly theories, available at the stock market value of the companies that lead architecture often grow faster than all the combined companies stock market values that utilize the architecture.

Thus, if Saifun become the dominant architecture with the smallest die size in my opinion it will probably attain the leading stock market value in the flash memory market.

Randy Durig manages the several Portfolios including the Monopoly Technology Portfolio to see the full list go to and

Durigs Monopoly Blue Chip Portfolio National Performance Rankings: 3rd In the United States, Ranked by 3 year annual return, for Large Capitalization Blend, 4th Quarter 2005, By Money Manager Review.

Randy Durig owns Saifun in discretionary client's portfolios and in his own account. Past performance is not a guarantee for future returns. All information we believe to be correct but make no guarantee to accuracy.

Randy recommend for open source investment news to read or publishing articles go to

Enrollment Of Beginners In Forex

Foreign exchange market becomes new market for the people who are engaged in the activity of foreign exchange. Generally, large number of people enters the foreign exchange market at their interest and particularly more number of beginners investors finds it difficult to enter the market. Foreign exchange market is a peculiar market, where more innovative things happen daily. When a person enters the forex trading, he is required to understand the various terms, procedures and other strategies required for trading. Forex trading is offered as per the customer requirement and to facilitate the investors, new innovations are been found out. Even online forex trading has been offered to the investors and the investors can also make their foreign exchange through online forex trading.

There are many forex trading companies which online forex trading to their customers. Using more courses and books offered related to forex trading should be used by the beginner investors, so that he can take part in forex trading efficiently and effectively. There are more useful tips, guides are available for the beginner of the foreign exchange and they found to be more useful to the investors. Generally for any forex trading investors, the beginner investor should be more careful and should make it more successful and complicated. Since, forex trading is the long term investment and involves unique steps, more knowledge and experience is required for the investors to be competent.

* The amount fixed for the foreign exchange usually differs and fluctuation can always be found out.

* The investor should be known that foreign exchange market is irregular market and they lay out certain set of procedures. The investor should undergo certain functions in foreign exchange.

* He should be known that foreign exchange market involves lot of risk. Particularly, trading foreign exchange currency comes up with more risky currency trading. So, the beginner investors finds difficult and they are afraid of investing in the foreign exchange currencies.

* More over forex brokers will encourage the forex trading investors and they motivate the beginner investors to come up in competitive prices. The beginner investor should come up the risks that are available in the market and the investor should try to ignore forbidden risk.

The investor should take time to read the new forex trading activities and they should practice each and everything required for forex trading. So, the beginner of foreign exchange market should be very careful and should follow the tips, guides, and steps in estimated manner.

Chris David is a SEO Copywriter of Forex Broker He written many articles in various topics. For more information visit: Online Forex Trading contact him at