One of the things that separates successful traders from the majority of market participants is that they have a detailed plan that guides them when to close trades. For them, this is essential. It is fair to say that when a lot of traders buy shares they have little idea of under what conditions they would consider selling. It would also be fair to say that a fair percentage of market participants routinely adopt a ‘buy and hold’ approach.

Whilst trading routinely involves decision making, there are no more important decisions you have to make than when to sell shares. Many traders often overlook this part of trading or underestimate how important that it is.

Importantly, the outcome of every trade is dependent on the exit. If you enter in a timely manner and then exit poorly, the trade could very easily be a loss. If your entry happens to be poor but your exit is good, you might actually still salvage a profit, or at the worst, minimise a loss. The exits, and not the entries, determine the outcome of your trades.

Any form of backtesting will illustrate this point. You can take an entry signal but combine it with different exit strategies. You will quickly discover that you can drastically affect the overall results with only minor adjustments to the exit strategy.

It could be argued that you cannot even conclude that a particular entry signal is effective because the final results are so dependent on the exit strategy used. Bad exits can make a good entry look bad and good exits can make a bad entry look good.

Selling shares is probably the most difficult decision you will face but it is the most important. The decision is especially difficult when you are faced with a loss and all you want to do is wait for the shares to return to your buying price. The situation is made worse when the shares continue to move away from you, making your loss even greater than you would have ever imagined.

There are a number of reasons why people will not sell shares when they are faced with a loss. Consider the emotions in a person who is contemplating cutting a loss. Cutting a loss means that you purchased some shares and they went down. Your initial decision to buy was wrong and selling the shares at a loss validates your mistake. Cutting your loss means accepting that you were wrong and unfortunately there are many people who cannot bring themselves to do this. Yet, it is essential.

Of the more than six billion people on earth, not one of them knows what is going to happen in the markets tomorrow or any day in the future. No one else knows, so how can you expect yourself to know for sure?

Those people who run their own business realise that they make some decisions that work out very well and others that in hindsight, were poor and perhaps result in losing money. However, another thing that is for certain is that they would all accept the latter as being par for the course in running a business. People who manage successful businesses would naturally accept that experiencing a loss is just a part of trading.

US home builders' bonds have become the biggest losers in the market for debt, with ratings below investment grade.

The debt sold by D.R. Horton Inc., KB Home and other construction companies has fallen an average 3% since May, leaving investors with losses around 1.1% for the year, including reinvested interest.

It equals the worst performance of the 37 industries tracked by Merrill Lynch & Co.

The bonds returned an average 2% through April. Many investors remained confident that the housing market would be able to handle higher interest rates. Yet, with continued increases in rates in both May and June, mortgage rates went to the highest levels in over four years.

The index measuring home-builder confidence has fallen to the lowest level since 1991 for July.

"You have to ask yourself if the worst is over or yet to come," said Timothy Compan, head of corporate bond strategy at Allegiant Asset Management.

The extra spread that investors demand to own home-builder bonds over Treasuries is widening as the housing market declines.

Building permits fell 4.3% in June, according to the Commerce Department. The sales of new houses are expected to fall 9% for the year, said David Berson, chief economist for Fannie Mae. Prices could rise only 2.6% for the year, he said.

KB Home, the nation's fifth-largest home builder, announced last month that profits will grow at the slowest pace in five years for 2006. This is due to higher mortgage rates cutting demand, according to the company.

"Every downturn is longer and deeper than people expect," said D.R. Horton Chief Executive Donald Tomnitz.

D.R. Horton is the third largest builder in the nation. Last week, the company reported its first quarterly profit drop in its 28-year history.

"We are assuming the worst," said Tomnitz.

But the slide among home builders isn't a reason to jump out of the market just yet, said Steven Brooks, an investment-grade debt analyst at T. Rowe Price Group Inc. in Baltimore.

"The credit quality is sound," said Brooks. Housing companies are "very well positioned to manage through a downturn as long as we have reasonable economic and job growth, and interest rates don't go through the roof. It's hard for me to imagine a serious downturn."

What is the stock market? Well in simple terms it is, a market for the trading of company stock, and derivatives of the same. Participants in the stock market range from small investors to large hedge fund traders. It doesn't matter who you are, if you are willing to learn the basics and make some money, the stock market is a place that you should investigate further. Many years ago the stock market was overrun with individual buyers and sellers, but now in days the market is more institutionalized, with an assortment of companies and business firms.

Some people have been trying to master stock trading for decades, but few have truly got it down. Many people believe that with a few courses and a few books they can make vast amounts of money in stocks. In most cases, that is not true. In order to make money, sometimes you have to lose money. Face the fact, if your in the stock market you will lose money, often or occasionally, depending on your knowledge of how the market works.

To understand stock trading, you have to understand what stock is. A share of common stock bestows the owner of that share, with a fraction of what is left over, after all other stakeholders in a business have been paid. Basically, that means that after everything important that keeps the business, that you have invested in, running has been paid for, you will get what is left in the revenue. The revenue is used to pay for raw materials, employee wages, energy, supplies, and pays interest on borrowed funds. If a company is managed poorly, the revenue that is left over for shareholders could be quite low, or even negative. If it is run smoothly and doesn't hit many bumps in the road, shareholders may be left with a great deal of money. The last person in the line to be paid is the common shareholder. Raw material suppliers, bondholders, employees, etc. are on the top of the list to be paid and will be paid with available funds. Because the shareholder is last, they are entitled to more money then the bondholder and so on.

That is the reason the stock market is set apart from gambling, as it is so commonly compared to. The fact is that the stock market is quite different from gambling. If you were to buy a group of stocks and keep them for a duration of 50 years, odds are they are going to increase in that time. It is true that it will fluctuate, but experience has shown that the stock market shows gradual increase over gradual decrease. Your portfolio will have gained in value, all the while no one has lost money. Unlike in gambling, where the winner has the losers money. The loser has shown a loss, while the winner has gained a profit. That's why stock and gambling are different, and should not be compared nearly as often.

A stop order, also known as a stop loss order, is a type of stock order where the trader can set a point to buy or sell a security once the price of that security reaches a trader specified fixed price. The trader fixes the price above the present market value in order to set up a buy stop order and below the current market value for a sell stop order. Stop orders can help to limit an investor's financial exposure within the market.

A sell stop order is essentially an instruction to a broker to get them to sell a security which is being held, at the best price currently available, should the market value drop below the pre-set stop price. These are traditionally used when investors “go long” in the hope of stock prices rising, and help to reduce any potential loss should the stock price fall beyond the fixed sell stop value.

A buy stop order is used typically to limit a potential loss on a short seller speculation, where an investor borrows and then sells a security in the hope of reducing the subsequent market price. Once the price falls, the investor can then buy the stock back at the lower price. This enables the trader to then return the stocks purchased to the lender, in order to profit from the difference between the original selling and repurchase prices. The buy stop order, which is always set above the initial market price, is automatically triggered when the stop price is reached, and is a call for the broker to cease purchasing stock; and so protect the investor against loss, should the price continue to rise.

While a standard stop order uses a fixed price to control when it becomes activated, a trailing stop order utilises a dynamic stop parameter. Investors using trailing stop orders specify a price difference or a percentage difference from a benchmark price position. This benchmark is the highest or lowest market price that the stock has reached since the stop order was placed. Trailing stops are used to protect profits as part of a risk management strategy, and will automatically adjust as the market moves in the investors favour. This type of order allows the trader to profit from any favourable movement within the market whilst at the same time having the protection of a stop order to prevent huge losses being accrued.

These days it is easy to find a large amount of information online about stock trading terms, through sites such as Wikipedia, it is important to note however that you need to ensure the validity of all information used to make any investments, in order to reduce the risk of potential financial loss. Many of the larger banks such as Barclays Stockbrokers offer regulated sources of information on subjects such as stock stop orders along with stock trading services to all potential market investors.

Disclaimer: All information contained in this article, is for general information purposes in the UK only and should not be construed as advice under the Financial Services Act 1986. The price and value of investments and their income fluctuates: you may get back less than the amount you invested. Remember that how an investment performed in the past is not necessarily a guide to how it will perform in the future. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.

Leverage is the ability to use a little bit of money to potentially make a large amount of money. For the past six years leverage has been used in the real estate market as lenders introduced new lending products such as zero down loans and Adjustable Rate Mortgages(ARMs) as well as through the use of option contracts. Leverage is also used to great effect in the stock market options market for about 25 years and in the commodities market for hundreds of years. In fact, leverage is what makes these markets liquid. That is to say these markets would be much less efficient without the use of leverage to bring hedgers, speculators, and manufacturers together and allow them to trade quickly.

Options are only contracts that people form to use leverage in a very simple form. Options are used in real estate and the stock market primarily, but may be used for any commodity or futures contract. An option is a simple contract that must be purchased from the option writer, or the person who owns the underlying asset for a price called a premium. This allows the options buyer to purchase the asset at a predetermined price no matter what the value of the asset may be when the contract/option is actually exercised, if it is exercised at all. This premium may only be 3% to 20% of the total value of the asset. This is leverage. Controlling a large valuable asset for a small price, even if for only a limited time period.

Leverage also allows the stock option holder to buy the stock for the predetermined price once the strike price is reached. If this happens the option holder may exercise the contract to purchase the stock at the predetermined price, no matter what the market price actually is at the time. Leverage exists because the price of the premium is usually between 3% to 10% of the total value of the shares that are being controlled. Stock options are standardized to control 100 shares of stock for the time period agreed upon. So if a stock that is trading at $100 can be controlled for 5% of the total value to the shares there is a huge amount of leverage for the option holder. $100 X 100 shares = $10,000 of total value of the shares. Five percent of $10,000 = $500. So for a mere $500 an options holder can control $10,000 worth of shares for a limited time.

This is leverage that any legal adult can use in either real estate, commodities contracts or in the options market to use resources (the asset) owned by someone else, for a limited time, for a very small price based on the total value of the asset. By using leverage properly any investor has the opportunity to build a large amount of wealth for a very low cost. Because options in real estate, commodities contracts and the stock market are considered very risky to the risk adverse, everyone must determine for themselves just how much risk they are willing to assume before using leverage as a tool for wealth building through investments.

Can you make good gains in stock and mutual funds? Well the facts suggest you cant and the risk reward is against you. If you do then you don’t make much.

Mutual funds simply are a bad investment and with soaring oil prices choking economic growth the near term future is bleak.

Let's look at the facts.

1. 90% of mutual funds have performance that doesn’t even beat the index

2. Those that do, consider a mutual fund performance as 10% + good. Add in inflation and that doesn’t leave you much.

3. Downside risk is high and many mutual funds can drop by 30% and some even more

4. Mutual funds that do badly simply disappear and another with a short term track record comes in its place and that if it fails it gets replaced.

5. Mutual funds are selling organisations and the sales patter always sounds great but if you wrote to one and asked for an aggregate of all funds ever managed you wont get a reply

6. Do mutual funds go out of business of they lose money? No, they still have their fees so performing is not an issue.

So reality is over 10 years if you make double figures consistently, that’s good in terms of mutual fund performance, but not good if you are interested in building wealth.

The best mutual performance (if your lucky to get it ) wont make you rich so what are the alternatives?

Firstly, you can find better performing investments with lower downside risk and you do not have to blindly give your money to a fund manager to lose.

Do a bit of research and homework – it wont take much effort and you will find a better investment.

A better alternative

A great investment is land. You may never have considered this but its cheap, easy to do has low risk and you can make big profits quickly.

You don’t need insider information or even to do a lot of work, but you will be able to get better growth than the best mutual fund performance.

A great investment in land is

Costa Rica. Land prices has been steadily increasing year after year and many investors are doubling their investment in just a couple of years and that’s way ahead of the best mutual fund performance.

Why is it increasing in value

Well the reasons are simple and compelling

Costa Rica is just a 3 hour flight from the US and property is 70% cheaper and so to are living costs.

Americans in record numbers are buying property here to improve their lifestyle and these properties need to be built on land in fact, investment is at record highs.

Why this bull makret will continue

Land bought in the way of the influx of new buyers can be sold quickly, at big profits and this bull market is set to continue. Why?

With 70 million baby boomers retiring in the next 15 years, with most unable to maintain their existing lifestyles means they will continue to go to Costa Rica for the good life at far lower cost they can get in the US.

By land here and you can beat the best performing mutual trust and have less risk.

We don’t have room here to explain all the advantages such as tax efficiency and ease of purchase but if you look into the facts you will see why this is a much better investment to build wealth longer term than even the best performing mutual fund.

The first chart is an SPX daily chart that shows bullish intermediate-term indicators. The CPC 50-day MA (above price chart) fell from 1.08 Monday to 1.05 Friday, while the NYMO 50-day MA (below price chart) continues the uptrend (other indicators not shown also show similar bullish patterns). Also, SPX has recently made higher lows and higher highs (the SPX high Friday was 1,280.42).

The second chart is an SPX monthly chart. Monday is the end of July. If SPX closes above 1,285 Monday, the MACD indicator (below price chart) may close the month maintaining the bullish crossover. Also, SPX has closed each month above the middle Bollinger Band, since rising above that level after the cyclical bull market began. Money Flow (above price chart) increased and remained positive in July.

SPX closed at 1,278.55 Friday. Currently, short-term technical indicators show SPX is severely overbought. So, if SPX closes Monday above 1,285, to maintain the monthly bullish MACD, it may fall to at least 1,261 key support later in the week, although the first few days of a new month tend to be bullish. Also, the FOMC announcement is August 8th (a week from Tuesday). So, next week may be volatile.

rthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

The last few weeks in May 2006 reminded investors all around the world that when it comes to the Stockmarket, shares can fall in value as well as rise. This is the number one reason why most people stay out of the investment game.

But for experienced investors, this is not an issue. Because they know that staying invested in volatile times as well as keeping sight of their long-term goals are important factors in achieving investment success.

Sudden downturns in the market are only factors of particular importance to the short-term investor.

Volatility, which is the ups and downs of the Stockmarket, is the price we pay for our expectation of investment gain. This is part of the investment process. The investor who is able to weather the storm lives to enjoy the sunshine. To avoid volatility is to avoid the reward.

If share prices drop instead of rise, this can be an opportunity instead of a concern as it means that you can buy more shares. Providing you do not need your money immediately, you will now be able to purchase more shares at a lower price.

With time, the share value will recover and your overall value well benefit from the rise as well. It is much like buying retail items on sale. According to Warren Buffet, his favourite holding period for stocks is forever!

A sound strategy to buffer some of the market volatility out of investing is to settle for regular investing as opposed to lump-sum investments. This is when you invest a fixed amount of money at fixed intervals of time regardless of the price of the shares.

This is what is referred to as Fixed Cost Averaging. This is a sensible approach and it takes a lot of the worry and stress out of investing.

If you have a lump sum of money to invest, you can phase your investment into six or twelve equal parts to effectively achieve the average price of your chosen investment over the period.

When the share price is up, you buy fewer shares, when the price is down you buy more shares. Fixed cost averaging does not guarantee the best results, however it provides the greatest opportunity to get the best price on shares over the long term.

It results in lowering the average cost slightly, presuming that the fund fluctuates up and down. Buying shares this way proves far more effective than buying a fixed number of shares each month. It also eliminates reliance on market timing and stock selection saving you time to focus on other activities in life.

No one in the investment world can consistently out-perform and beat the market.

The good news is that you do not need to! All you need is a fully diversified portfolio of investments, which is the best defence against market volatility.

Do not listen to the ability of the media or financial advisors to keep people in constant fear and hope. Remember: they are not in the business of educating people.

The primary focus of financial advisors is their own profit and

Despite popular belief, investing in the Stockmarket does not have to involve high risk, extortionate commissions and fees, punitive restrictions, specialised knowledge or even much effort on your part. There are many different ways to invest your hard earned money to create wealth. Some routes involve higher risk than others.

Depending on your objectives, your aim should be to choose the lowest risk route for your investments.

The ideal conditions to make your investments worthwhile would depend on your individual circumstances but there are general conditions that most people expect. Usually these are:

1. High return
2. Minimal Risk
3. Low Maintenance
4. Low Fees and Commissions
5. Easy Access
6. Maximum Flexibility
7. Tax Efficiency

High Return

Although no one can guarantee you a high return on your investment, when you invest over the long term and are not pressured to withdraw your money in the short-term, you are virtually protected from market corrections. Sudden downturns in the market are factors that affect the short-term investor.

The ability to generate a significantly high return on your investment comes with the willingness to accept a relatively low investment risk. A good investment should produce returns between ten to fifteen per cent over a number of years with a minimal risk to your money.

A reasonable target return to aim for is twelve percent, which can mean that your investment can fluctuate annually. But over a number of years you can anticipate an average return over a number of years of twelve percent. When the return on your investment dips at any time to seven percent at any time that should not cause any concern providing the average return for the entire period is high.

Minimal Risk

It is equally important to limit the investment risk to your money. The subject of risk is relative to every person, and greatly depends on your financial circumstances and your understanding of the Stockmarket. Your aim for any investment should be to achieve a high growth with minimal investment risk to money. Ideally, you should be investing your money for the medium to long term. Short-term investing is inherently risky as it exposes you to fluctuations in the Stockmarket.

Even experienced investors and professionals lose money speculating on the stock market. Some people spend their entire professional lives studying stocks and shares and still only get it right half of the time.

For a person fairly inexperienced with the Stockmarket, investing directly into the market bears a higher risk and can be potentially costly, with less predictable outcomes. That is why investment advertising always includes the warning: "The value of your investment can go down as well as up", and "Past performance is not necessarily a guide to the future".

The good news is that you do not have to be a specialist in the market to benefit from high growth with minimal risk.

Low Maintenance

Investing through a stockbroker is one of the most expensive routes into the Stockmarket, especially if you are just starting. This is usually high maintenance investing, as you need to give instructions to the stockbroker when shares are being bought or sold, and monitor the Stockmarket regularly. Also, your investment should achieve a significantly higher return to justify the additional funds to pay the stockbrokers fees.

Ideally, most people prefer investments that are easy to set up and simple to maintain with little investment knowledge. It should take some effort to initially set up and manage, but once set up you want to be able to focus on other important aspects of your life, including generating more wealth in other areas.