NetTrade

• Understanding Insider Trading

  Insider trading has been cast in a negative light to the public. But in all actuality, insider trading is not always illegal. There are actually two types of insider trading- the legal and the illegal one.

  Defining Illegal Insider Trading
  By definition, insider trading is generally the practice of trading a corporation’s stock or other securities usually done by individuals that has potential access to non-public information about the company in question. The illegal type of insider trading is one that is done by trading stocks and other securities by insiders such as corporate managers and employees who might possess valuable internal information not yet known to the public. Such information gives the insiders in the company quite a considerable advantage over the public who owns the same stocks and securities but do not have the same access to such information.

  An example of an illegal insider trading is if a CEO of a certain company sells some of his stocks after discovering that the company may be losing a big contract in the following month that might have a great effect on the stock price. Another example is that if a son of a CEO hears about the loss of the big contract and decides to sell his own stock shares in the company to avoid the fall in stock price. People think that only those who belong on the upper management or work for the company who can be guilty of illegal insider trading. In fact, even friends, family members of people with access to insider information in a company can also be considered as insiders if they take part in transactions that constitute insider trading.

  Defining Legal Insider Trading
  But there is also a legal type of insider trading. These can be stock trades that go in company in between employees of a company or publicly traded corporations, provided that such trades are made after inside information has been made public. This trade window or period is usually after financial statements and earnings reports of the company or corporation.

  An inside trade may also be considered legal if an employee of the said company has previously created a written contract stating that he or she has planned such trade in the future. The pre-existing contract should state the future transactions and trades and on what periods in order to be binding enough as a legal insider trade. Examples of such contracts include those where an employee agrees to sell a certain part of stocks every month for a period of two years as part of his retirement plan. And so when an employee trades his or her stocks and comes into possession of some important non-public information concerning the company, the trades that are based on the original agreement made does not constitute as illegal insider trading.

  Posted in Advanced Trading

  September 23rd, 2008 / No Comments

• Cleaning Up Your Portfolio

  One of the important factors of enjoying success in stock trading is by having a well-managed portfolio. Such a portfolio contains that provide a stock trader with various opportunities to profit from, both in the short and long term. A well-managed portfolio also requires that it has to be cleaned up now and then.

  One’s stock portfolio can get considerably large over time. It can consist of a mix of stocks that may or may not offer promising returns for its owner. Some stocks can even be considered as dead weight and bring down the portfolio’s overall performance. Stock traders can better manage their stock portfolios by learning how to clear out those stocks with dismal showings in the market to allow better returns.

  Having A Profit Mindset
  Some traders try to hold on to stocks in their portfolios for as long as possible with the hopes of bigger profit in the future. With their patience, it might just happen. But it also may not. There are some stocks that just don’t offer that attractive deal no matter how long you try to hold on to them. Having a profit mindset will enable you to look into the stock investments in your portfolio and gauge the profitability of each one.

  Traders should know how to look into their stock investment portfolio and check out which stocks are gathering dust by the corner. Bear in mind that the longer such stocks remain in your portfolio, the more money that you lose in terms of potential profits investing in other stocks. Try to get rid of stocks on dormant status and invest on something else.

  Review Your Portfolio
  In order to ensure that your stock portfolio performs well in the market, you may need to review it regularly. Getting the most attractive current stocks for your portfolio and holding on to them, may not necessarily give you the most profit. Remember that stocks are considered as volatile investments. The potential profit that you earn today may be lost tomorrow. That is why checking and reviewing your portfolio on a regular basis is important to ensure a good and profitable track record.

  Organize
  A good way to check up on your portfolio more efficiently is through effective organization. Organizing your portfolio does not just mean your stocks, it also includes your files, records and data that you use to base your trading decisions. After doing a lot of stock trading through the years, you may have noticed that clutter has begun to accumulate in your office. You may have so much unwanted files and records that you may need to get rid of. It becomes more difficult for you to look for the information that you need because of a cluttered office or PC. To work more effectively, you might need to clear out the clutter and organize your office in order to organize your thoughts and business decisions.

  Posted in Advanced Trading

  September 2nd, 2008 / No Comments