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Thursday, August 28, 2008

Why Economic Indicators Are Important When Buying Stock

Why economic indicators are important when buying stock?

What is economic indicator?
An Economic indicator is a statistic report about the economic condition. It allows traders to analyze past and current economic performance as well as predicting future market trends.

Why is it important?
No matter what stock you buy,it's pricewill be affectedby the general market trends. Do you ever experience that a company reported good news constantly but it's stock price keep going down? One of the reasons is that it might have been affected by the general weak market conditions. For example, if you are holding a restaurant stock and the current market is weak with oil price keep going up and job market down. As oil price going up, people will drive less and therefore less people will go to restaurants. As job market going down, people will worry about job cuts and tend to save more money and therefore go to the restaurants less often than they used to. Some people might simply sell stocks to pay their mortgages because of layoffs. As more people selling than buying the stock, the stock price goes down. These reasons have nothing to do with the restaurant stock that you are holding, yet your stock price is dragged down because of these causes. Therefore, it is important to know the general market trends when picking stocks.

Which economic indicatorsshould youwatch out for?
There are dozens of indicators out there, and I will list the most important ones. These indicators will help you predict the market trends in the near future and help you make trading decisions weather you are a long term or short term investor.

Employment Situation - This is the most important indicator. It is published the first Friday (8:30am EST) of each month covering the previous month.
Unemployment Insurance Weekly Claims - It is published every Thursday (8:30 AM EST) covering the previous week.
Consumer Price Index (CPI) - It is published 2 weeks of every month (8:30am EST) covering the previous month.
Producer Price Index (PPI) - It is published 2 or 3 weeks of every month (8:30am EST) covering the previous month.
Retail Sales - It is published two weeks of every month (8:30am EST) covering the previous month.
Institute for Supply Management (ISM) - It is published the first business of the month (10am EST) covering the previous month.
Durable Good Orders - It is published 3 or 4 weeks of every month (8:30am EST) covering the previous month.
Gross Domestic Product (GDP) - It is published on the final week of Jan, April, Jul and Oct (8:30am EST) covering the previous quarter.

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Reuters - Thornburg Mortgage Inc , a specialist in jumbo home loans, said its survival remained in doubt following additional margin calls, but it is on track to complete a restructuring and avoid collapse.

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Do's and Dont's of Stock Trading

Stock market in the present time is touching new peaks of success. As the trading process has become much easier with the advent of the Internet - more investors are investing their money in the stock market everyday. Since, everyone is investing money in order to earn profits, therefore it is inevitable to know when they should invest in the market. Also, since the market is quite volatile - one should know about the things that need to be avoided in order to earn profits effectively.

The followings are the dos and don'ts that need to be considered in stock trading.

Dos:

Investment plans: This is very important for all those who want to invest in the share market. Planning means, the amount of money you want to invest in stocks. Also, how much return you expect from your investment during a particular time period. Do you want to invest on a long-term basis or for a short-tem basis?

Online financial experts: Since, planning is the most vital part of investment - if you have any doubts in financial planning then consult with online financial experts and discuss the issues with them. They can give you the best possible option for the same.

Market knowledge: For a successful trader, it is necessary to have comprehensive market knowledge. There are several free online resources available on the Internet - browse the site and read articles, blogs, newsletters, reviews, etc. Once you get familiar with the terms that are commonly used in the stock market, you can easily do trading online.

Stock trading company: For online trading, every investor needs to open an online account on the trading company website. In the present time, there are several such industries available in the market. Therefore, do some market research, compare some major company services and then find the best company as per your requirement.

Online broker: Choose the best broker who can help you in buying and selling the stocks. Since broker is the person who does all kinds of online transactions it is very important for the investors to select the best one.

Don'ts

Investors should always need to verify the status of an online stock broker. Avoid unregistered brokers.

Since the market is volatile in nature, do not directly jump into the market. For buying and selling of stocks, investors need to do a complete market analysis. Use analysis tools that are available on the company website and then analyze the market in the best possible way.

Do not wait for further rise in the share prices - if you are gaining profits from today's share price buy the share and earn profits. Many investors think that the share prices would increase even more, but prices fall suddenly and investors fail to regain profits from their trading. Therefore, an intelligent decision making capability is a must in the trading process.

Follow these important Dos and Don'ts and make your trading successful. Reap the real benefits from your investment and build a strong financial backup for future. Since, investment today has become a necessity - stock market trading provides the best option for making profits. So, what are you waiting for - invest now!

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Reuters - Thornburg Mortgage Inc , a specialist in jumbo home loans, said its survival remained in doubt following additional margin calls, but it is on track to complete a restructuring and avoid collapse.

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