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Once you decide to start investing in the stock market, you will encounter the terms common stock, preferred stock, type A and type B.

What distinguishes one type of stock from the others is how big the risk is taken by shareholders, and their voting rights at general meetings of shareholders.

Common stocks or ordinary shares are shares issued by companies that will give the owners voting rights in shareholders general meeting to select board of directors and oversee the company policy. However, ordinary shareholders bear the highest risk because if the company went bankrupt and liquidated, first company will pay its creditors such as banks etc who have given loans. After that the company will pay the holders of preferred stock and the last come the common stock holders if the company still has remaining assets. But most investors who invest in the stock market will take this risk because the common stock will provide capital gain if the company has a good performance.

Now if we compare with the common stock, preferred stock owners have the advantage in having a claim on income and assets before common stock holders, and in case of company liquidation, will be paid after all creditors have been paid. Preferred shareholders generally have no voting rights but they are entitled to some fixed dividend paid to them.

You will also find the classification of shares, known by the shares of type A and type B. Type A shares will usually have ten or five voting rights per share and Series B Shares shall have one vote per share. Classification of shares as a type A or type B can be exactly the opposite for some companies because the companies try to disguise the voting power of particular shares type. The need for classification occurs because companies try to give more voting rights to investors from certain sectors.

Be sure to read the company profile, rules and the prospectus before investing. A cautious investor could possibly make more profit than an ordinary investor.

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Becoming a stock trader is not a simple endeavor. It is a challenge that takes a lot of time and patience to master. If you do not exercise trading in a tactical and strategic manner, you will surely end up losing more than what you have bargained for.

Here are some major things that you must rack up to improve your chances in becoming a successful stock trader. Let us talk about what these things are and how they can help you in smart trading.

Trade With Money That You Can Manage To Lose

Stock trading can be quite a speculation. Your chances of gaining can just about equal to your chances of losing, and in some cases, there are even greater risks of losing more. You should never trade using money that you will need for supporting your daily life.

Because most trading markets can be very fluctuating, make sure that you trade with money that you can spare to lose. It may be too risky to invest money that you will badly need for survival or for your future. Always keep an eye on the risks involved and what you are particularly risking in the stock market.

Always Trade In Reasonable Sizes

Some markets in the exchange may allow individuals to trade in very large quantities. Because of that, a lot of people trade in large quantities in order to gain larger profits. However, doing this may also increase the chances of losing money in such large quantities as well.

It is always wiser to trade in rational amount in order to lessen risks. Do not trade quantities that can wipe you out of all your money. And you would have nothing to lose if you actually start small, and grow your transactions from there.

Identify Market States Before Trading

It is also very important that you understand how the market is doing before you start trading. Take time to find out what trends the markets currently have. If you know whether the market trends are weak or strong then it may become easier for you to make the right decisions in your transactions.

If you are aware of the situations in the market, you can easily prepare a plan for conducting a successful trade. Things would become easier for you to anticipate what must be done when you have a good idea on what may happen. In this way, you may prevent making a lot of wrong choices.

Set A Time Frame For Trading

Even if your main goal of trading in the stock market is to merely make a lot of profit, preparing an exit plan for when things go awry can save you from a lot of troubles.

The trading industry is perpetually moving, therefore the stock prices always evolve. Because of this, there can also be a growing exit price. Although it may be very hard to absolutely determine when you would exactly go out of the market, it could be useful if you at least place your trade in perspective and find out when you would best collect the exit price. Doing this contributes to liquidity in the market volatility.

Anyone who will lead you to believe that stock trading is easy and always profitable is being dishonest. Remember that this particular market, by nature, is a volatile and consistently moving industry. And so, you should understand the different trends as well as formulate a good and strong strategy to overcome whatever obstacles may get in the way.

In order to become a successful trader, you must consider the technical as well as fundamental factors in order to make good and informed decisions. Make sure that you use your knowledge and skills in determining a strategic trading plan. Achieving success in stock trading industry is not as easy as it may seem, but with a little hard work, you may just get great results.

In part 1 of this 2 part series on investing in Indonesia stock market, I already gave a brief explanation on Indonesia and list several blue chip stocks traded in Indonesia Stock Exchange.  In this part, I will continue with explaining several ways an American can choose from to invest in Indonesia stock market.

An investor can select one of four ways to invest in Indonesia:

• Open an account with Asian based brokers. It is actually not easy for retail investors to open accounts with these brokers, because most of them only serve foreign institutional investors. But you should check Kim Eng Group if you want to take this path.
• Invest in Van Eck Global Market Vectors Indonesia Index ETF (NYSE:IDX).  This is an exchange-traded fund listed on NYSE that gives investors exposure to the Market Vectors Indonesia Index. This Index tracks the overall performance of companies that are domiciled and listed on Indonesia Stock Exchange.
• Invest in Aberdeen Indonesia Fund (NYSE:IF). This is a closed-end fund listed on NYSE, having Indonesian equities and debt securities as its underlying assets.
• Buy an Indonesian company’s ADR traded in the United States. Unfortunately, there is only one Indonesian stock that has an American Depositary Receipt that trades in NYSE. It’s Telkom (NYSE:TLK), the telecommunication company I mentioned in part 1 of this series.

If you want to avoid complexities involved in buying shares in a foreign country, investing in the funds or the ADR should be easy enough, as long as you already have an account with a US broker.

Indonesia is the largest country in South East Asia region. Having population of more than 240 million, which is growing steadily, Indonesia is a really promising market. The large number of population create huge demand for goods and services. As a result, the GDP growth of the country is driven mainly by domestic consumption.

Indonesia has only one stock exchange, the Indonesia Stock Exchange (IDX), which is based in Jakarta, the capital city. IDX has listed 399 public companies, with market capitalization reached about $250 billion in April 2010.

Below is a list of several blue chip stocks in IDX that an emerging market investor should be aware of.

• Telekomunikasi Indonesia, or Telkom (NYSE: TLK) (IDX:TLKM). Telkom is the  largest telecommunication group in Indonesia which offers both fixed line and fixed wireless telephone, data and internet services. Telkom also offers mobile cellular services through its subsidiary, Telkomsel.
• Unilever Indonesia (IDX:UNVR).  The largest consumer goods company in Indonesia that was founded during the Dutch’s occupation in 1933.
• Astra International (IDX:ASII). The leading automotive company which also engages in other business lines: agribusiness, information technology, financial services, heavy equipment, mining and energy.
• Indofood (IDX:INDF). A total food solutions company, producer of the most popular instant noodle brands in Indonesia
• Perusahaan Gas Negara (IDX:PGAS).  A state owned company that engages in transmission and distribution of natural gas to residential and industrial customers.

This concludes part 1 of Investing in Indonesia Stock Market. In the next part we will look at how an American can invest in Indonesia stock market.

In a previous article, we already discussed briefly what was meant by fundamental analysis and what made it different from its counterpart, technical analysis. In this article, we dive into more detail on fundamental analysis and learn about the term “Capital Structure”, which is a measurement often used by analysts when evaluating the balance sheet of a company.

Capital structure is a composition of a company’s long-term or permanent capital, which consists of some combination of equity and debt. Equity can be further categorized as common stock, preferred stock or retained earnings. When it comes to debt, financial analysts have different opinions on what constitutes the debt component in a company’s capital structure. Some analysts only consider long-term debt, while others argue that short-term debt should also be considered to be part of the capital structure.

When analyzing a company’s capital structure, analysts use several different ratios that compare the company’s debt to total financing. The most popular ratio is debt-to-equity ratio, which is often referred to as the company’s leverage. Rating agencies such as Moodys and Standard & Poor’s use Retained Cashflow (RCF)/Net Debt ratio and Funds from Operations (FFO)/Net Debt ratio. For example, please have a look at Reuters Group (RTRSY) Capital Structure, that shows the capital structure of Reuters Group from year 2005 to 2007.

As stock investors, sometimes we need to know how a company’s capital structure changes over time. Of course, we can always search through SEC filings to find it, but there’s an easier way. We can use the new feature provided by Wikinvest, which pulls sections from annual reports and matches them up, as can be seen in NRG Energy (NRG) Capital Structure. Another example is Transocean (RIG) Capital Structure. This Wikinvest feature will save us time and effort when analyzing a company’s financial statements.

If you are new to stock trading and eager to learn, there are so many resources out there to help you learn the basics. Online courses, seminars and even personal training are available. But sometimes the best way to learn is the old-fashioned way – reading a book.

The most obvious advantage of reading a book is that it’s substantially cheaper than most courses and seminars available. By reading books, concepts that are not immediately understood can be reread as many times as necessary. The question is, which trading books are the best?

Be suspicious of any book that makes unreasonable claims in its title or cover “Become a day trading pro in an hour!” or “Turn $1,000 to $1,000,000 in a month!”.  It is likely these books will not teach you the fundamental risks associated with trading. Risk management is even more important than stock picking. No point selecting winning stocks only to have all your profits wiped out because of one trade where risk management was neglected.

There is a common misunderstanding that trading is a fast paced, exciting activity very similar to gambling rather than a calculated, measured activity. Any good trading book will give calm, reasonable, practical advice on trade selection, money management, risk management and trading psychology. This restraint suggests that author knows the market and is simply explaining what he/she has learned.

On the other hand if the language is fast paced, sensational and overwrought it is an indication that the author has written the book as entertainment rather than as trading education. The author’s goal is to sell books rather than educate the reader on trading.

Pay attention also to the book’s presentation. Are there many grammar and spelling errors? Is it an e-book sold by some guy off his web site? If it is, it may not have been professionally edited. Does the author offer the book with a 100% money back guarantee for a reasonable amount of time? If it doesn’t the author is unwilling to put his/her money where his/her mouth is. After all, they are making money following their own advice aren’t they? They should be able to offer a guarantee.

When considering a trading book, it’s worth taking a few minutes to search the author’s name in the search engines and see what comes up. Are there reviews of the book written by actual readers (not just testimonials on the author’s web site)? Has the author been mentioned in any news and forums? Does he/she have any real world trading experience, or do they just write trading books?

The best trading books will treat trade selection, money management, risk management and trading psychology as equally important to becoming a successful trader.

“Support” and “resistance” is slang popular with business professionals on Wall Street.

“Support” applies generally to a stock that is directed downward in the short term, but may be a long-term uptrend or downtrend. It refers to the price level at which the stock seems to bounce back up over time. You may consider support as a floor that the stock did not seem to break for a long time.

Staying with the above example, “resistance” is like a ceiling. It ‘s the price level at which the stock seems to bounce back down once it is reached.

The good news is that once a stock finally penetrates through the resistance, you can go to the moon. Traders love a stock that breaks through the ceiling because there is nothing holding it from going higher.

Similarly, once a stock falls through the floor, it is likely to go down and down until it finds a new support. This could be a support level at which the stock previously had stayed several times in the past.

Stocks that face resistance or support usually don’t break the level easily. Trading professionals generally like to buy stocks that are in a long-term uptrend and are just bouncing up from support. Or better yet, they like to buy a stock when it breaks through its resistance.

Trading is a completely different business compared to investing. When you invest, you should look for companies with a sound business plan, having share prices close to their minimum of 52 weeks.

Your goal is to hold the stocks for a minimum of 1-5 years or even longer. An undervalued stock with a price unfairly knocked down is a good thing for a patient investor.

By contrast, stocks reaching new highs of 52 weeks are more appropriate for trading. This is because traders are more interested in the stock chart patterns than in its business. As a trader, you’re trying to keep a stock for up to a month or two, but more likely for days, hours, or even just a few minutes.

Trading can be exciting, and it can be nerve-racking. Not everyone is cut out to become a trader – it takes a person with a gut of iron and nerves of steel. Above all, the business requires discipline.

Is The Stock Trending Up or Down?

You could have a trading insight from a news story or even an instinct, but you should never really place an order without analyzing the stock’s chart.

A stock that is in a general downtrend is rarely appropriate for trading.

You can determine the stock’s trend by looking at its one-year chart, and connecting the peaks over time and its spikes down over time (its depressions). In general, professionals only risk their capital in stocks that are trending up over time.

The definition of day trading is “The purchase and sale of a position in an account during the same  day.” A day trading can be a short sale followed by a short covering also known as a buy.

A day trading refers to the practice of buying and selling financial instruments within the same trading day so that all positions are usually closed before the close of the market of that particular trading day. Traders who carry out day trading are referred to as day traders.

History of  Day Trading

Day trading has its origins in the birth of the computerized, over-the-counter NASD, in 1971. Fourteen years later, NASD created the Small-Order Execution System, or SOE, which made it easier for individuals to perform actions and tasks automatically, provided that the orders were for 1,000 shares or less. So, for day trading, with the use of phone lines, orders were placed in a matter of seconds instead of minutes.

The modern trade is no longer limited to SOEs. In fact, the most popular tool for the day trader today is the electronic communications networks, which are established to manage customer groups who make large blocks of stock trades. Thereby facilitating all members to trade directly with other members of their network, placing buy or sell orders electronically. Then, the electronic media has become an instrument of great help for day traders.

In the previous article, we already discuss three kinds of investing styles, growth investing, value investing and GARP investing. This article will continue the discussion of stock picking strategies by describing the final two stock picking strategies, fundamental analysis and technical analysis.

Fundamental Analysis

Fundamental analysis is a stock picking strategy whereby an investor or analyst tries to estimate the intrinsic value of a company based on financial facts. Although this strategy requires time and effort, it is more suitable for long-term investors.

Through fundamental analysis, investors seek to understand the trends of earnings of a company and expected future profits rather than market sentiments. In addition to revenues and earnings, investors also focus on factors such as, ROI (Return on Investment), ROE (Return on Equity), cash flows and P/E ratio etc.

Technical Analysis

Technical analysis, also known as chart analysis, is an investment strategy through which investors predict the future price movement of a stock based on past performance. Technical analysis mainly depends on supply and demand for particular stocks and trading volume.

Technical analysis is completely opposed to fundamental analysis. Technical analysts or chartists do not care much of the intrinsic value of the specific title.

Despite the advantages and disadvantages of each stock picking strategy, many investors are making millions regardless of the strategies they choose.

A choice of investors of a particular strategy should depend on its market knowledge, industry trends and potential for business growth. Above all, investors devotion of time and ability to calculate risk play important role in the choice of a particular stock-picking technique.