There is no doubt that stock trading forums can provide some very useful information when you are learning to trade stocks. However, it is important to remember that whilst they can be useful, a lot of the content that is posted on these forums is posted by losing traders. So it’s very important to make sure you don’t take everything you read as correct.

One thing I have personally found useful with stock trading forums, you can see the mistakes other traders make and it can help you make the same ones.

When posting, always try to be helpful and give back to the community as well as taking.

Some of the best stock trading forums I have come across to date are:

Trade2Win Boards – This is a very active forum targeted at all kinds of trading, not just stocks. A lot of the members are from europe. This is a great forum for newbie traders.

EliteTrader Forums – Another busy forum. This is definitely one of best forums for intermediate and advanced traders to share ideas.

ForexFactory – This is a very busy forum. It’s primarily aimed at forex traders, but recently they added a section on stock trading that has become very popular.

OnlineTradersForum – This is a smaller forum that has a nice community feel. It is primarily aimed at the stock trader.

Zecco Trader Forum – This is the zecco broker forum. A nice community, but as you’d expect, it does have a bias towards trading with zecco.

This is a good question and there are currently many pieces of data that make me think that we may be coming to the end of the recession.

In the last week we have seen Germany, France and Japan actually post GDP growth between April and June 2009. This has brought an end to the year-long recession for these nations.

I strongly suspect more countries will follow in the coming months.

However, a few nations coming out of recession doesn’t mean all is rosey. There are still risks in the global financial system system and it seems we are very unlikely to return to the growth levels seen in recent years, for quite a long time.

I feel recovery is likely to be slow, but we will haul ourselves out of this mess eventually.

Was the recession as bad as it could have been?

I would say no. Many experts predicted financial Armageddon, but thankfully this scenario has been averted. I feel the recession is significant, but it’s nothing like as bad as the “Great Depression” of the 1930s.

Back then, the US GDP contracted by around 25%, unemployment hit 25% and back then there were no bank bailouts and government insurance on bank deposits. As a result many people lost their savings they had in the bank.

Unemployment

Losing your job is tough, especially if you have a family and a mortgage to pay. You may be in this position. If you are I feel for you.

The good news is the jobs market will improve as the global recession lifts. The bad news unfortunately is that in historical recessions, unemployment has continued to rise for a period of time after the recession.

Did you know the worlds most successful investor Warren Buffet made his fortune through compounding his returns?

He has been one of the richest men in the world for many years. He has been number 1 on a few occasions too,.

He has averaged around 24% per year for over four decades. 24% per year compounded for 40 years would turn $1,000 into $5,455,000.

I know what your thinking. Maybe you cannot make 24% per year or maybe you don’t want to keep your money locked away for 40 years.

I know I don’t want to lock away money for 40 years, I mean let’s be honest, I could be dead by then!

Let’s say we only earn 15% per year. The table below shows how a $1,000 investment could grow:

As you can see, at just 15% per year, your investment value doubles in less than 5 years.

Compounding is a very important part of making money grow significantly over time.

15% per year is relatively easy to obtain for many good stock traders.

You will have probably heard that in recent months, many of the major economies have resorted to printing money to try and tackle the global financial problems we have been having.

This undoubtedly presents a potential inflation risk. Some of the best ways to hedge against inflation include:

Property

If you can afford it, put your money into property. In most economies, property has beaten inflation in the long term. Obviously, don’t buy at the top of a big boom like we saw in the early 1990′s. Often the best time to buy is after a crash.

Blue chip stocks

Buying a variety of blue chip stocks has historically worked well against inflation. However, always be sure to select stocks from a variety of different sectors to lower the risk.

Savings

Always make sure you are getting the best interest rate on your savings. Many banks offer introductory offers that can bolster your returns. bankrate.com is a helpful comparison site for Americans and moneysupermarket.com for people in the UK. Historically, the best paid savings accounts have been above inflation.

Diamonds

Diamonds are often over looked. They can be one of the best hedges. However some knowledge of the diamond market is essential. Historically the right diamonds have not only been an excellent hedge against inflation, they have almost been a great long term investment.

There are many other common inflation hedges, but I personally see them as too risky:

Gold

Many people see gold as an inflation hedge. It’s a fairly dubious one in my opinion. In the past gold has done well in times of crisis. For me it’s more of a “crisis hedge” than a hedge against inflation. There have been long periods of inflation where gold has fallen in value.

Oil

Oil like many other commodities will inevitably be affected by inflation, but the high volatility makes far too risky to be a good hedge.

The main reason is the lack of value for money. It is not uncommon for them to charge many many more times more than what a discount stock broker would charge.

The main reasons I feel they don’t offer value are:

As you can probably tell. I don’t like full service brokers at all. I see them as legal con artists. For me the only way they can in any way redeem themselves is to move their commission structure over to more performance based structure, instead of a day-light robbery kind of structure.

Of course, they won’t do they, because most of them wouldn’t make any money.

There are high quality discount stock brokers out there charging less than $5 per trade. Full service brokers often charge well in excess of $100 per trade, but at least you get an incompetent pushy salesman for your money.

As I am sure you know you know crude oil prices have been all over the place recently. We had a high of $147 in July 2008 and a low of $33 in February 2009. At the time of writing this post the spot oil price is hovering around the $70 area.

Let’s take a quick look at a historical oil price graph.

This chart shows the price of West Texas Intermediate or WTI crude oil. Prices have been volatile, haven’t they?

What affects on the stock market do oil prices have?

As with most commodities, when prices fluctuate there are winners and losers.

High oil prices tends to be favorable for the major oil companies like Exxon Mobil and Shell as their oil reserves will have a higher value.

When we have had exceptionally high oil prices in the past like in 1978 and 2008, there have been many casualties. Oil is significant cost for most business’ and the doubling and tripling of the oil price can put a massive strain on many industries including haulage, couriers, distribution.

When the price of oil is high, it can have a very broad inflationary affect as everything has to be distributed and that takes diesel!

The state of the economy

The current state of the global economy can play a major role in determining how oil prices affect the stock market.In the past when we have been in an economic boom cycle, the economy can often withstand higher oil costs.

However, in recession when the economy cannot withstand such high prices can deepen a recession and take longer to recover.

As oil prices are traded openly, they are ultimately controlled by supply and demand. However, as we have seen on occasions before, speculators can cause spikes that can be harmful to the economy.

We all feel it

There is no doubt the cost of oil affects most of us. High oil prices mean many large corporations will show lower profits (unless they have oil interests of course), food will cost more, gasoline and diesel will be more. The list is potentially endless.

My thinking is that NOW may be a great time to invest in the stock market. There is no doubt there has been an enormous amount of doom and gloom in the financial markets. We have had major high street banks needing to be bailed out by governments, we’ve had a dramatic cut in lending to businesses and individuals and we are currently in the biggest recession since the 1930s.

The big reason I think now is a good time is, all the drama has occurred. I feel things have probably got as worse as they are going to get.

Sure there are still some massive risks in the system. We don’t know how long the recession will last, we don’t know how quickly things will get moving again.

Many of the major stock markets have dropped in excess of 50% from top to bottom.

However, if we take a long term view I feel there is a good risk / reward ratio .

I see investing now as an exciting opportunity, but we mustn’t be blind to the risks. As I see it, the main ones are:
Double Dip Recession

Things appear to be improving, but theres always the risk that the downturn will worsen.
Banks hoard money

Banks may hoard money instead of lending it out an attempt bolster their balance sheets. If this happens too much, the recovery may take longer.
Sovereign debt Defaults

Many governments have drastically increased their borrowing to try to deal with the recession. If governments default on these debts, there could be widespread implications.
Printing money could lead to inflation

Many central banks have resorted to printing money, or the more “geeky” term quantative easing. Printing money always has the risk of inflation in the future. Both the US and British central banks have printed a large amount of money. The full effects are yet to be felt.
History

I always think to myself, this recession is the worst one i’ve seen, but it’s nothing that hasn’t happened before and unfortunately will inevitably happen in the future.

Stock markets move with human emotions, mostly commonly fear and greed.

We have had the greed stage, the banks have were too greedy for many years and now it has backfired. We now have the fear stage. Investors are scared as the future is uncertain.

We appear to be coming out of the fear stage, as the future looks more optimistic than it did at the start of the year.

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