Here are the other five things to know when shorting stocks.

6. Margin Calls – This is probably the scariest thing about owning a short position in any company.If the stock you’ve decided to short moves in the wrong way (stock price rises), your broker will insist that you do one of two things. One, deposit more money into your account, enough to cover the purchase price of the stock at the current price. The other choice is that your broker will insist that you sell some of your long positions to cover the margin call or they will do it for you in their own way.

7. Early Sale – If the original owner of the shares that you borrowed decides to that they want to sell the stock, you must replace it — either by finding other shares through your broker or buying it on the open market. Remember all you did originally was “borrow” the shares.

8. Short Squeeze – If you’re new to the stock market then this is a term that you might not be familiar with. It’s a term that is used quite often on Wall Street. A short squeeze is when the price of the stock jumps up in value quickly, causing short traders to “cover” their positions. Which means that they have to buy shares to cover the ones that they borrowed. This typically causes higher prices, which prompts more people to sell and to take profits. This is something that you may never want to get caught in the middle of because of the ferocity of the situation as well as get quite expensive.

9. Properly Covering You Position – You may not even realize it, but you can have a short and a long position at the same time. When you go to “cover” your short position, you need to tell your broker clearly that the shares you’re buying are to cover your short position. If you just buy the share while still having a short position, you’ll have conflicting positions. Many times people are in a rush to cover their position, that they may not even realize their mistake of overlooking their selection, especially online traders.

10. Dividends And Taxes – If you have borrowed and shorted a dividend-paying stock, you will receive the dividends, but you, in turn, must pay the original owner the value of those dividends. Also, should you hold a short position for more than one year, well, tough luck — the IRS still treats capital gains as short-term gains. Ah, Uncle Sam is always reliable!

I hope these ten things I’ve given to you will help you in your trading. If you are new to the stock market, then it’s wise to stay away from shorting stocks until you learned more of the basics.

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Blog carnivals are a great way to get information from a variety of sources. When it comes to stock investing, it’s a smart idea to research several sources before making a decision.

We submitted a post on Action Alert Plus, the investing program by Jim Cramer.

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If you have Sirius/XM radio, you can listen to the Bloomberg channel and a handful of others for up to date information. As for TV, you can watch CNBC. Their stock market coverage throughout the day is quite informative, but other than these few channels you really don’t have a wide variety of choices.

When it comes to the internet though, there is a ton of resources to get you started and the amount of information is endless. Of course you have a lot of the spammers out there and those who just want you to buy into their program or buy their e-book. Most of these people are not known in the investing community and all they talk about is their own self-proclaimed accomplishments of how they struck it rich.

One person that I would recommend is Jim Cramer, the over-the-top, happily-insane, entertainer and well informed in the investing world, host of Mad Money. He is also the chairman of the stock market website, The Street.com

I have been watching Cramer for as long as he’s been around and I learned a lot of things from him and I personally have made quite a bit of money from his recommendation. Yes, there are times that he will be wrong but when he does, he admits it, which I admire about him.

Jim Cramer is very knowledgeable in the stock market world and I trust his opinions and his techniques in choosing the right stocks. He is more of a fundamentalists analyst than a technical one.

There’s so much more to what Cramer can do for you than just his TV show. His website The Street.com has a few different services available that I know can help increase your knowledge and your portfolio. Action Alerts Plus is one of those programs that will give you the insight into why Cramer picks the stocks he does.

As a member, I receive his e-mails several times a day and they inform me as to what stocks he’s going to buy or sell before he does any trading. I also get a chance to study his portfolio.

The best part is that you can get a FREE two week trial of his service. If you don’t like it and want to cancel, no problem. During the two week FREE trail, you will be able to poke around and see what you need to do to make your portfolio a success.

I’ve been a member for a year and have made some good returns in a down market. With all the different places out there that want to get you to sign up before seeing anything, give Jim Cramer a try for two weeks of FREE and I sure you won’t be disappointed.

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Just like when you hear that you haven’t taken a loss in a stock until you sell out of your position, the same goes for your profits. You didn’t make anything until you have sold the stocks.

After the DOW made some major drops and looked like it it had bottomed, I started to build up a position in some stocks that I’ve been watching for some time and know that they were solid companies with good fundamentals. The stocks gained in value by about 25% and from my experience, I sold out of about 50% to 75% of those positions. What I didn’t expect was that the stocks weren’t done gaining value. The DOW pretty much leveled off, but the companies that I invested in had some more momentum in them. I missed out on an extra 10% to 12% of gains that I could have had if I just hung in there and waited.

My point is that yes I could have made more money than I already did, but I could have lost a good portion of those gains too if the stocks fell. I’m just as happy with the 25%-30% gains since they are now in my account as cash. There’s a saying that I’ve heard Cramer say many times and I agree with him. Bulls make money, bears make money and hogs get slaughtered. As long as you continue to make money in the stock market, you’ll be able to continue trading and investing in stocks.

Being able to sell when you’re up is easy as long as you don’t get greedy. I’ve spoke about it before and I will talk about it again. Be happy with the gains you made instead of getting frustrated over the money you could have. The same thing goes when you’re looking at a stock to invest in and before you get the chance to build a position in the company, it makes a big jump in value. You missed the opportunity and there will always be another one as long as you are looking for them. I watched too many people try to “chase” a stock up only to get in it right before other trader start taking their profits.

Don’t get yourself bent out of shape if you miss a ride up on a stock and don’t get “hog-like” by staying in the stock too long. Following these rules will help make you a better investor or trader.

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During the time that I was working full-time, I didn’t have time to sit and watch the tickers during the day’s trading hours. I would sit home at night and catch up on the day’s news and do research on the stocks that I was interested in buying. If there were stocks that I decided to buy, I would set up a limit buy order, which was typically lower than the stock’s closing price. The next day after work I would come home to see how my trades went.

After I stopped working for someone else, I started spending more time during the day tracking the activities of the day’s events on Wall Street. I would be able to keep closer tabs on what was going on and react when I thought the time was right and the opportunity was good. I also started to take Jim Cramer, and his stock investing tips, more seriously.

I started to notice that my gains weren’t as good as they were when I was working. I wondered what was the problem. I took a little while for me to realize I had changed my trading strategy, without meaning to.  Since I was able to watch the stock market more closely, I was also exposed to the constant fluctuation of the share prices.

For example, let’s say I was researching stock XYZ  and it had a share price at the close of the day of $20.65. I would set the limit order to buy at $20 per share. Since I was at work I never really saw how the price reacted throughout the day. Once the price dropped to my target, the sale would trigger at the point and I would have my shares at the desired price.

When I was home and watching throughout the day, I started to react to the minute by minute moves. Let’s use the same example of stock XYZ. If the price opened up at $21.05 and then for the first hour or so of trading it moved up to $21.35, I would think that others had seen the same good numbers on XYZ and were buying up as quick as possible. I would set a limit order at $21.25 just to grab it a little lower than where it was. Wouldn’t you know that after the stock climbed, it started to descend. It would go down below where it closed the day before and in some cases, go below the original limit order price of $20 per share.

What I was doing is what I refer to as chasing a stock. Chasing a stock will do nothing for you but make you lose profits and wait longer for a turn-a-run after you’re in the hole by a couple of percentage points. Granted, the stock I would get into would go up well above the $25 dollar range and I would still make a profit, but like I said earlier, my profits weren’t as big as before.

If you want to be successful in stock trading, you need to understand your actions first. Many people don’t realize that the individual’s emotional state will totally effect the profitability of your portfolio.

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I’ve learned quite a lot and still have more to learn. As I increase my knowledge in investing, I will share it here, with you.

FOREX, which stands for the Foreign Exchange, is relatively new to me. Like everything else that I want to invest in, I make it a point to learn all that I can about the opportunities that are out there for us to trade, invest and profit in.

In this post I will list some of the key words and terms that are used when trading currencies. Don’t worry, none of the words or terms will force you to learn another language to understand them-lol. In no particular order I will list some of the basic ones for now and in a later post I will go continue with others. If you have any to add, feel free to leave them in a comment and I’ll add them in a later post.

Commodity Futures Trading Commission (CFTC)
The Commission is a United States agency that Congress set up in 1974. The duties of the commission is to monitor trades in commodities, futures as well as options for any fraudulent practices. They have the power to fine and/or suspend and companies or traders who are in breech of any trading laws.

Currency Pairs
All FOREX trades are based on the pairing of currencies. One currency is traded against another (i.e. the US dollar/Japanese Yen. You would see it listed as US/JPY 115.95. How you would read that is the base currency is the US dollar and for every dollar that is traded, you will receive 115.95 yen in return.

Point
The minimum change that a price can move. Often referred to as a pip (price interest point).

Majors
When a trader or investor refer to “The Majors” it’s refers to the more popular traded currencies like the US dollar, Euro, Japanese Yen, the British Pound, Canadian Dollar, Swiss Franc and the Australian Dollar.

Fundamental Analysis
A method that is used by brokers and traders to predict price movement within a stock. It involves key data like earnings, dividend payouts as well as risk evaluation.

Base Unit/Currency
This is the first currency quoted in a pair, it is used to measure profit or loss. An example is EUR/US 1.32, which means that for every one Euro it will be traded for $1.32 of US currency. The base unit will always have a value of 1.

Convertible Currency
A convertible currency is one that does not require authorization from a central bank in order to be traded freely against other currencies in the FOREX market.

European Monetary Union (EMU)
A union consisting of eleven European countries, Germany, Italy, Luxembourg, France, Finland, the Netherlands, Austria, Belgium, Portugal, Spain and Ireland. The union is responsible for establishing the Euro which replaced the national currencies of the EMU members in 2002.

LIBOR
LIBOR is an Acronym which stands for London Interbank Offered Rate. They are the Federal Reserve funds rate of the UK. It refers to the interest rate that are charged by banks to other banks when exchanging monies.

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In my travels I have found many phony programs and other types of investor “clubs” that leave something to be desired. I have also found quite a few places where, after years of being involved with, I still keep coming back for more because I find the information to be honest and straight-forward. One of those places where I’ve been going to for research and knowledge is Jim Cramer from CNBC’s Mad Money. He is also the Chairman for the web site TheStreet.com, a site dedicated to the stock market and one that I visit a couple of times a day.

I first started watching him in 2005. I found his show to be more entertaining than informative, but after awhile I realized that the show was purposely geared to make stock trading entertaining.
During the first two years that I watched his show I increased my portfolio by leaps and bounds. The man knows his stuff.

FREE JIM CRAMER – 14-day trial to Action Alerts PLUS, & his latest bestseller FREE.

For over 10 years Jim Cramer was a successful hedge fund manager and now he writes for RealMoney.com. Over the years he has developed a strict set of investing disciplines that have helped all kinds of people be successful through any market.

If you asked any average investor out there between the years of 2005-2007, they would say the man is a great source of information and that they made money from his insight. In the last year though there are people out there that don’t know the intricacies of the show and say that they’ve lost money from his recommendations. If you watch the show you would know that he even says that you should not buy stocks on his recommendations until you have done the research to see if the investment is right for you. It also doesn’t help that since October 2007 the stock market has been correcting itself as well as dealing with all the deception that the financial sector had been up to.

Through it all, Jim Cramer has given me some great insight into the stock market through a service he created Action Alerts PLUS, which allows people to follow along as he makes his own trades. Managing money with an open hand is hard. But, Jim Cramer is so committed to helping people learn that he created a charitable trust portfolio to show investors how and why he makes trades.

In Action Alerts Plus, you’ll have the ability to see what Jim Cramer recommends for the trust fund and get to trade along side him. You’ll get e-mails a couple of times a day from him depending on what is going on in the markets. He doesn’t buy or sell any stock without sending you an e-mail first and he will give you his reasons for the action that he’s taken. You also get to look at his portfolio as he buys and sells stocks.

In the time that I’ve been a member of Action Alerts Plus, I’ve gotten insight to why the markets have been taking a beaten and how to avoid losing any more money in the process. In most cases, I’ve made money as the stock market corrected itself.

I suggest giving the program a try and seeing for yourself what you think of it. Click the banner below, or in our sidebar, subscribe for a free two week trial and get a free look at Jim Cramer’s Action Alerts Plus Portfolio.

During your free two weeks, you’ll have the same exact access that all the paying members get, such as;

1. Daily e-mails that will inform you of what he planning on buying or selling and his reason for it.
2. Full access to his stock portfolio which will show you which stocks he holds, what his cost basis is, when he first bought into the stock, when his last transaction was and what his gains and losses are for each stock holding.
3. Jim Cramer’s 25 Rules of Investing.
4. Jim Cramer’s 10 Commandments of Trading.

After the two week free trial period, you have the option to sign up or cancel. If you sign up, you can pay monthly or annually.

Jim Cramer has enlightened and educated me in many aspects of the stock market and I know he can do the same for you. Try it free for two weeks and let me know what you think.

Reader Question: Do you watch Mad Money or read The Street website? What’s your opinion on it? Are you, or have you ever been a member of Action Alert Plus, and if so, what was your experience?

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