Posted by stocker on June 28, 2010 in Stock market basics | Short Link

One of the things that the stock market for dummies books will give you are the definitions of a lot of the confusing words and terms that you hear associated with stock investing. A “trading range” is when a stock or the market as a whole, trades in between certain numbers. In other words, it goes up and down and really make no progress in any direction.

Right now, the Dow Jones is in a trading range which can be seen clearly in the graph below. For more than a month there has been little to no change and it is at about the same point now as it was on May 18th.

It is during times like these that it is confusing what to do with your money that you have sitting on the sidelines. At some point in the future, the market will breakout of this trading pattern and either go down or start to head up. But for now, it is unclear when a change will start to happen and which way it will go when it does start to move.

People who have stocks that pay dividends are in the best position when the market gets stuck in a trading range. Dividend stocks pay you money no matter what the market is doing and regardless of whether the stock price is going up or down. This is why many professional stock analysts recommend you have at least some dividend producing stocks in your portfolio. Especially now with interestrates so low, stocks with dividends are especially attractive.


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