Posts Tagged ‘options’

Before Short Selling-Know These Shocking Facts

Mar 9, 2010 Uncategorized

Short Selling Stocks is one of the favorite day or swing trading strategy. Many traders short stocks. Now many stock brokers make it very easy for the investors and traders to short stocks. Now a days, most of the trading is being done online. When you sell a stock, a message will ask you whether you are selling stocks that you own or you are selling short. With one click, you tell the broker that you are short selling. The broker than goes about and arranges the shares for you to short sell. These shares are a loan to your account.

In some cases,a stock gets so much shorted that there are no more shares of that stock left for you or your broker to borrow anymore. Now, you cannot always short a stock instantly. Most of the investors work on rumors. In that case, you simple will have to cross your fingers and see how the other short sellers do on that stock while you search for another stock to short!

Now, day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts. Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down!

You have to be careful about the uptick rule as stock exchanges have rules in place to help maintain an upward bias in the stock market. What this means is that you can only short a stock when the last trade was a move up. In other words, you can’t short a stock that is moving down.

If you are wrong in your short selling decision, your loss can be catastrophic.How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

There is something known as Short Squeeze. A short squeeze happens when the stock of the company that you have shorted has some good news that drives the stock prices high. Now if this happens, many short sellers might lose money and even get margin calls. When they get desperate to buy back the stock, its prices go even higher hurting them more.

Now many companies, brokers and investors hate short sellers and try tactics to bust them. Sometimes, they will issue good news or spread rumors of good news to create a squeeze. Other times, they can ask the stock holders collectively to tell their brokers not to loan out their shares. What this means is that short sellers have to buy back the shares and return them to the brokerage firm and close their short positions even if it does not make any sense.

Mr. Ahmad Hassam has done Masters from Harvard University. Turn $200 into $100K in just 3 months with this Penny Stock Trading FREE Report!Read this 49 page Quantum Swing Trading FREE Report plus the shocking Profit Button Report that applies no matter what you trade-stocks,forex, futures or options!

Tags: , , , , , , , , , , , , ,

Candlestick Trading Patterns- The Hanging Man, the Hammer and the Spinning Top!

Mar 7, 2010 Uncategorized

There are many candlstick patterns that you can master. Candlestick patterns can be highly profitable trading signals. However, some patterns appear frequently and can be easily spotted. Hanging Man and the Hammer are the two among them. Both are different. Hanging Man is bearish while the Hammer is bullish.

The first question. How do you identify whether this is a Hanging Man or a Hammer? If this type of pattern appears at the top of an uptrend with the long wick at the bottom, it is a Hanging Man. And if it appears at the bottom of an downtrend it is a Hammer. Hammer and the Hanging Man both have a very small candle body accompanied by a long wick either on the bottom.

Now suppose, you find the Hammer or the Hanging Man. What you need is to look for the confirmation the next day! Now, in most of the cases, you will also find a small wick on the top of the candle body.

If you think that you have spotted a Hanging Man appear on the top of an uptrend, wait for the next day’s opening price. If the opening day is lower than the last day’s close, you have spotted a true Hanging Man.

Similarly suppose, you think that you have correctly spotted the Hammer in a downtrend. A Hammer should have a very small candle body with a long wick at the bottom. You should confirm this with the opening price on the next day. If the opening price is higher than the closing price the previous day, you have a true Hammer. If the opening price is not higher than the closing price the last day, it is not a true Hammer!

Whenever, you trade candlestick patterns, first spot them correctly than wait for the confirmation on the following day. The best chart for these candlestick patterns is the daily chart. Once, you get the confirmation, trade these patterns. They can be highly profitable. But in case, you don’t get the confirmation the next day with the price action, simply ignore the pattern as not true.

Spinning Top is a signal that the battle between the bulls and the bears ended in a draw. It will start next day again with ony side giving in. What this means is that an explosive move in the price action can take place the following day. Spinning Top is just like the Hanging Man and the Hammer.

How to identify a SPINNING TOP? This pattern appears very frequently in the daily charts and can be highly profitable if spotted correctly. A Spinning Top has a very small candle body in the middle with two equal wicks on the top and the bottom.

Mr. Ahmad Hassam has done Masters from Harvard University. Master Candlestick Charting with this 82 page PDF FREE Candlestick Guide! Get this 49 page Quantum Swing Trading Report FREE.

Tags: , , , , , , , , , , , , ,

What Is Momentum Investing? How It Can Make You Rich?

Mar 1, 2010 currency trading

Investment is always long term whereas trading is always short term. Day trading always has got a short term perspective and requires quick reflexes. Now day trading is not possible for many investors. Many people have a long term perspective. They feel more comfortable thinking about their long term financial goals and matching them with their investment strategies over months and even years.

An investor might have to wait for a long time before realizing a return on his or her investment. Many investors can learn a few tricks from day traders that can help them make a quick profit in a matter of days orn weeks instead of months or years. Now a company’s stock may have a good long term prospects supported by strong fundamentals. But the stock may stay still for a long time before it catches the attention of the media and the investing public before it’s price get’s bid up.

There is a general problem with so many investors. They fall in love with their investment after doing so much research and committing so much time for the position to work. Now, day traders are always hit and run types. They have developed an innate sense of discipline among themselves that teaches them when to commit money to a trade and when to cut and run. So, many investors when they fall in love with their investments on the long run forget this cardinal rule of trading that you have to cut your losses. Market least care who you are and how long you have been in it.

When, there is momentum behind a security, it means that it’s price will continue to icnrease as long as it has got momentum. This way by investing in stocks having momentum behind them, you avoid the risk of getting stuck in stocks that might not move for months and months.

When investing, you try to buy low and sell high. In momentum investing, you buy high and sell even higher! One of the tricks that you can learn from day traders is momentum investing. In momentum investing, you look for securities that are expected to go up in prices accompanied by the underlying momentum. Now, when the price of a stock or security increases because of strong demand, it is said to have momentum behind it.

How to you find that a security has got momentum behind it? You can use these technical indicators like the MACD ( Moving Average Convergence and Divergence), RSI (Relative Strength Index) or the Stochastic. A swing trader is also looking to ride a trend as long as it lasts. A trend lasts as long as it has got momentum behind it. Momentum investing is similar to swing trading.

However, if too many investors start practicing momentum investing, it sometimes leads to bubbles like the tech bubble that happened at the end of 1990s. Now, when doing momentum investing, you need to also do some fundamental research behind the company. As most of the momentum investing done during the dot com bubble was on hearsay without being supported by any strong fundamentals!

Mr. Ahmad Hassam has done Masters from Harvard. Read this shocking 40 page PDF FREE FRWC Brutal Truth Report on trading robots! Get this FREE 40 Page Investing in Gold Report by Robert Prechter!

Tags: , , , , , , , , , , , , , , , ,

Trading System Back Testing! Know These Shocking Limitations

Feb 27, 2010 currency trading

Developing a trading system is not easy. It requires first of all good trading experience. Than you need to test your trading system under live trading conditions. It might take time as well as involve the risk of losing money. To overcome this difficulty in testing a trading system or a trading strategy, backtesting has been developed. Backtesting is possible with the use of software. A trading system might comprise of a set of two or more indicators with a set of rules that tell when to enter or exit the trade.

How to do backtesting? Using a backtesting software makes it very simple and easy. Backtesting uses historical data to test the performance of the trading system under the past market conditions.

Now, back testing is done with historical data. What this means is that although your trading system might perform very well with back testing, it may not work in the present market. Market conditions keep on changing and what worked in the past may not work in the present. In the same way, what didn’t work in the past may start working now.

So when you look at back testing results, you should look at them with scepticism. But it doesn’t mean that backtesting is entirely useless! What we can say is that no two trades are exactly alike.

Some markets are highly seasonal. For example, if you are a commodity trader and tend to trade agricultural commodities like the grain, seed or the livestock, these have a fixed planting and harvesting cycles.

For example, some markets especially the commodities market is highly seasonal and cyclical in nature. Now in other markets, you might not find any seasonal trends. For example, there is very little seasonality in curreny market or the bond market. In case of the stock market, there is much talk of the January Effect. Well, it is there no doubt about it. Some years, it is highly pronounced and others it is not that pronounced. Similarly stock prices tend to rise at the end of each month and the first few days of the new months. The reason for this is that many institutional investors tend to put the new funds to work at the end of the month and the beginning of the new month!

Back testing can also help you establish the amount of time a particular market tends to run in a certain direction. For example, in case of US Dollar Index, its trend lines tend to last for months to years.

Now when you back test your trading system and the set of indicators, you can check their accuracy. For example, if you using a trading system based on moving average crossovers, you can back test it using different combinations. Then monitor each combination under live conditions to see which works the best.

Mr. Ahmad Hassam has done Masters from Harvard University. Download this 1 Minute Forex Trading System FREE that makes money anytime instantly! Read this shocking FREE 40 page PDF FRWC Brutal Truth Report that exposes everything about trading robots!

Tags: , , , , , , , , , , , , , , ,

Harami And The Harami Cross Candlestick Patterns Can Make You Rich!

Feb 27, 2010 currency trading

Harami is a two stick candlestick pattern or what you may call a two day candlestick pattern observed on the daily charts. The first day candle is longer than the second day candle. Harami candlestick pattern can be bullish as well as bearish.

This is an important signal that bulls are now active and trying to take hold of the market. This means that the downtrend will be soon over and an uptrend is about to start.A bullish Harami is formed in a downtrend when the first day candle is very bearish. But on the second day, the bulls come into play and beat the bears out of the market by taking the prices higher. However, the bulls are not completely successful and the second day is still lower than the first day open and the first day high is not crossed.

On the second day when the Harami is formed, the bears are still slightly ahead of the bulls at the start of trading. The open is higher than the close of the last day. However, the bulls close the day higher than the open.

Bulls and bears are always fighting with each other for the control of the market. When a bullish Harami is formed what this means is that the bulls are still cautious about their success and fear that the bears might return to take the prices lower again. However, when this does not happen, it gives confidence to the bulls encouraging more buying in the market and the reversal of the trend.

What this means is that you need to confirm it with the price action on the following day. Now, like most of the candlestick patterns, a Harami can fail. Always place the stop loss first when you trade. When you spot a Harami, place the stop loss near the open of the second day.

Harami pattern has got few variations. On of them is the Bullish Harami Cross Pattern. The first day in case of a Bullish Harami Cross is a bearish candle. The signal day or the second day is a Bullish Doji with an open higher than the close of the first day and the close lower than the open of the first day. Now,a Bullish Harami Cross is not formed very frequently. But when it does form, it means an sudden trend reversal. So you should act immediatetly when you spot it.

When a bearish Harami is formed what this indicates is that bears have taken hold of the market now and are about to push the prices down signalling a downtrend is about to start! The bearish Harami is similar to a bullish Harami. It is formed in an uptrend. The first day is a usual bullish candle that forms in an uptrend. The second day candle is a bearish candle. It’s open is lower than the close of the first day. And it’s close is higher than the open of the first day.

Mr. Ahmad Hassam has done Masters from Harvard University. Master these Candlestick Patterns with this FREE 82 page PDF Candlestick Guide! Get these Forex Scalping Cheatsheets FREE!

Tags: , , , , , , , , , , , , , ,

What Do Stock Trading Tools Do?

Feb 8, 2010 currency trading

Just what do stock trading tools do? They can provide you with all of the info you may need on a targeted share to produce an knowledgeable judgement if or not to buy/sell it. This may well involve, technical graphs, information, real-time quotes, commentary, news, firm backgrounds, suggestions, interpretations of charts, predictions, and so on. Its just about like having your technical analyst to study and analyse everything in your case!

Even though loads of this information is accessible over the internet,or in books, the software organizes it in to means that you couldn’t without having totally wasting serious time. It additionally may include particular improvements, newsletters, or even predictions from superb stock traders, or high-functioning bots that study and also interpret statistics.

The approach the software works is it’ll draw out a chart on the stocks prior performance. It will after that put side by side the photo to different types of ‘trends’ it will notice. It may also review the chart to recent trends in some other related stocks or recent events. Some will culminate all of this data and can make a decision for you, others will basically present you exactly what that they have observed and allow you help make your own selections. Several software package may possibly immediately get or market stocks for you. I don’t in reality recommend that on the grounds that you could realize something the software program doesn’t.

The software program could additionally examine other variables, such as insider trading, annual trends (Christmas, new year’s, etc) and others.

Loads of software will permit you to research and/or sort the different stocks. So you could ‘ask’ it “what is the most effective stock for me to buy?”, but you will not get a very clear response. Sort out it according to form of stock and you can see the top performing tech stock this year, or possibly the most undervalued blue chip stock. These types of sorting and ordering will offer you a marked edge whenever you begin to definitely trade.

Consider to do whole study prior to purchasing a stock. The stock trading tool won’t know every thing. For example, a stock is observe which is severely undervalued. It is selling for 20% of it worth. You look at the charts, read the facts and decide the dip is often a fluke and obtain it out. However, you find out a few days later that the dip was an in house mass market since they knew the business was heading under. This kind of thing happens all the time, don’t let it happen to you. Constantly take a look at within trades. They’ll, obviously, know points that you just don’t in regards to the company. You’ll find those who make tons of income inside the stock market easily obtain following insider trades and that is all.

Decide what kind of stock trading you wish to do, Forex, day trading, options, etc. The list goes on. Some belonging to the most popular for speedy, short-term, but high probability income is Forex. This requires trading currencies. Currencies are constantly raising and dropping in price and money is mad or lost very quickly with this method. Be careful and understand and analysis concerning the type of trading you are going to be accomplishing prior to doing it!

Wish to learn more about stock trading tools? Go to http://stocktradingtools.org/

Tags: , , , , , , , , , ,

Using Automatic Forex Trading Software For Bigger Profits

Jan 24, 2010 currency trading

Due to the introduction of automatic and automated forex trading systems, forex trading has gained tremendously in interest and popularity in recent years. Now the market which was previously open to banks and similiar big financial institutions is luring in medium and even small investors.

People come to the forex market to exchange currency of one country for the currency of another country. As forex trading is 24 hours and billions of dollars are traded, it is no doubt the largest and most active financial markets.

With the advent of the internet, network, communication technologies, and sophisticated automated forex trading systems, participating in the forex market is now open to virtually anyone having a computer, an internet connection, a forex brokerage account and a good trading platform.

Trading forex requires constant monitoring due to the fact that the market does not close. But with an automated forex trading system, you can specify in advance your entry and exit price. Together with a small seed amount and with the help of a broker, your trading orders will be executed instantly.

With an automated trading system, you can trade profitably even without becoming an expert in trading. In automated trading through a managed account, it is the trading program that will executes the trades for you.

Another advantage of an auto trading system is you are not required to do the actual trading. Thus it frees up a lot of your time. If you do watch the market constantly, you can manage multiple accounts from your trading platform simultaneously. This was not possible with manual trading. With automated trading system, it lets you trade multiple systems and multiple markets.

An automatic and automated forex trading allow your trades to be made at any time of the day or night, regardless of your presence. You do not miss a single profitable trade even if you are not present in front of your computer terminal.

Using an automated forex trading system helps you to take advantage of various forex strategies and systems. As different systems are designed to be triggered by different trade indicators, you can lower your risk.

An automatic and automated forex trading also eliminates human emotions and psychology that can often affect proper and profitable trading decisions. With an automatic and automated forex trading system, you will be capable of monitoring many currency pairs at a time and you can follow and execute all of them.

Having said so much about automated forex trading system, you will still have to learn about the basics of forex trading. You should understand some fundamental analysis, technical indicators.

Having an automated trading system will never ensure you to be profitable. There are simpy too many variables and parameters. Only with good decision rules input into the system will ensure you to make money from the forex market.

Discover a Forex robot that is capable of doubling your money every single month. Click here to see the live proof of a $5100 real money deposit turning into $42,500.

Tags: , , , , , , , , , , , , , , , , , , , , ,

Potentially Lucrative Trading Vehicles for 2010

Dec 23, 2009 currency trading

Everyone wants to turn their money into more money. If we’re able to enjoy our lives knowing that our nest egg is constantly building through wise investment decisions, we’ll live happily and easily.

People are always looking for ways to make their money grow, and the first place that many people look is to the hottest markets. We’ve seen many of them in our lifetimes and we’re bound to see some more. These exemplify the dreams of overnight riches that many of us have, so there are always investors flocking to them.

The present day investment environment brings about a lot of opportunity. Whether you feel that the market is on its way up or down from here, one thing is for sure. The market is extremely volatile.

For everyone who’s lost money, there have been others who have made money. If you’re looking for places to potentially make a fortune or lose it all, here are some volatile markets that may excite you.

Perhaps the biggest fad in today’s market is that of the ETF, which stands for exchange-traded fund. Whether you’re buying an ETF that’s tied to the banking industry, the energy industry, or the overall market as a whole, there are plenty of ways to profit from an ETF and they all involve the directional movements of certain industries.

Another high risk situation, but one with high reward, is that of the options markets. An options trade can yield you as much as ten times your investment or more within a matter of days or weeks if played right. On the same note, you could easily lose your entire investment if things don’t go your way. Therefore, it’s never advisable to throw all of your money into an options trade.

If you’re interested in profiting from the growth or demise of other economies, you should definitely look into Forex trading. This all has to do with the foreign exchange market and millions of people actively trade Forex currencies.

Try any of these out if you’re short on investment ideas. Just remember though – where there’s reward, there’s risk.

Ivybot is a very popular Forex trading robot. Read this writer’s review of the product, which gives a straight up Ivybot review.

Tags: , , , , , , , , , , , , ,

Investing With Confidence Using Trend Following Strategies

Dec 22, 2009 currency trading

I’m not what anyone would call an active trader in the stock market. I generally rely on my broker’s advice and invest in low risk stocks and mutual funds. This strategy worked for me until the latest recession. I lost money on some investments and my return on most of my investments was poor. I decided I would have to take a more active role in managing my money.

I was looking into strategies like Forex, hot stocks and trend following and trying to decide the safest and most profitable way to invest what was left of my capital, when I came across TrendFollowingStrategies.com. Unlike other trend following websites, this one didn’t require a lot of knowledge of either the market or computer software. It also followed low risk ETFs (exchange traded funds) instead of individual stocks.

TrendFollowingStrategies.com gives members advice on which ETFs to buy whether the market is in an upswing or a downturn. They track the trends in ETF trading and follow the stocks that are rising. They also advise their members when to sell to realize the maximum reward from the trade. I decided to join.

I’ve been a member for just over a year and my investments are doing very well. I made just over a 20% gain in the last year. Riskier investments like hot stocks always worried me, but this method is low risk while it yields better returns than I used to get even in a good market. The information they give me lets me know which ETF trends to follow, when to buy and when to exit. I can evaluate the trade and make a decision on the amount to invest.

Even better, I don’t have to spend a lot of time buying and selling stocks. The system works with about ten trades a year. I’m really not crazy about playing the market, but I do want my money to work for me. TrendFollowingStrategies.com allows me to make money without having to spend a lot of time setting up trades.

One thing that I really like about this trading technique is that there is so little risk. EFTs are a bit like a mutual fund and they are a fairly stable investment. I can make money by trading, but I don’t have to worry much about any massive losses. By using the information I get through my membership I can maximize my profits. This program has been great for me.

If you’re like me, a conservative investor, you’ll really appreciate the advantages of trading with TrendFollowingStrategies.com. The system works whether the market is up or down. The EFTs that they recommend are always in an upward trend. If the trend changes, you’ll be notified so you can sell. It’s just easy.

I would recommend membership in this site to anyone who wants to make money in the market without investing a lot of time and effort. They do most of the work for you and you just have to make the decision on when and how much to invest in the trade. You can maximize your return on your investment with a minimum of work. If you aren’t a member of TrendFollowingStrategies.com, you should be.

Find more on trend following strategy and trend following trading system.

Tags: , , , , , , , , , , , , , ,

Leveraged Short ETFs

Nov 22, 2009 currency trading

You can short stocks. You can even short ETFs. Have you ever heard of Short ETFs? The ProShares Short Dow 30 ETF (DOG) will return the inverse of the Dow Jones Industrial Average (DJIA) on daily basis. If the DJIA falls by 2%, DOG rises by 2% and if the DJIA rises by 2%, DOG will fall by 2%. Short ETF returns the inverse of the index it is linked to.

ETFs are the most popular investing tool these days. They are a hybrid between the stocks and mutual funds. They give you the benefits of mutual funds without the high loads. They trade like stocks. During the past few years, the number of Short ETFs has risen dramatically. Short ETFs not only cover the major stock indices like the S&P 500 or the DJIA but also different sectors like the energy, utilities or technology. You will even find Inverse ETFs on currencies now. Short ETFs are also known as Inverse ETFs or Bear ETFs.

Most of the ETFs are designed around some market index. ETF shares trade like ordinary stock shares. You can buy them. You can sell them unlike the mutual funds that can only be sold at the end of the day. The ProShares UltraShort Dow 30 ETF (DXD) rises 2% when the DJIA falls by 1%. So you can even find leverage short ETFs. A leveraged short ETF gives the trader leverage without the use of margins.

Short ETFs give you an excellent opportunity to profit from the volatility in the market and the major indices. Over the years, short ETFs have risen in popularity with the investors and hedge funds.

Short ETFs are a great product as they have created new opportunities for traders. A trader had to actually short sell stocks to take advantage of a market drop before the introduction of short ETFs.

ETFs have opened up a whole new way of profiting from the markets. The trader had to go against the trend and buy or else move into cash or fixed income in the past if the market was dropping. Traders are not allowed to sell short stocks or ETFs in their retirement accounts. Short and leveraged ETFs provide traders with new opportunities.

Ever wanted to trade international stocks? Emerging markets give a higher rate of return as compared to the mature economies. China is one example that garners a lot of attention. The Shanghai Index in China rose 100% in 2007. In the first quarter of 2008, the Shanghai Index was down 35%. ETFs also provide you with the opportunity to take advantage of the global market swings.

China is a great emerging market. You can now profit from the volatility in the Chinese Stock market with the ProShares family of ETFs that introduced the Ultrashort FTSE/Xinhua China 25 ETF (FXP). Now if you want to trade the fall of Chinese stocks, you can trade FXP ETF. In the past, traders who wanted to benefit from the fall of Chinese stocks could only short Chinese stocks that were traded in US Stock Exchanges.

As a long term investor you can take advantage of short ETFs to hedge your portfolio position. Assume you have a portfolio of $100,000 composed of 75% stocks and 25% money market fixed income.

As a long term trader, you are interested in the long term forecast for the market but still do worry about the short term trend in the market as it has the potential of wiping out your portfolio. The forecast of the market for the next six months is not good. But you are reluctant to sell your stocks due to tax reasons. Suppose the market falls by 10%. Your stock portfolio falls by 7.5% assuming the same ratio between the market and your portfolio.

Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! Learn Swing Trading! Get a totally unique version of this article from our article submission service

Tags: , , , , , , , , , , , , , ,