Posts Tagged ‘stock market’

Investing Explained – The Ins And Outs

Mar 13, 2010 currency trading

Numerous people want to try their hand at investing, ordinarily as a way to build a nest egg for their family in the future and there are a number of ways to do this. Investment in stocks and shares seem to be the most obvious choice, but there are many more feasible alternatives which might also seem profitable.

Any one of these would be promising for the future, provided you have the right intellectual make-up to handle them. Unfortunately, the area is complicated, far, far more than this very brief article can deal with but it should supply enough information to enable you, the reader, to decide if this is something you would like to try.

Stocks and mutual fund investments have always been lucrative, but before doing this you ought to do a lot of research on the corporations where you want to invest in. The stock market supplies good opportunities for short and long term proceeds on investments, but be careful, as there could be big pitfalls too. Another area where weighty returns are guaranteed after investing is real estate, but you might have to wait for the money to pour in, in this safe option.

There are many individuals who buy dilapidated houses which need a great deal of reconstructing work and they buy these properties at throwaway prices, spend money to repair them and sell them at a huge profit margin, but then these things require a lot of hard work at the beginning. Prior to taking this option carry out some research because there is more involved than it has been referred to here which is something that is not so much of a problem with the next area we will look at.

The quickest way to get started is by doing online trading and it is also the fastest growing sector of investing as it can be carried out by just about anyone furnishing they have a computer and an internet connection. If you are keen on Internet dealing, do your research about companies where you want to invest, for instance, their performance, their wares, respect in the market etc., but all these types of work does not take too much time. This type of investment requires some guessing and anyone with a great deal of built-in discipline would be good at it, as most individuals goes on blindly bidding till they find that more money is lost than gained.

Although some individuals may depend on luck, they are very few as most rely on ‘old fashioned’ graft by researching what it is they need to know about investing to make the money they have set out to accomplish. If you think that trading is a bit like gambling, then you are badly wrong as loss is unavoidable, because you lack the essential knowledge of the markets.

Once more, the internet can help with forums and sites dedicated to supplying tips and tricks for prosperous online investing, use these and learn from the experience of others. I know many individuals who have mastered this type of investment and have become richer, but there are also people, who have invested blindly and lost a lot.

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Profitable Candlestick Patterns-The Bullish White Marubozu

Mar 12, 2010 currency trading

Bulls and bears are always fighting for the control of the market. Candlestick charts are the best way to know who is controlling the market. With one glance on the candlestick chart, you can find out whether the bulls were in control or the bears. There are many candlestick patterns. The most basic and the most powerful candlestick pattern is the the long white candle. When this candle is formed, it means that bulls have been controlling the market throughout the day pushing the currency prices or the security prices higher throughout the trading day. This is one of the most bullish candlestick pattern to form on the chart!

As prices rise through the day, sellers do come in but not enough to stop the prices from continuing to rise. When sellers do show up during the trading day, buyers buy from them and the prices move higher.

This is an indication that the buyers are not done with their buying. The following day the bulls will still be in control and pushing the prices further higher. This is an indication of the fact that there are not enough stocks or securities in the market to satisfy the buying appetite of the investors. With high demand and low supply, the prices will continue to rise! Now, what this means is that prices have been constantly rising throughout the trading day. The closing price was equal to the high of the day or very near the high of the day.

In case of a true white Marubozu, the opening price is equal to the low of the day and the closing price is equal to the high for the day. Now, this might occur occasionally. For our purposes, a white candle may have some wick on its both ends. What this means is that the opening price in case of a long white candle will be close to the low of the day and the closing price will be close to the high for the day.

How do you know that this is indeed the white long candle? When you find that 90% of the area between the low and high of the day is covered by the candle body, you know that this is indeed a long white candle. You wil find many bullish white candles on the chart. Off course, everyone will not be the white long candle.

Now always remember, price action doesn’t move in one direction always. It retraces a little bit and then again starts moving in the previous direction. So when this retracement in price action takes place, you get the chance to trade the signal! When a long white candle is formed, it means that the price action had been intense throughout the day. This price action was covered in a very short period of time.

With long white candlesticks, the low price on the candlestick is a good support level. Support is the level where the buyers are expected to support the price of the stock or for that matter the security.

There are some variations to the bullish long white candle. Three are very important. The first is the Long White Marubozu that has no wick. It is all candlebody. This is the most bullish of the candlestick patterns. The other variation is the Closing White Marubozu. In this case, the closing price is equal to the high of the day. What this means is that there is no wick on the top of the candlebody.The third important variation is the Opening White Marubozu. In this case, the open price is equal to the low of the day. What this means is that the there is no wick below the candle body.

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Dragonfly & Gravestone Doji Candlestick Patterns- A Rare But Highly Profitable Patterns!

Mar 10, 2010 Uncategorized

A Doji Candlestick Pattern is very easy to spot but it forms rarely when the opening and the closing prices of a security or a currency pair are the same. So there is no stick on the Doji Candlestick Pattern. It is all wicks with no candle body. In essence, a Doji Pattern looks like a cross. There are a few variation to this important pattern. Read this article to know more how profitable this pattern can be.

For a Doji to be created, a trading day must begin and end with the same price. A whole lot of trading takes place during the day but when it is all said and done, the security price is right back where it had started in the morning.

It is a signal that the battle between the bulls and the bears had been a draw during the trading day when a Doji is formed with the opening and the closing prices equal. Soon, either the bulls or the bears are going to previal. In other words, a trend reversal is about to take place.

A Dragonfly Doji pattern is unique in the sense that the opening, closing and the high prices are all the same or equal. A Dragonfly Doji is formed when the stocks opens, trades down during first part of the day. During some part of the day, the price starts to climb again and eventually closing on the high which is the same as the open.

When a Dragonfly Doji is formed, bears initially decide to rule the market. But at some point the bulls step in and decide to buy again. When the bulls step in, they start pushing the price up. As the bulls dominate the trading day, the security price ends up right where it had started.

Dragonfly Doji is considered to be a bullish candlestick pattern. The low on this pattern can be taken as the support level because this was the level at which the bears entered the market and started buying.

When a Bearish Gravestone Doji Pattern is formed, it is a signal that a prolonged downtrend is about to start in the market. The second important variation to the Doji is the Bearish Gravestone Doji. This pattern is formed when the open and close of the day is equal to the low of the day. This is something opposite to the Dragonfly Doji where the open, the close and the high were equal.

When Doji Pattern does form, get ready for a trend change! As said before, this pattern is rare but very easy to spot on the chart.

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Profitable Candlestick Patterns -Bullish Necklines, Bearish Meeting Lines & bearish Piercing Line

Mar 9, 2010 Uncategorized

Trend is your friend. But how do you know it is really your friend. Trend can only be your friend if you know that the trend is going to continue or it is about to reverse ahead. Otherwize, trend trading is going to give you a loss. Candlestick patterns can help you anticipate whether a trend is going to continue or reverse ahead. There are many candlestick patterns. Bullish Necklines is one of them. It is a two stick trend confirmation pattern that tells that the trend is expected to continue. There are two type of Neckline Patterns, the In Neck and the Out Neck. When you spot the Bullish Neckline in an uptrend, it is a signal that the trend is expected to continue for sometime.

The candle formed on the setup day should be a long bullish candle that shows a lot of buying. On the signal day a bearish candle either long or short is formed with its closing price very near the close of the setup day.

If the closing price on the second day is very near the closing price on the first day, the neckline candlestick pattern formed is known as the on neck pattern. If the closing price on the setup day is a little lower than the closing price on the second day, it is known as in neck pattern.

You might be thinking that this is not much of a difference. Well, this is true but nevertheless, you should be aware of this slight difference between the In Neck and the On Neck Patterns. Both these patterns are telling the same thing that the uptrend is going to continue in the near future. So even if you are not able to differentiate between the In Neck and the On Neck, don’t worry much. You must at least be able to identify that a Neckline Pattern has been formed.

Now, let’s talk about a trend reversal candlestick pattern; The Bearish Meeting Line. On the first day or what you call the setup day, you will find a long bullish candle.What this means is that heavy buying took place throughout the day. On the second day or what you call the signal day, you will find a gap opening. This is a Bearish Meeting Line Trend Reversal Pattern. What is means is that the trend is about to reverse itself soon! This gap entices the sellers to start selling that continues throughout the day. This will result in a long bearish candle on the second or what you call the signal day. This long bearish candle should have a close very near the open of the low of the day as well as the close should be very near to the close on the first or what you call the setup day.

Another trend reversal pattern is the Bearish Piercing Ling Pattern. This candlestick pattern is formed when on the first or the setup day, a bullish long candle is formed meaning that the bulls have been in control of the market throughout the day. The second day or what you call the signal day, there will be a bearish candle formed. This bearish candle should have an opening higher than the first day’s high. This means that on the second day or what you call the signal day, the sellers started selling pushing the price action down past the opening price to the midpoint of the first day candle.

This pattern usually occurs in the last stages of an uptrend and when it happens, it means that the trend is about to reverse itself. When this Bearish Piercing Line Candlestick Pattern is formed, it means that the price action has lost it’s momentum.

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My Thoughts On Forex Autopilot

Mar 8, 2010 Uncategorized

It seems as if every month, a new trading robot is released.

With a market that is essentially flooded with these programs, it becomes such a task to find just the right one. I have found out that a few of these programs are quite similar except for a few others.

The newest of these trading programs is Forex Autopilot. Forex Autopilot is an automated forex trading program that is used with metatrader platform.

This trading bot was created by a professional day trader by the name of Marcus Leary. The program claims that it can make inexperienced traders filthy rich just by doing nothing.

You may find this claim quite outrageous and outright exaggerated, but some people just can’t get the thought of getting rich quick out of their minds that they go on to purchase the product without even knowing anything about it.

Before you take the program for a spin, it is important that you understand a few aspects of it.

What really then is Forex Autopilot? In a nutshell, Forex Autopilot is a kind of automated currency trading bot that can trade on your behalf by using a fund that you have initially set-up.

However, before you the program go on autopilot, you have to set the parameters of the program first which may require a little knowledge about the foreign exchange.

What is really convenient in the program though is the fact that it provides a demonstration mode which will allow any user to make use of a dummy account wherein one can practice trading until one gets confident enough of the system to start using real money.

Forex Autoplay is pretty accurate which means that losses are rare occurrences. However, when one does encounter a loss, the value can be significant and that can get you broke even before you have build up your profits.

In order for you to be on the safe side, never risk more than 50% of your capital at a time.

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Trading Futures Like The Turtles

Mar 3, 2010 currency trading

There are many types of financial instruments that traders and investors trade. Futures is one of them just like stocks and bonds. A stock gives you ownership of one part of a company. If you own 10,000 stocks of a company, you own 10,000 parts of that company. On the other hand a bond is an IOU that governments and companies issue to finance their operations.

A futures contract is a legally binding contract between two parties with a set of conditions for the delivery of the underlying asset such as a commodity or a financial instrument at some specific date in the near future.

Futures market is the backbone of the whole sale and retail commodity market ranging from oil, wheat, corn, heating oil, meat, cattle, soybeans and other foodstuff. So you can well imagine the importance of the futures market. Futures market serves the purpose of hedging and speculation.

Futures contracts are by design meant to limit the amount of time and risk exposure experienced by hedgers and speculators. What this means is that all futures contracts are time bound and at some point in the future they expire.

Now you can easily trade these contracts by opening an account with a FCM brokerage and deposit an amount to start trading these contracts on margin. The minimum amount with most of the brokers is something like $5,000 but it can less too! Brokers allow leverage upto 10:1 when you trade on margin. Compare this to the leverage of 2:1 allowed by stock brokers. In the last decades, electronic trading has become highly popular among the traders. This includes futures as well.

In US, open outcry trading still takes place during the official hours at the different futures exchanges. However, most of these futures contracts also get traded electronically. GLOBEX allows electronic trading of most of these futures contracts 23 hours each day. Electronic trading provides a more level playing field, more price transparency and lower transaction costs.

CME, NYMEX and CBOT are the three most important Futures Exchanges. GLOBEX allows you to trade most of the contracts that get traded on these exchanges. The popular contracts that get traded on GLOBEX are the E-minis like the S&P 500, NASDAQ 100 and Dow. You can also trade E-mini gold futures as well as crude oil futures on GLOBEX.

GLOBEX trading overnight tends to be thin and more volatile than during the official trading hours that are from 8:30 AM EST to 4:15 PM EST. If you trade financial news on Bloomberg or CNBC before the stock market opens officially, you will find quotes on S&P 500 futures and other taken from GLOBEX.

These GLOBEX quotes are real time and if you have taken a position with sell stop or a buy order, early next morning, you might find your position executed with a new position or out of the position altogether. Futures can be highly profitable if you know how to do it!

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Learn Stock Trading- Three Things to Consider

Mar 2, 2010 currency exchange

As we face the harshest financial environment in decades many people have turned towards managing their own portfolios as a method of finding some security in this otherwise topsy-turvy world. This is prompting many individuals to learn Stock trading on a level that they had otherwise ignored before. This being so here are three basic tips to help you to learn Stock trading and take back the keys to your own financial kingdom.

While you learn Stock trading it may be necessary to dabble in some mutual funds in order to get your feet wet. Some experts believe that single stocks are too risky for a majority of investors. Ultimately the amount of time you have prior to needing to access the money that you’re trading is the key. More time and you can afford to take more risk. All these factors should be considered as you learn Stock trading.

In order to learn Stock trading you need to know the basics. One basic term that has been used to assess a stock’s value is PE ratio. Whereas we all know that a stock is only worth what someone is willing to pay for it today we also understand that we have to find some way to assess its potential future value. Price to earnings ratios are a method of doing this and while learning Stock trading you should become well acquainted with them.

To follow up with figuring out price to earnings ratios you should then go on to become acquainted with the PEG ratios. Another important thing to know as you learn Stock trading is how a PEG ratio or profit to earning to growth ratio can become a vital piece to deciphering the stocks potential upside. Important enough, that anyone who’s looking to learn Stock trading should learn and be able to understand this information.

If you use these three simple rules while learning Stock trading you will be well on your way to successfully controlling your financial future and figuring out the Stock trading game. So always remember PE ratios, PEG ratios and getting started in mutual funds in order to manage your risk.

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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!

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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.

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What Are Trend Following Indicators?

Feb 27, 2010 currency trading

Looking into trend following indicators which is a way that people will use to invest in the stock market. This strategy will be used to compare how stocks have done in the past, the trend of ways they have moved on the stock market.

With this method you will watch the way that the market goes and invest according to those movements in the past on the stocks. You will look at current market price for the stock, moving averages, and also any breakouts that have happened in the past.

People who use this method are not forecasting what will happen but they are following a trend and using it. This method will use three main components. Current price of stock, equity level and current market volatility. How much you buy or sell will be determined prior to buying of the stock and be based on volatility.

This type of method will be used only after the stock has established a trend. In other words not on a new stock that hasn’t yet established any type of trend to it. Price will be one of the main considerations in this method. A person who trades through this method may use indicators to figure out which way the stock will go next.

They should know when the trend will continue until, and how much they will trade during that time. If the market becomes more volatile they will reduce the levels of trading this will be to cut losses. Price and time are the most important things for trend following indicators.

The following questions will be able to be answered when you use this type of method. Shares that will be traded during the trend, how to enter the market and at what time. Risk to be taken on each trade, cutting of unprofitable stocks, and how to get rid of profitable stocks.

Find more on trend following and Covel trend following.

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