Online Stock Trader

Archive for the ‘Stocks’ Category

Technical analysis of the stock market, or any other market such as Forex, futures, is how most traders and investors make their trading decisions. This is as opposed to fundamental analysis which most people more agree is pretty much done as a way of making trading decisions, unless of course you are Warren Buffet!.

You only have to think back to major stock market scams like Enron to know that it is almost impossible for the average, and even very sophisticated fund manager or hedge fund trader to really know what the real financial state of a company is.

Just by reading the balance sheet and other quarterly reports they release gives you a very limited insight into the real health of the company. Whereas the technical analysis charts of the company tend to give the real picture of what the market thinks of the value of the company. In the case of Enron even simple technical analysis told you to SELL when the stock was in the $80-90 range, this is why technical analysis of stocks is so popular.

So what is the secret to technical analysis?, I’m about to tell you, here are my golden rules:

* Only use 3-5 simple technical analysis indicators

* Make sure that you understand how the indicators that you have selected work, what the parameter settings are and in what market conditions they are effective

* After selecting your indicators and parameter settings don’t mess with them.

The real secret to technical analysis is to become VERY familiar with your choosen indicators, and really this can only be done by watching and studying the market, so that you get to the point that you TRUST them.

The fact is that in any market, for each bar, there are only 5 pieces of information, the open, close, high, low and volume, yet there are now hundreds of indicators. Most of these indicators are displaying the same information and so are redundant.

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

But the way I use them is quite special, to learn more about how to become an expert at technical analysis visit:

Top Dog Trading Review

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Hoping and praying that the stocks that you just bought will go up is not the best strategy to use, however it is the one very often used by the average Joe stock trader who is using simple trading indicators. The only salvation they have is that in bull markets most stocks will go up.

Statistics show that in a bull market about 75% of the stocks will follow the general trend and go up, and in a bear market 75% will also go down. Trading with the trend is the best way to trade as 8 out of 12 stocks will follow the trend and give you the best chance of making gains on your stock purchases.

But what if you own some good stocks and don’t want to sell when the market is clearly going down, or about to go down?. There are a few tactics that you can consider, both of which involve the use of options, CALL options and PUT options. There is the widely known strategy called Covered Calls, and the much lesser known one called the Married Put.

If you are going to trade options it is important that before you start trading you get the best option trading education that you can. You should also practice stock trading until you are comfortable with the process. This is a very important point that must be taken seriously, if you don’t understand the terminology and the theory then you should not be trading options. If the terms Put option, Call option, Married Put and Covered Call are new to you then don’t trade until you have studied sufficiently.

Selling call options against your stock in 100 share increments is the basis of the covered call strategy and it can provide about a 2-7% buffer against the loss in stock price. However a bigger drop in the stock price will not be compensated for using the covered call strategy, in general.

Stocks in a bear market, and even in a bull market, can drop quickly on news or earnings releases, as much as 15 to 40% within a month. Using covered calls to protect your stocks will only provide limited protection of less than 7% at best and so will not save your account if the stock takes a 40% tumble.

The better solution to providing downside stock protection is the option strategy called the Married Put. As the name suggests the PUT that you buy is used to provide protection when the stock goes down because Put options will increase in value when the stock decreases in value. The term married is used because the option that is selected has to be very compatible with the stock, in other words a good match, if the strategy is to work.

The selection of the best Put option is not easy and involves several criteria which are listed below:

1. The strike price of the option

2. The current share price

3. Choice of options, in or out-of-the-money

4. Put expiration time

Even though the married Put protection only has a short life span if offers much more protection than the covered call. It can provide as much as 90-95% loss recovery in the event of a significant drop in the stock price.

The downside of the good protection is that you have buy the Put which is a cash debit whereas the covered call is a credit. But there are ways of off-setting this expense and there is much more to this strategy when executed correctly. The Married Put can be made to just about pay for itself and used to generate very good gains if the market, or stock to be specific, moves a lot.

The general idea of the Collar Trade is to combine the covered call and married Put strategy into one, this is what is called the Collar Trade. In effect you put a collar around the stock, sell a call and buy a PUT. If you do this correctly most of the cost of the Put can be offset by the credit from the covered call so you can protect your valuable stock at almost no cost. Yes this is a great strategy which the general public is unfortunately very ignorant of, and most brokers don’t understand.

The strategy that I have outlined above is unknown to the average stock market trader but is one of the best trading systems you could have.

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Wheater you’re considering investing in the stock market in one way, shape, form, or fashion you have probably heard the term “mutual fund.” Wheater you are like I was, you probably have no real clue whether to what the term actually means in terms of financial advantages or though exactly what a mutual fund is. Hopefully, reading this will clear up a few of the details for you hence that you could move on to make up to date decisions about where and how to invest your money.

I must begin by pointing out that there actually is no system for investing that is fully without risk. That being said, mutual funds have lower risks that a number of other investment alternatives, which makes them an attractive bargain for those that are unsure about investing. In fact, for the reason of savings, mutual funds often have lots of better rates of refund than the average savings account at your local bank & the risks are minimal in this kind of investment, specially compared to other riskier ventures.

Therefore back to essentials, mutual funds are, easily put, a collection of stocks & bonds that are owned by a group of people rather than one personal investor. This accomplishes a few things. First of every, it provides investors to purchase in by considerably low money than it will take to purchase the similar ‘portfolio’ on their own & it spreads the damage out among a group of people should something go wrong. In addition, because it is not one single stock or bond or majority of even though one sector of the stock market, the risks for a complete & total loss are reduced to some degree. Remain in mind on the other hand that the market does simply have bad days on event and there’s little that could be done about that short of stuffing your money under your mattress & it certainly won’t grow there.

There are plenty of advantages and disadvantages in regards to buying mutual funds. You won’t discover the flashy swings, dips, dives, & other grand maneuvers in the typical mutual funds. Lots of mutual funds are selected because of their stability not for in hopes of massive profits though several mutual funds are, admittedly, extra aggressive than others. It actually depends on how much of a gambler you’re with nature & how lots of of your investment & retirement you’re willing to risk as or not you will be satisfied with mutual funds whether part or all of your investment portfolio.

Diversification is one of the key ingredients of a healthy portfolio and mutual funds will assistance you work the diversity you need into your portfolio in short order. Wheter you are young & just beginning your occupation and in no real hurry for retirement this’s one of the safest tips to invest your money for the long haul. Sadly it may lead to a comfortable retirement but is unlikely to lead to a flashy retirement, whether lots of mutual funds don’t have the good payoffs that several investors aim.

There are mainly three kinds of mutual funds through several variations on every. First there are money market funds. These funds are good for the long-term investor who has a slow and steady approach to investing and would majority of be better than leaving your money in a savings account collecting interest but there are greater earning funds to be found. Second are the equity funds. These funds give slow progress over time as well whether some income along the track. Lastly there are the fixed income funds. The reason of these funds is to give a current income over time. These aren’t funds that are anticipated to rise in value just to remain a particular regular of living. This is excellent for those who have retired or investors that are very conservative in nature. Hopefully this finds you knowing a little more about mutual funds in general & preparing to study although extra about how to overcome your investment alternatives and create these key decisions for your future & that of your family. Read more other FREE articles about military auto insurance, viking auto insurance and auto insurance lead