Stock Trading Tips and Tools
What is a Derivative?
Posted on January 20, 2012 by lukeboris | No Comments
If you are brand new to stock trading and have only just started skimming through the headlines of financial news sources, or even if you are a seasoned investor who has been investing your own money for most of your life, there is a concept that has been appearing with greater frequency in the news over the past several years due to the 2008 financial crisis and most recently due to the European debt crises of Greece and Italy. The concept I am of course talking about are derivatives and they are perceived to be so profound and complex that people shudder at the mere mention of the term. It is no doubt that derivatives are complex in practice but they are not as difficult to understand as many people believe them to be and shouldn’t scare you away from learning everything you can about them because that will help you become greater at stock trading.
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The Folly of Anchoring in Stock Trading
Posted on January 13, 2012 by lukeboris | No Comments
The Folly of Anchoring in Stock Trading
If you are like many investors, then one of the metrics you use to gauge whether or not to purchase a company’s stock is based on taking a glance at the company’s price on a chart and seeing how their price has fluctuated over some past increment of time. There’s a certain rush that comes when you see a chart-based opportunity while performing some stock trading analysis that involves a graph that, for the most part, is at an appreciating 45 degree angle and has been appreciating that way for quite some time. The urge to buy stock in a positively moving company like that seems to make intuitive sense because a price that has been moving upward in the past should continue to do so in the future – Right?
In psychology there is a concept known as the cognitive bias that is used as a way to describe a number of patterns when we as humans fail at using rational judgment. Many of them have fancy names like, “Hyperbolic Discounting,” and “Irrational Exuberance,” but one in particular we need to focus on as stock traders analyzing charts is known as Anchoring. Anchoring is the bias involved when a person goes about analyzing a situation and relies too heavily on one piece of information over the rest of the available information. Of course when this is applied to Read more
Interview With Howard Feigenbaum
Posted on March 30, 2011 by StockTrading.net | No Comments
Howard Feigenbaum has been an investor since he was in the seventh grade when he and his classmates pooled their money and bought two shares of Standard Oil of New Jersey. He has been in the financial services business since 1981 helping clients plan for retirements with a variety of investment products and strategies. For the last twenty-two years he has owned a broker-dealer firm, Sharemaster (www.sharemaster.com), that specializes in mutual funds that pay dividend income.
1. What are the main reasons people should consider investing?
Investing allows an individual to participate in owning parts of successful businesses or businesses which are on the path to becoming successful; or, conversely, an individual may benefit from identifying businesses which are declining in value and benefit from the decline in ownership value. An individual may also loan money to businesses who have offered an attractive return to gain capital.
There is inherent risk in taking a financial position in ownership or lending. For many people the return or profit from taking the risk may be attractive; the risk may seem prudent or worthwhile. However, there is always risk. There is also risk in not investing.
When someone deposits funds in the bank and receives a one percent rate of interest, there is inflation risk. The asset may be guaranteed against loss by FDIC but the value of the deposit may decline because of inflation. If the inflation rate is four percent per year but the interest rate is one percent per year, the asset is losing value at the rate of three per cent per year. When businesses experience inflation, they pass the increase costs on to their customers.
A good example is gasoline. Oil producers do not sell the product at the price you prefer; when their cost goes up, your cost goes up. If you own shares of an oil producing company, the value of your shares may stay the same or go higher, even in the face of inflation.
Some companies pay dividends. They distribute their profit among their shareholders. If they do well, you do well. It’s nice to be an owner. If they don’t do well, then you don’t do well. Then it’s not nice to be an owner.
The essence of investing is Read more
Which Stock Trading Technique Is Best For You?
Posted on March 10, 2011 by StockTrading.net | No Comments
There are numerous options when it comes to choosing a stock trading strategy and choosing which one to go with can be a complicated decision. If you really want to make it big in stock trading it will be important for you to become educated and understand the different strategies available to you. Then, you can go with the strategy or strategies that you think will work best for you. Here is a brief look at some of the most common short-term strategies that you can consider using.
Diversification
The first strategy, considered by many to be the most important, is diversification. No matter what type of trading you choose, it is always good to diversify when it comes to stock trading. Keeping some funds safe and going for higher risk on others helps to round out your portfolio. The most important thing to remember when it comes to diversification is that you should always be reviewing what you have, and making tweaks along the way in order to help boost your profits.
Fundamental Trading
It is a long term investment, owned with the intention of holding the stocks till there is an appreciable change in the fortunes of the company. The long term protects the stocks from the volatility of the market. The stocks can be held for a period of a few months to several years.
Day Trading
One of the riskiest forms of stock trading, day trading involves buying and selling of financial instruments within the period of a single day transaction window. Multiple positions are changed throughout the day such that all the positions are closed before the markets are shut down. Earlier, the stronghold of large financial institutions and professional investors, day trading is becoming popular with the advent of online trading. The intention of this type of stock trading is to make maximum money by using immediate information about the company and the market.
Scalping
Scalping is a form of stock trading that aims to make quick money from small commissions on hundreds of different trades. It takes advantage of the ask/bid spread and the volume of the trade conducted by a scalper. Since the commission is small, the profit is generally maximized by handling large number of accounts.
Swing Trading
It usually lasts for a day or more but less than the duration of the long term trading. Swing traders do the trading at the peak or bottom of a price swing of a particular stock caused by market volatility.
Momentum Trading
It is another risky form of stock trading. It takes advantage of the extreme volatility and swings of the market. It involves making use of the information from other sources about the mood of the market. Making money in this form of trading is more about getting in and getting out at an opportune moment.
Penny Stock Trading
In penny stock trading, you purchase what you hope will be an up and coming stock. These stocks are priced very low, usually under $10.00 a share. While many of these stocks go nowhere, if you learn how to pick the right one, you could see huge profits.
Shorting Stocks
Shorting stocks is the trading strategy when you benefit from a stock declining in price. The idea is that you sell a stock into the market that you have borrowed, collecting cash from the sale. Then, once the price of the stock has decreased you buy it back for a lower price than what you sold it for, and return the borrowed stock from where you borrowed it making a profit on the difference between what you sold it for, and what you bought it back for later.
Insider Following Trading Systems
This strategy involves researching what others are purchasing to find trends. You look at what major players like large shareholders are purchasing and follow their lead. This strategy can be used with other stock trading strategies to help increase your chances of success. Public companies list their biggest shareholders, and when you see these major shareholders buying and selling, they often have more valuable and pertinent information that hasn’t yet been distilled to the major news sources.
News Trading
News trading is a form of the momentum trading strategy that works if you are a day trader and can move quickly when it comes to trading strategies. You need to keep abreast of what is being reported in the news that might affect stock prices. Real time news releases often give insight to where a stock will go and if you act fast enough, it could pay off.
Tips For Successful Day Trading
Posted on March 5, 2011 by StockTrading.net | No Comments
If you are a day trader or plan to get into the day trading market, you need to have a certain mindset and certain skills to be successful. Day trading takes time and dedication as well as knowledge and the ability to pay close attention to details. Day trading can be very lucrative, that is if you are good at it. Here are some tips to help you become a successful day trader.
- Time Commitment: In order to be a successful day trader the first thing you must have is a lot of time. Successful day trading is nearly impossible without time and dedication.
- Analytical Thinking Skills: Day traders need to have the ability to analyze and make moves quickly without second guessing their decisions.
- Knowledge: Day trading takes extensive skill and knowledge and in order to be good at it you must take the time to become educated on how the market works, the strategies you can use and so on. If you can, take courses and try out a simulator training game. Even experienced traders can improve their skills through ongoing education.
- Find A Mentor: A great way to learn the necessary skills and knowledge needed for day trading is to find Read more
Day Trading For Beginners
Posted on February 2, 2011 by StockTrading.net | No Comments
There are many strategies and techniques for stock trading. One method is called “day trading” and it’s a strategy recommended for people who have experience with the stock market and the discipline to research and study the various stocks. Day Trading is perhaps the most exciting type of stock trading. Those that enter day trading however need to be careful as the adrenaline and thrill of being in day trading can often over power sensibility. Beginner day traders have a lot to learn if they want to be successful and should never let their feelings and emotions overtake their ability to make a good trade. Here are some important things you should keep in mind if you are just starting out in the day trading market.
Never Enter A Trade Without Knowledge
In order to be successful at any type of stock trading you need to become educated and with day trading this is especially important. You never want to enter day trading without being prepared and having, at the very least, a basic knowledge of how the market works. Before entering into the market you especially need to have an understanding of market strategy. If you do not know what your strategy and game play will be, you very well could be in for a big loss. Take the time to analyze the day trading market, paying close attention to strategies and determine what you think will work best for you.
Never Use Money That You Can’t Afford To Lose
While this is true for any stock trading you may partake in, for day trading it is most critical. Never put up money that you need to Read more
Online Stock Trading Chat Rooms
Posted on January 11, 2011 by StockTrading.net | No Comments
It used to be you could only get stock trading advice from official members of the stock exchange or stockbrokers. There are courses and seminars and books you can purchase to get stock trading advice – but there are now specific chat rooms available on the internet where people gather to discuss strategies and support one another. The participants in stock trading chat rooms are eager to share their own experiences and network with other traders.
Where to Find Stock Trading Chat Rooms
If you are interested in taking part in online chat rooms for stock traders, you can start by finding communities that focus on stock trading. Many forums exist as part of larger financial and investment websites, and even Yahoo groups exist for stock trading topics; once you are a member of these forums and groups, you can typically participate in live chat rooms for the members. Read more
How to Reduce Stock Trading Transaction Fees
Posted on December 28, 2010 by StockTrading.net | No Comments
Stock brokers make money when people participate actively in stock trading, so it’s unlikely you will find any who will continuously execute your trades for you for free. Instead of trying to find a zero commission broker, you can use your skills to pay the broker.
Transaction costs for stock traders involves the commissions and/or fees paid to a broker who executes your stock trades, plus “slippage”. The slippage is the difference between the price of the trade when you enter a position and the actual price of the trade when you execute it. If you request your broker buys 100 shares of a stock at 1.00 stop; and the broker fills the order at 1.01, the slippage is negative $1. The slippage in this case is negative because it cost you $1 more than the theoretical trade would have, and this cost is added to the total transaction costs of the trade. You can also end up with a positive slippage if the price of the stock goes back a bit between the time you request the trade and the time you buy it. In that case, your positive slippage is going to reduce the amount you must pay to the broker. Read more
How to Choose a Good Stock Trading Training Program
Posted on December 24, 2010 by StockTrading.net | No Comments
If your goal is to begin stock trading as a profitable adventure, you need to grow your understanding and knowledge of the markets and how it works. If you have been day trading for awhile, it may be time to invest in a good training program, course, or seminar to further your knowledge base.
Stock Trading Training Programs and Courses
Completing a training program or course will ensure you have the skills necessary to read daily stock reports, and analyze stock market charts in real time. You will learn how to take the information from the reports and charts and use them to make profitable trades in the market. Read more
Understanding Terminologies of Stock Trading
Posted on December 20, 2010 by StockTrading.net | No Comments
Using stock trading software requires that you have a basic understanding of the terminology generally used in the stock trading industry. If stock trading is new to you, the best thing you could do is learn the important terminology of the market before you dive in and start making trades with your software.
Here are a number of terms and their meanings that you will come into contact with on a regular basis while using software and making trades in the market:
Bear Market – the economy of the country has slowed in a “bear market”, with higher rates of unemployment and a lower revenues for companies are some of the signs of a bear market. Stock prices often drop and stagnate at a low point when we are in a bear market. Read more
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