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The Secret To Technical Analysis

Posted by admin | Under Options Trading Tips Sunday Apr 25, 2010

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 quaterly reports they release gives you a very poor insight into the real health of the company. Whereas the technical 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 are the secrets 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 get 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 much 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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Should You Become An Options Trader?

Posted by admin | Under Options Trading Tips Tuesday Apr 13, 2010

There is a lot of hype surrounding options trading, and for good reason, it’s a good way make a lot of money fast, or can be used to grow your capital consistently month after month.

There’s also a lot of hype about how complicated it is and why you need to spend thousands of dollars on options trading education before you get started. Needless to say this last statement usually comes from trading seminar companies trying to sell your their trading course on options.

Lets cover a few of the basics about options trading and set you straight about a few important points. Firstly yes it is true that you can make a lot of money trading options, but of course you can also lose money just as fast.

When trading stocks your leverage is 1:1, if you go on margin you can get get 1:2 leverage, but thats about it. With options it is not quite as straight forward to calculate the leverage but generally speaking you can get between 1:5 and 1:10 when you buy an option on a stock, or ETF.

So with 1:10 leverage, when the stock increases by 5% your option can increase by approx 50%, and this can happen in just a few days, this is why swing trading strategies using options on stocks is so popular.

However the downside is that the reverse can happen, if the stock drops by 5% your option can also drop by 50%, at which point you may want to close the trade and save some of your option value, it really depends on what your stop loss and risk management plan is.

What I’ve just described is called directional option trading where you are betting on the getting the direction of the stock movement correct, this is highly speculative. Options can also be used in option strategies which are much more non directional, such as covered call trades, credit spreads and Iron Condors. In these trades there is much less dependance on getting the stock direction correct, but it still matters.

So should you trade options?, in my opinion you should not do directional option trades until you become an expert stock trader 1st. This is because you really need to be very precise with your entry and exit strategy and trading plan, and be very good at technical analysis.

Whereas if you want to do non directional option trades you don’t need to be such an experianced stock trader to be successful, but of course it does not hurt either.

Learning how to trade options is a very good skill to have, but don’t rush into it and blow out your account. Make sure that you get a good options trading education before you start, and also make sure that you have a very solid stock trading education as well, such one from Top Dog Trading Review.

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Foreign Exchange Trading: What You Need to Succeed

Posted by admin | Under Options Trading Misc Saturday Dec 19, 2009

Currency trading needs particular things if you’re intending to do it successfully. One of these things is you need to take it seriously. It’s no good going into forex trading if you simply deal with it like a game. You will never make any money, in truth you’ll lose the game. The way to win is to treat it more of a business.

This means that you need a plan. Not a business plan, though it might have a few things in common with that, but a trading plan. The trading plan comes in many versions, one is Correlation Code, but in case of all of the approaches, it’s essential, as we claimed before, that you treat it seriously. It is a plan for your success and if you dip in and out of it, applying it only when it suits you and depending on intuition the rest of the time, you can’t hope to earn income or learn anything useful from the experience.

Long term foreign exchange trading plan

When you think about your long-term goals for your currency trading, it is actually better not to concentrate on the idea of cash. You may be hoping to double your money in six months or whatever, but in fact it’s not so crucial how much cash you make. All that matters on the money front is that you make profit instead of loss. Even if it is $10 profit, you should be pleased with that.

This is because having express financial goals it will just put you under even more pressure than you are already under when you are trading. You begin to think, “I need to make $x this week to hit my target,” and then you start to get into all types of trades that you should have left alone. Sometimes the conditions are simply too unsettled and they can stay that way for several days. You don’t wish to be feeling that you have got to trade simply to make your $x.

Instead, concentrate on what you want to learn or master and express your goals in that way. For instance, developing new systems based primarily on different indicators, even if you only use them in demo accounts. This may add a breadth to your trading and may be helpful if you happen on something that works. Or keep records of how many times you sidetracked from your system and have a goal of getting this down to zero.

Foreign Exchange Trading Plan For Trades

Your exact day to day trading plan is more about your position size, stop losses, close point for a successful trade, and so on. In this example you do have a profit target, voiced apropos the number of pips you will take if the trade is profit-making. It is not a smart idea to let trades drift, looking for unlimited profits. Some folks do only close out half their position at a certain point, it’s correct, but if you are about to do that it should be a written part of your intention, not a snap call.

Do not carry your planned strategy in your head where you can easily get tempted to change it. Write it down with the rules of your trade apropos the signals that you’re going to act on. That way everything is clear and you can offload some of the stress onto the paper. Currency trading is a disturbing as well as a risky business, and having a well thought plan is essential to the success of your enterprise.

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Live Online Stock Trading – Day Trading Live 12 March 2008

Posted by admin | Under day trading options Tuesday Aug 11, 2009

2 Live Online Stock Trading Day Trading Live 12 March 2008 Harvey Walsh of http://www.daytradingfreedom.com trades Nasdaq and NYSE stocks live. See how to make money daytrading