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10 Proven Tips for Stock Market Trading

The internet is jam packed with so-called independent experts who claim that they made a fortune trading stocks. They are only too willing to share those tips with you for a price. Maybe you recognize the name of the expert, maybe you don’t. Which expert is right? Here are 10 tips common to the best stock market trading strategies.

1. Set financial limits. Dumping all your cash into a stock hoping for fast return is not investing. You might as well put that money on a horse in the fifth race and admit to gambling. Stock market investors decide how much money to put at risk before buying.

2. Buy low – sell high. That’s the tried and true formula for making money in the stock market. The problem is determining those points. No magic here, just plenty of analysis and research to achieve that simple yet elusive goal.

3. Price rules, value drools. The best research may show that a stock is undervalued or overvalued but the proof is in the price. For totally absurd reasons a stock price may rise or fall regardless of what you and the experts believe is the value. As with anything, the actual price is what people are willing to pay.

4. What goes up, comes down. Even a Cinderella stock on a wild ride to the top is headed back to the bottom when the clock strikes midnight. Online stock traders must get off with some profits before riding their pride to a crushing loss.

5. Change happens. Stocks are subject to directional swings that make no sense. The trends may show it or the change may be due to external events. Either way, smart online stock traders live with it and move on. Asking “why” is not as important as deciding “what now”.

6. Yield for Curves Ahead. Once a market move is evident, watch for the direction and duration of the trend. Generally a trend move during a bull market is more likely to be positive. A trend move during a stalled or bear market is more likely to be negative.

7. Says who? The internet is jam packed with stock market trading advice from software vendors, online trading firms, stock market newsletters, analysts and people who want to make money from you. How reliable is their advice? Keep a healthy skepticism about whose advice you use in making trading decisions.

8. Expertise is no substitute for Instinct. If technical tools alone made for success than the market would be packed with millionaires. Instinct leads the pack when analysis shows up a day late and a few dollars short.

9. The Efficient Market does not exist. The Efficient Market Hypothesis is a myth. The idea that the stock market will benevolently work itself out from peaks and valleys to a level playing field only works in textbook models of capitalism.

10. Be True to Your School. Consistently apply your trading strategy. Flipping strategies only leads to confusion. If the latest hot tip does not fit your trading strategy, it’s not for you.

Beginner Stock Market Tips

You can handle your new investments in the stock market by getting a good broker who you trust, by reading and studying up about it – which includes learning lots of economic thought or you can dive into it without adequate information and get creamed. And no one wants their beginner stock market to result in them losing lots of money.

The point of this article is to help you to the next level and show you what this amazing subject has to offer.

The unruly is, as rapidly as you beginning your beginner stock market you will be practically bombarded by guidance. You can get ironic hurriedly if you invest here, you can make money practically risk limitless if you buy that book. It is all nonsense. Your beginner stock market is no safer than someone bedside’s stock market and each knows at slightest one self who is an practiced at the stocks and has still full a tremendous dive. No one wants that to transpire, but you’re no different from someone besides just because you’re just beginning. Don’t be a mark. Don’t let your beginner stock market front you to pecuniary ruin.

Investment clubs can grant some help with being a beginner in the stock market because they can put you in feel with a group of people who might be more weathered and experienced at investment. That can give you the competitive verge you must, by allowing you to profit from the gear that they already know.

Seminars can also be valuable for your beginner stock market, but memorize there is no wealth without risk. They are regularly gifted wealth without risk at these tutorials, but that is completely bogus any effort involves risk, and your beginner stock market is one of the riskiest of them all, so memorize: a tutorial which promises wealth without risk is perhaps a dodge and should be avoided. Bond to your books of classical and then useful economics, and rapidly you will be investing like a pro. Your beginner stock market will be a bizarre fancy of the previous as you are swept up by ever compounding investments haulage you away to fancy lands of unchecked and unimagined wealth. That is, if you are blessed. But for now, keep fancying, and keep studying, and keep developing your beginner stock market selection.

Stock Market Analysis

The return that a stock can provide is often predicted with the help of technical analysis. Stock market trading tips are based on technical analysis of various parameters.

Stock market analysis is science of examining stock data and predicting their future moves on the stock market. Investors who use this style of analysis are often unconcerned about the nature or value of the companies they trade stocks in. Their holdings are usually short-term – once their projected profit is reached they drop the stock.

The basis for stock market analysis is the belief that stock prices move in predictable patterns. All the factors that influence price movement – company performance, the general state of the economy, natural disasters – are supposedly reflected in the stock market with great efficiency. This efficiency, coupled with historical trends produces movements that can be analyzed and applied to future stock market movements.

Stock market analysis is not intended for long-term investments because fundamental information concerning a company’s potential for growth is not taken into account. Trades must be entered and exited at precise times, so technical analysts need to spend a great deal of time watching market movements. Most stock tips and recommendations are based on stock analysis methods.

Investors can take advantage of these stock analysis methods to track both upswings and downswings in price by deciding whether to go long or short on their portfolios. Stop-loss orders limit losses in the event that the market does not move as expected.

There are many tools available for stock market technical analysis. Hundreds of stock patterns have been developed over time. Most of them, however, rely on the basic stock analysis methods of ‘support’ and ‘resistance’. Support is the level that downward prices are expected to rise from, and Resistance is the level that upward prices are expected to reach before falling again. In other words, prices tend to bounce once they have hit support or resistance levels.

Stock Analysis Charts & Patterns

Stock market analysis relies heavily on charts for tracking market movements. Bar charts are the most commonly used. They consist of vertical bars representing a particular time period – weekly, daily, hourly, or even by the minute. The top of each bar shows the highest price for the period, the bottom is the lowest price, and the small bar to the right is the opening price and the small bar to the left is the closing price. A great deal of information can be seen in glancing at bar charts. Long bars indicate a large price spread and the position of the side bars shows whether the price rose or dropped and also the spread between opening and closing prices.

A variation on the bar chart is the candlestick chart. These charts use solid bodies to indicate the variation between opening and closing prices and the lines (shadows) that extend above and below the body indicate the highest and lowest prices respectively. Candlestick bodies are coloured black or red if the closing price was lower than the previous period or white or green if the price closed higher. Candlesticks form various shapes that can indicate market movement. A green body with short shadows is bullish – the stock opened near its low and closed near its high. Conversely, a red body with short shadows is bearish – the stock opened near the high and closed near the low. These are only two of the more than 20 patterns that can be formed by candlesticks.

When glancing at charts the untrained eye may simply see random movements from one day to the next. Trained analysts, however, see patterns that are used to predict future movements of stock prices. There are hundreds of different indicators and patterns that can be applied. There is no one single reliable indicator, but these stock analysis methods when taken into consideration with others, investors can be quite successful in predicting price movements.

One of the most popular patterns is Cup and Handle. Prices start out relatively high then dip and come back up (the cup). They finally level out for a period (handle) before making a breakout – a sudden rise in price. Investors who buy on the handle can make good profits.

Another popular pattern is Head and Shoulders. This is formed by a peak (first shoulder) followed by a dip and then a higher peak (the head) followed again by a dip and a rise (the second shoulder). This is taken to be a bearish pattern with prices to fall substantially after the second shoulder.

Other Stock Market Analysis Methods

Moving Average – The most popular indicator is the moving average. This shows the average price over a period of time. For a 30 day moving average you add the closing prices for each of the 30 days and divide by 30. The most common averages are 20, 30, 50, 100, and 200 days. Longer time spans are less affected by daily price fluctuations. A moving average is plotted as a line on a graph of price changes. When prices fall below the moving average they have a tendency to keep on falling. Conversely, when prices rise above the moving average they tend to keep on rising.

Relative Strength Index (RSI) – This indicator compares the number of days a stock finishes up with the number of days it finishes down. It is calculated for a certain time span – usually between 9 and 15 days. The average number of up days is divided by the average number of down days. This number is added to one and the result is used to divide 100. This number is subtracted from 100. The RSI has a range between 0 and 100. A RSI of 70 or above can indicate a stock which is overbought and due for a fall in price. When the RSI falls below 30 the stock may be oversold and is a good time to buy. These numbers are not absolute – they can vary depending on whether the market is bullish or bearish. RSI charted over longer periods tend to show less extremes of movement. Looking at historical charts over a period of a year or so can give a good indicator of how a stock price moves in relation to its RSI.

Money Flow Index (MFI) - The RSI is calculated by following stock prices, but the Money Flow Index (MFI) takes into account the number of shares traded as well as the price. The range is from 0 to 100 and just like the RSI, an MFI of 70 is an indicator to sell and an MFI of 30 is an indicator to buy. Also like the RSI, when charted over longer periods of time the MFI can be more accurate as an indicator.

Bollinger Bands – This indicator is plotted as a grouping of 3 lines. The upper and lower lines are plotted according to market volatility. When the market is volatile the space between these lines widens and during times of less volatility the lines come closer together. The middle line is the simple moving average between the two outer lines (bands). As prices move closer to the lower band the stronger the indication is that the stock is oversold – the price should soon rise. As prices rise to the higher band the stock becomes more overbought meaning prices should fall. Bollinger bands are often used by investors to confirm other indicators. The wise technical analyst will always use a number of indicators before making a decision to trade a particular stock.