financejems

Want to find out about the Stockmarket?

2008-01-08T04:25:00.000-08:00

By: John Reimann

Are you thinking about the future? This is a crucial question to consider, regardless of your age. When it comes to retirement, none of us want to be left with hardly anything to get by on. The fact of the matter is we all want to live comfortably and not have to worry about how we're buying groceries for this week. This is why you need to plan ahead of time. In what way do you intend to set aside extra money? Will your job take care of you after you've put in those twenty years? But what about the termination issue? Maybe that large company will dump you after an eighteen year run. This could throw your entire retirement plan out the window. Then you're basically left with nothing. How will you survive if this occurs? Maybe it's time you started thinking outside of the box. Have you ever considered Stockmarket Investing? A great number of people do this and are able to produce enough capital for their retirement.

What do you know about Stockmarket Investing? Do you see random infomercials regarding this issue? It seems like most ads make the stock market appear glamorous and wonderful. All you will ever do is earn, earn, and earn more cash. Soon you will be a billionaire with a house in the Hamptons and a private helicopter. Does this sound ideal? Well sure it does.

However, Stockmarket Investing is not always as simple and easy as it looks. There is some imperative knowledge involved. First of all you should keep a close eye on what you're investing. Things can change at the drop of a dime. Sometimes your stock will plummet and on other occasions it will climb forever. This is part of the intrigue and excitement that goes along with Stockmarket Investing. Secondly, you don't want to invest what you can't afford to lose. This will certainly bite you in the butt when you least expect it. All of a sudden you will have lost your home from being careless. Therefore it's prudent to only invest what you can deal with losing.

Want to get started in Stockmarket Investing? This is not a problem to say the least. Hop online and pop open that trusty Google search engine. Punch in the keywords "Stockmarket Investing. You will get flooded with websites regarding investing. Browse through infinite tips and pointers that will aid you in getting started right.

How Stocks Get Some Market Manipulation

2008-01-08T04:24:00.000-08:00

By: wallmann

How Stocks Get Some Market Manipulation

How many times have you placed an order to buy a stock and immediately sat and watched as the darned thing falls apart in front of you?! A few we'd bet because it has happened to all of us at one point or another. The real difference is what you do about it.

Unless you are so rich that losing money doesn't hurt you, we would venture a guess and say that you generally do a little homework before you place your hard earned money in a stock. Well, if you have taken a recommendation, done your homework and decided that the XYZ stock is a good buy, but the minute you buy it it starts falling, you have to do some quick decision making.

First off, how is the health of the overall market? As you know (from us preaching it to you) it is the "tone" of the overall market that determines on a day to day basis if stocks are going to rise or fall. In other words, if the NASDAQ is down 100 points from the open, unless XYZ had some big news, it is probably in the toilet too. So, before a total panic, look at the health of the market first, this is where the BONUS SITE also comes in handy.

Okay, the market is fine, the NASDAQ is up 35 but the stock you bought for 50 is now at 48 and still sinking. Now what? Next, did it gap up 5 bucks from yesterday? In other words, did you buy at the morning's high and now it is just "closing the gap?"

This is why we say "don't buy the opening gap" folks, often it is the very high of the day and never gets back there. This is a good time to review the special report on TRADING GAPS.

Okay, the market tone is good and we didn't buy at the morning high, now what? This is the tough part. If all our research and homework says XYZ is a good buy, but the street starts to sell it off, we have found it is best to hop back out and take your loss rather than "hoping" it back up. In other words, never go against the market. Remember the old adage "don't fight the tape?" Well that means no matter how good something sounds, if the street doesn't want it, it isn't going up friends. In times like that it is often best to set your stop and obey it. If you get stopped out, sure it could rebound and fly for a ton, but it may have just saved you from a nasty beating.

More times than not a stock that looks good and has a lot going for it, gets some very special "manipulation" from the market makers. Their job is to make money and they know full well what's hot and what's not. If you play this game long enough you will see some of the oddest moves you could imagine and all of them are intended to get your money! So, sometimes when we have a good stock that is going completely the wrong way on a good day, it has a lot to do with "where the big guys" want the price on that day. You will often find that selling back out and "re-buying" some right before the close will reward you the
next day.

One last note about this topic. There are times when you simply made a bad move. Maybe you hopped on a high flyer right at the very top, or maybe the stock you just bought gets a mid day downgrade and falls like a rock. But, one of the most important aspects of trading is getting a good "entry", so, if you enter something and its falling on you, don't wait around too long to see where the faling stops, get back out quickly. There is a big difference there. For instance, let's say we buy XYZ at 50 and it ends the day at 52. Now the next day it pulls back to 51.25, should we dump? Probably not, it is just clearing its throat. But, if we buy something at 50 and ten minutes later its 48.50, we didn't get such a great entry price did we? No, and we don't know when it will stop either. We wouldn't let a situation like that get out of hand, because if we hold it and it ends the day at 47, we have to have a darn nice day the next day, just to break even.

The bottom line is that we need to assess the best possible entry period on an issue so that we get some profit right away.

That way we can "live with" a bit of a pull back and still be in a winning position. History has shown us that if we buy something and immediately start losing on it, we probably could have picked a much better entry price and will bail out quickly with a small loss versus riding it down. We will expand on "entering" a stock in another issue.

The Gap Stock Trading Technique

2008-01-08T04:23:00.000-08:00

By: ArticleTrader

My trading style consist of one search everyday after the markets are closed. I do a search of stocks that increased a minimum of 500% + above the average trading volume. From there I only look at the ones that were positive for the day. Then I check the charts of these stocks to see if they gapped up for the day. The gap up has to be bascially an all time high or a few years all time high. It is better if there is a base prior to these gaps. If it is uptrending that is ok. Then I check the news once I narrowed it down to see if there was postive related news. There must be positive related news. The news must be better than expected, highest quarterly earnings, or anything similar. That is it in a nutshell folks. Usually, I start the day with about 50-70 stocks. Then it is narrowed down to 30 or so. Finally, after reviewing the charts I get anything from 0-4 that made the cut. Most days I recieve 0, which is fine because on the days I find something it is all good.

Buying and Holding:

If there is one I like and would buy; I try to put an order in for the next day. How long do I hold these stocks when I buy. I hold for a little as 5 weeks, but I'm seeing better returns in about 10 weeks. Once in a stock I watch it to see if it can hold a 10 DMA line. I won't sell unless it goes below the 50 DMA or if it goes down to fill the gap. Even if it is at the 50 DMA and I have some gain I'll hold till I find the next stock I think will be a winner.

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My Trading Technique

Although there are many different trading styles and techniques that have been used to great effect by many different ( sometimes very rich) traders, it is not really a good idea to keep on trying out different techniques for different stocks and just hope that "if it worked for them, it will work for me". To make a system successful you need to know what you are doing. I do not mean that you need to understand it as it is written by the person that is giving you the information. I could easily red Bill Gates's story about how he had an idea and thought that it would work. I could follow every step that he did and make all of the same decisions, but would I make the same kind of profit that he has? I think that (although it is a nice idea), I would be lucky to break even. But why can I not replicate his success? Because the market conditions are different and what will work has changed.

But even in the financial markets, just because someone has had success with a system, that does not mean that the same system will make you the same money. Although it sounds as though this should be possible, the facts do not bear it out. If it was this easy then everyone that read Warren Buffets book and applied it in the way that he does, would make the same amount of money. The reason that they do not is not the fault of the system, but of the choices that people make when they use the system and their reaction to the conditions that are prevailing in the market at the time. Most of the well known trading systems are well tried and work well. That is the reason that they are well known. After all if they did not work then no one would bother with them. But it does show you that there are many ways (with apologies to those of you with pets!), to skin a cat. The reason that different traders are successful with different systems is because they have learned how to make a system work for them.

The trading system that I use is not complicated and if you learn it well and how you can use it in reaction to market changes, then you can use it to make a great deal of money. It is a very simple system and because of that, there is less room for error. But you still need to get to know it and how it works, so that you are able to read the markets with these tools so you make the right choices.

The system uses a search of the days trading as it's basis. Each day you need to make a search of the days trading and the stocks that have had the best increases. You need to do this after that market are closed so that you get a consistency of results that are not affected by the trading that happens after you have looked the stocks, when you are still researching others. So wait until the markets are closed and then start your research and then all of your results will be consistent.

You need to do a search for stocks that grained at least 500% above the average trading volume of the rest of the market. Do not look at the stocks that were just under this or were close to it. Just look at the stocks that were 500% above the trading volume average. This will mean that you can get a good consistent result that you can analyze. From the stocks that you find, just look at the ones that were positive for that day. Make sure that you follow this carefully. If there is a stock that looks good, but does not fulfill this criteria then do not do not use it. If you are going to follow a system, then you need to follow it properly to make sure that it works and that you are not changing it by adding things that may affect the final answer.

You also need to check the variables to see if they gapped up for the day. You make sure that this is not just a one day thing you need to check that this is an all time high. This will make sure that you are on the right track. Even if it is not then you might still be able to use it but you need to make sure that it is a definitive movement and is not just a market shift that will get set back the next day. You need to make sure that the move is fundamental. If it is not an all time high then you should make sure that it is the best that it has been for a few years. You need to make sure that the move is positive, so it is much better for these purposes if there is actually a good base to the stock before any of these gaps occurred. And if the turn is upward, then that is also a good indicator.

Next you need to do some research to make sure that the result that you have found is actually real and that there is a good basis for the change in the values and that the are not going to suddenly drop. The best way to do this is by checking the news about the stock. This is a good way to find out if there is a reason for the move and to work out if it is likely to continue the trend or not. You need to find some positive news about the stock to justify the price, so that you know that it is not just a blip. You need to find something that is positive, such as better than expected earnings. Any good news that might mean that the price rise is consistent with an actual increase in the real, or perceived, value of the stock.

That is really the basis of this system of trading. It is simple to learn, but very effective as there are few things that even a beginner can get wrong. The trick is to learn the best places that you can do your research accurately. If you find a stock that fulfill the criteria on the figures but is not bourne out by the news then leave it. There is always another that will. Usually The day begins with around 50-70m stocks, but as you begin to use the system you will find that this is reduced to around 30 or so. When you review the charts and make all of the decisions dispassionately and based on the system, you usually end up with nothing.

This is not a problem if you are not left with anything at all. You are not doing this to buy for the sake of it and if there is no stocks that are suitable then you need to wait until there are. Do not think of it as a lack of profit, think of it as a good way of avoiding loss. And when you do find a potential profit maker, then you will know that there is a good reason to buy and that you are very likely to make a profit.

When find something that is good, then you should try to buy as soon as you are able to. If it is possible, then you should try to put in an order for it the very next day so that you do not miss out on any profit. When you buy you need to make sure that you only keep them for as long as it is profitable to do so. Very often you can hold on to them for as little as 5 weeks. But very often it is better you take a bit longer than this to make sure that you get the most from it. Do not try to go for the quick profit when, by delaying a bit, you might make a lot more. Very often you need around 10 weeks to make sure of a good profit.

A good indicator of this is if the stocks able to keep a 10 DMA line. It is not usually a good idea to sell unless it goes below a 50 DMA line. But if it reduces to fill the gap then that may be good. But even if the stock is at 50 DMA and there is already some profit in it, then it might be a good idea to keep it until you find the next stock that looks profitable according to the system.

This system is a very simple way to find the best profitable stocks and to make sure you avoid the potential loss makers. But if you decide to use this system then you need to make sure that you follow it well and do not allow you own opinions to cloud your view of what are the best stocks to buy. That way you will be more likely to make a good, consistent profit.

The Two Ways to Buy and Sell Penny Stocks

2008-01-08T04:22:00.000-08:00

By: Dan Cohen

There are two primary ways to buy penny stocks. Either you buy the penny stock at the offer price, or you attempt to purchase it at any price under the offer, including, but not limited to, the bid, using a limit order.

There are two ways to sell a penny stock. You sell the penny stock either at the bid price or at any price above the bid, including, but not limited to, the offer, using a limit order. As is the case with both buying and selling, either you are initiating the action, or someone else is initiating a trade against you. By contrast, when you buy stock on the offer or sell stock at the bid, you are initiating action against another party, be it a market maker or another trader.

The other party has already determined the price at which he wishes to make a trade (this can be referred to as a limit order or could be the actual bid or offer price as is the case with a market maker), and you are reacting, or initiating action against this price. When you buy a penny stock on the bid or any price under the offer or sell a penny stock on the offer or any price above the bid, another trader or market maker is electing to trade with you. You have already entered a limit order, and another party has come and "hit" your bid or "taken" your offer.

The most important thing to remember is that when you initiate action, it is in anticipation of the stock continuing on the path of momentum on the side of the market on which you are trading. If you buy a penny stock on the offer, then it is in anticipation of price appreciation and vice versa on the sell side. Traders initiate in this manner when they open a trade or when they are forced to cover an existing position.

On the other hand, when you are buying a penny stock under the offer or selling over the bid, another trader knows or thinks that the stock is going in that direction. The other trader is initiating action against you. This other trader could be someone who is covering a position that has gone against him and he is being forced to "pay the spread," or the trader could be an institutional trader who simply has an order to buy or sell the penny stock. When you buy or sell penny stocks in this manner, you are usually covering a trade that is going in your favor or opening a position with the anticipation that the current momentum in the stock is close to a saturation point and the stock is about to reverse direction.

Remember, no traders are ever going to sell you stock if they think or know it is going up, and no traders are ever going to buy stock when they think or know it’s going down. The only exception is if they made a mistake, which is very rare, or if they panicked. It is still a rational market in that the players are not altruists. They’re not there to give away their money. These distinctions become extremely important as you become more involved with the market-maker game, since the manner in which you enter your trade will determine not only your risk but your potential profit as well.

Isn’t It Time for a Better TRIN (Trading Index) Indicator?

2008-01-08T04:20:00.000-08:00

By: Barry Taylor trades for a living and specializes

TRIN Formula

The formula for the TRIN is as follows:
(Advancing Issues / Declining Issues) / (Advancing Volume / Declining Volume)

Where, Issues is the number of stocks rising or declining in price and Volume is the total volume traded of rising or declining stocks.

Problems with the TRIN

However, as revolutionary as it may have been, there are some problems with the Trading Index.

Problem 1: The TRIN is not an intuitive value.

Values above 1 indicate that there is selling in the market. Values less than 1 point toward more buying activity. Normal convention would use the reverse - a high number should mean that the market is rising; a low number should mean that the market is falling.

Problem 2: The TRIN makes market data look unbalanced.

If stocks are bought and sold at equal rates, the TRIN value is 1. But after a day of heavy selling, the Trading Index could be as high as 3. Similarly, the Trading Index could dip to 0.3 after a day of heavy buying. When charted over time, the result is a graph with high spikes but shallow dips and, therefore, unbalanced.

Problem 3: When averaged over time, the TRIN provides an inaccurate picture of market trends.

Traditionally, traders average the TRIN over 10 days. Anything under 0.8 represents an overbought market, while a value of over 1.2 indicates that the market is oversold. However, because the data is lopsided to begin with, this average is a faulty calculation at best.

A Better Way to Calculate the Trading Index

It’s been 40 years since investors first began using the Trading Index as a market indicator. Can we do better? Yes! By making some simple mathematical adjustments in your charting software, the result is an adjusted TRIN value that is easier to interpret and more accurate when averaged.

Here’s What to Do:

Step 1: Take the Log of the TRIN value.
Step 2: Invert this value so negative values are positive and vice versa.
Step 3: Multiply the inverted Log value by 100.

Interpreting the Adjusted TRIN Value

If you have successfully followed the steps above, the adjusted TRIN data is easy to interpret at a glance and gives you a better idea of market trends when averaged.

Values range between -100 and +100, with 0 as the neutral point. Positive values indicate buying and a market on the upswing. Negative values indicate selling activity and downward moves in the market. Values are balanced, requiring the same amount of buying or selling for the indicator to be +100 or -100 and, therefore, averages are accurate.

Now, the Adjusted TRIN makes more sense to me!

Moving Average Convergence Divergence (MACD) Momentum Indicator

2008-01-08T04:18:00.000-08:00

By: Manny Backus

The MACD is a great trending indicator that can be used for many daytrading strategies. A bullish market is indicated by the faster-moving average crossing the slower-moving average on the way up. A bearish market is indicated by the faster-moving average crossing the slower-moving average on the way down. On top of that, the MACD has different periods for the fast- and slow-moving averages. The typical default MACD periods are 8, 17, 9 or 12, 26, 9.

The MACD is based on three moving averages, however, they essentially show up as being only two lines. The 8 – period and the 17 – period moving averages are combined to form the faster-moving average line. The 9 – period exponential moving average forms the slower-moving average. In your daytrading strategy, the MACD moving average lines can be read for three pieces of information to give you the buy and sell signals you need for successful trades.

The first type of buy and sell signal you get from the MACD is called a breakout. This breakout is signified by the faster-moving average crossing the slower-moving average. If you were to examine a MACD chart, you would see a few places where this is happening. Like we talked about earlier, when the faster-moving average line crosses the slower-moving average line on the way up, you’ve got a bullish signal. Conversely, when the faster-moving average line crosses the slower-moving average line on the way down, you’ve got a bearish signal. That’s a breakout. There are some traders who will enter or exit a trade based when the line crosses, however, keep in mind that by doing so, you could limit potential profits and take on additional losses.

The second type of buy and sell signal we can get from the MACD is to test for support and resistance. When you’re day trading stocks, you might be told to trade on the cross, but here is something you can add to your strategy instead of just blindly trading at the cross. What you can do is check to see if the indicator lines are moving in the same direction and test the indicator line as being a support or resistance line after the cross.

The last type of buy and sell signal we can get from the MACD is divergence information. When the fast- and the slow-moving average lines move away from each other, the mound on the chart expands. As these lines draw near to each other, the mound shrinks. That is called divergence. Divergence is an important day trading tip that can strengthen your position on a trade if read correctly.

Using the MACD is a good way for experienced day traders to get an idea of when to buy and sell based on averages that give you a logical reason to buy or sell at a particular time.