How to Select the Best Stock Trading System?

December 1, 2009 by  
Filed under Stock Market Articles

For a novice in stock market, it is very difficult to understand hundreds of different terms related to share market. On top of that, he needs to learn how to start doing the trading. The best way for beginners to stock market is to open an online account with one of the reputed discount brokers. These discount brokers have a facility to do online trading using a computer and internet connection.

Opening an online account to do stock trading is the easier part. The more difficult thing to do it to choose the right stocks to buy. Most of the times, the investors rely on one of the various types of analysis techniques. Some prefer to use technical analysis while others do fundamental analysis of the stock. Many people just don’t have the time or energy to do the analysis and they usually rely on the hot tips which are shared by many websites. Each morning, they will start looking for tips on various websites according to the stock market sentiment on that day.

A lot of investors prefer to do the technical analysis of stocks before they invest their hard earned money in a particular stock. They use all sorts of technical indicators like moving averages, Bollinger Bands, relative strength etc. It is obviously, very difficult for a beginner or even an experienced investor to do this analysis on his own. Therefore, they make use of the stock trading systems. These trading systems have a huge database and contain information about all the stocks including the historical prices.

The investors can make use of all the information and then make the buy or sell decision. There are various other options which are provided by the stock trading system. The investor can set limits while entering his order or transact at the market rates. He could also buy any kind of security apart from stocks like mutual funds, futures, options etc. Due to high speed and reliable internet connections, it has been possible to trade in stocks all around the world from the comfort of your home.

While choosing a stock trading system, the investor should look at various factors. The commission and trade rate should not be the only consideration. The investor should see if the system gives any stock trading tips, what the features available are, how the user interface is and how the customer service is. There are a lot of scam websites which are available on the internet therefore it is important that he reads the reviews from experts before choosing a stock trading system.

The Iron Condor – Make a Financial Killing With This Bird

December 1, 2009 by  
Filed under Stock Market Articles

You might think that “iron condor” is a strange name for an option trading strategy – and indeed it is. But in a way, the image it presents is well suited to the setup. The condor was a large prehistoric bird. Like any bird, it had a body and wings. The Iron Condor is no different. It is a combination of concurrent bought and written (sold) option positions which effectively has a body – the sold positions – and two wings, being the bought positions. The 4 positions work together to form a formidable vehicle for taking prey, or profit.

What is An Iron Condor?

The Iron Condor is really just two credit spreads combined, but facing opposite directions and not directly adjacent to one another. You take out a ‘bear call spread’ (sell call options closer to the money and buy them further out, in the expectation that future price is bearish) and a ‘bull put spread’ (sell put options close to the money and buy them further out). The end result is a credit to your account from both sides of the trade – and the fact that you receive double the premium helps to minimise the overall risk. The “body” of the condor (the two sold positions) must be at least one strike price apart. The wider the overall 4 position spread is, the more “iron” the condor.

Theoretically, you are relying on the market price of the underlying stock to remain within an anticipated range for this strategy to be profitable. But as we shall see later, one of the beautiful things about option credit spreads is that they can be adjusted, which means that ultimately, you have an excellent chance of making a profit whatever happens.

Advantages of This Strategy

Because you have established a trade facing both ways, it means that by the expiry date only one of them can possibly lose. This would only occur if the price of the stock moved strongly and broke through the outer bought position’s strike price on either side. But the double credit premium works in your favour in this regard. Not only that, but because only one side can lose, any good options broker will only require collateral in your account to cover the maximum risk from one side of the trade. This gives you a much better return on risk than a lone credit spread.

So what if the worst occurs and the share price does move outside one of the outer boundaries (wings) of your Iron Condor setup? The maximum loss at expiry date is the difference between the strike prices of the sold and bought options on any one side, multiplied by the number of shares your option contracts cover. Notice we have said “at expiry date”. There is no requirement to hold the position until expiry, but since any credit spread and therefore especially an iron condor, takes advantage of option time decay, you would take this into consideration when deciding whether to take profit or let it run further.

You would normally set up one of these option strategies with a short term to expiry – say 3 to 6 weeks maximum. If the outer boundary has been breached, you can then assess the situation and adjust the position using one of the following alternatives.

1. Rolling out

You close your original losing position and open a new one with the same strike prices, but with the next expiry date. Since both positions will be ‘in the money’ you will receive a premium larger than what you are losing on the closed trade.

2. Rolling out and up (or down as the case may be)

You close your losing position and open a new one further away from the original (expanding the wings) and with the next option expiry date. Your credit in this case will not be as large as in the first example, but you have now received three premiums from this strategy – and done so AFTER the strong move, so you should still make an overall profit.

The other side (wing) of the iron condor which hasn’t been breached will simply expire and you keep the premium.

The Best Chart Patterns for This Strategy

The best chart patterns are stocks that are basically moving sideways within a range. This is called a ‘channel’. You can draw a trend line over the tops of the peaks and under the troughs on the chart and see points of support and resistance. Ideally, one side of your iron condor (the credit spread) should be ‘legged in’ at the extremity of the channel and as the stock retreats toward the other extremity, you would ‘leg in’ the other credit spread. This would give you maximum profit. The chart pattern doesn’t have to be a channel. It could be an expanding wedge pattern or a head and shoulder pattern forming at a long term resistance or support level.

Chart patterns to avoid would be triangles or contracting wedges, because these can often precede strong moves and are therefore more suitable to straddle trades, not iron condors.

Final Points to Consider

When you set up your iron condor, the distance of the strike prices of each credit spread from the current market price of the share will determine the amount of credit you receive. Further away, there is less risk of the wings being breached but less profit as well. Make sure you only do this on a stock with lots of option liquidity. If one side goes deep-in-the-money you want to be able to easily adjust it without being at the mercy of market makers. Finally, use some good software to construct a dynamic risk graph so that you can visually see where your positions are in relation to impending expiry dates and current profitability levels. Now trade with confidence.

Here’s How You Can Make Money Investing in Penny Stocks – A Little Known Secret!

December 1, 2009 by  
Filed under Stock Market Articles

If you see the term “Penny shares” this is refering to stocks of businesses that are priced at extremely low prices. There is significant growth potential, and your initial investment can be rather small, but you run the risk of the business becoming shut down and you losing your money invested. Although there are certainly risks involved with these types of stocks, there is also a significant potential for sizable gains.

If you’re trying to pick out a penny stock to invest in you are going to want to know a few details about the organization. Just like investing in other stocks, you want to understand the type of business they are involved with and what business plans they have in the upcoming future.

One of the things that makes penny stocks so appealing is the fact that most of the companies issuing them are extremely simple. You will find many of these kinds of stocks that are businesses that work with with resources – their value will appreciate and depreciate based on the value of the commodity produced.

As you may have already guessed, penny stocks are thought to be to be full risk investments. The risks you might have with these shares include inadequate reporting of financial information, limited trading volume and even fraud.

Always remember that that the accounting reporting regulations for penny stocks aren’t typically as strict as stocks on national stock exchanges. One of the types of penny stocks is known as a “pink sheet” and has almost no regulation when it comes to their reporting and accounting standards.

Because of this this lack of regulation, this type of stock is extremely vulnerable to being manipulated and unfortunately even fraud. Some investors will use their influence to run up penny share prices, then they’ll unload and delist the share. This is a well known scam known as a “pump and dump”.

Don’t let the above scare you off! Penny stocks always have risks but also have a large potential for a large profit. There are plenty of real, legitimate start up organizations, and they have tons of potential. Tons of companies that are looked to as penny shares are destined to be a great success in the future. Investors who can choose a strong organization will get a handsome payoff.

It’s important to remember that picking out a good penny share will make you a big payoff.. Even if you were to post a loss on the majority of your penny share selections, the single winner will return you such a sizable profit that you’ll forget all about the picks that fell in value.

Secrets to Find Penny Stocks Picks Revealed

November 30, 2009 by  
Filed under Stock Market Articles

Penny stock is popular business in the business world. Though it is risky, there is great chance to make huge amount of money without any physical labor. What you have to invest in stock trading is your money and brain. The stock investor should have foresight and good knowledge on stock market to make a good return in this business. Therefore, certain strategies have been made to become a successful penny stocks trader.

The following points can help you choose the good penny stocks:

*Check industry trends

Before making any investment, look for industry trend. Find a trend when it’s just dealing with its upward swing. That means finding companies that are producing products that are just starting to grasp in their target market. When everyone knows about the product, it’s already too late to make the greatest profit.

*Build a list

Once you’ve chosen a few companies that seem promising, put them on your watch list. Observe how these stocks move every day for at least a few weeks.

*Develop a trading philosophy

Gather your experience-based trading lessons into a logical trading philosophy. As a trader gathers more experience and knowledge, the existing philosophy should be revised accordingly.

*Do your research

Read articles, blogs, forums, or message boards. Join online stock trading communities. Research a company before you by stock in it. Actually profitable penny stock investing requires more research that investing in more popular stocks because these stocks don’t follow the same filing and disclosure rules stocks on larger markets. It can help you to get dynamic penny stocks list.

*Brokers Recommendations

Recommendations can often be a good way to get a head start, but you should always you make your own research whether the company has good records or not and other market values before you buy any stock.

*Use a screener

Stock Screener is an indispensable tool that allows traders to deal with thousands of stocks and return a dynamic list of stocks that match technical and fundamental criteria. There are several of the highest quality screeners available free online, but all of these do not include penny stocks.

*Newsletter

Some newsletters are given out for free. In this business, information is delicate and precious. There is money at the end of the line. Stay alert for free information. If a company is paying IR professional money to profile a stock to its subscribers, don’t dismiss a paid profile as publicity.

How to Make Money From High Frequency Trading

November 30, 2009 by  
Filed under Stock Market Articles

What is high frequency trading?

This is the use of very powerful high speed computers to execute trades by transmitting millions of orders at lightning speed making millions of dollars in milliseconds. It enables high frequency traders look into literally look into a crystal ball just before making a trade to find out where a stock is going before they place their order,….and it’s legal.

On Wall street, stock trading has always been a straight forward business, sellers and buyers come together at the floor of the stock exchange, go back and fort until they reach a deal. However, in 1998 this changed. Electronic commissions where authorized to open the market to anybody with a laptop or desktop computer to trade from the comfort of their office or home.

Fast forward to today, stock trading has become so high tech that speed determines who wins or loses. The computers on Wall Street are so fast that regular pc’s cannot cope with them. The big question is how does his work does and how can the individual stock trader take advantage of these fast pc and make money executing high frequency trading?

This is how high frequency trading works. Assuming you are interested in a stock and you decide to buy a large chunk. In order not to draw undue attention to your trade and cause the stock price to increase, you break down your purchases into maybe 10 small batches. As you and other traders that are interested in buying that stock start placing or issuing buy orders, these high frequency computers then come in. What they do is that they kind of intercept the order you placed, show your buy requests or intentions to traders who have access to these very fast computers very quickly within 3 milliseconds or 0.03 seconds.

Since these traders involved in high frequency trading already know what you are going to buy and your order has been initiated, they buy up the stocks and by the time your order gets there they own the stock and they just turn around and sell the stocks to you making a profit. Remember all this happens within fractions of a second. Now, imagine doing several of these within a minute, an hour or a full trading day and you begin to understand how profitable it is and how it is very easy to make millions with software and fast computers.

The computers and software spot trends in the market before other investors, alert the high frequency traders who then quickly place orders in milliseconds, known as flash orders and then make a killing.

The Best Penny Stock Alert Program Review

November 30, 2009 by  
Filed under Stock Market Articles

There are a number of stock programs on the market today which analytically process real-time market data and deliver what they claim to be profitable moneymaking stock picks so that you don’t have to do anything beyond enacting the trades as they come to you.

Most of these programs emphasize on style over substance and use their flashy and attractive branding and promised sales figures to lure in potential customers. One particular penny stock alert specific program which focuses entirely and uniquely on penny stocks has been bringing some validity back to the market in recent months.

After hearing about their eight week money back guarantee I decided to break down and give it a try myself, so here are my feelings and review of the penny stock alert program, Penny Stock Prophet.

The first thing to mention about this penny stock alert program is exactly how and why it works to deliver profitable stock picks. Much like the major trading houses, Penny Stock Prophet compares the origins of trends from the past to find overlaps in real time stock market data to further investigate.

The market repeats itself traveling in cyclical patterns which repeat, so by looking at where the market has already been and performed well, if you can find similarities in current real time market data which are behaving the same with current stocks, you can put together a remarkably precise idea of how certain stocks or the market will follow through and act in the immediate future.

As I mentioned, Penny Stock Prophet only targets penny stocks. This is a major asset as one, it’s one of the few programs which only targets them as many other programs largely ignore penny stocks, and two, it delivers some of the biggest gains to be found in the market accordingly.

This is because penny stocks require a great deal of less market influence and activity to send them skyrocketing or plummeting in value. So using a penny stock alert program like this one, you can put together a remarkably accurate idea of how certain stocks are set to act in the stock markets so that you can double or triple your investment over the course of a few hours.

For example, the very very first pick which I received from Penny Stock Prophet was a stock valued at $.18 a share. I bought one thousand shares for $180 simply using my online trading account. I checked back in to watch that stock’s performance a few hours later to find that it had already skyrocketed up to $.38 over the course of about four hours.

From then on I of course started to check in on it on the hour as it continued to quickly climb its way up to $.57, momentarily topping off there. At this point I was beyond satisfied as I didn’t even know what to expect initially.

I traded it all away then but now with subsequent picks I’ve learned to keep much of my profits reinvested in other picks generated by the penny stock alert program which I recommend that you do as well to keep a constant stream of income flowing as it’s much easier to reinvest profits than starting capital.

The only thing you need to do is take their stock symbol they generate for you, invest accordingly, and be able to check in on it every now and then you can make a huge profit in a short term no matter who you are or regardless of your experience.

A Major Test of Current Market Advance’s Longevity Now Underway

November 30, 2009 by  
Filed under Stock Market Articles

The past seven months have provided all market participants with essentially a free lunch. Of course, the free lunch was well deserved, considering the historic extent of the market decline that preceded the current seven month advance. Nevertheless, it’s been exceptionally easy to profit in 2009, thanks to the fact that this year’s advance has carried with it record-setting participation. Specifically, market breadth (as determined by advance/decline ratios) and the percentage of stocks that have settled into an uptrend (as determined by the Bullish Percent Indexes) have reached record heights during this move, and that equates to most stocks realizing big and quick gains. But it would be a mistake to assume these good times will last forever. In fact, the longevity of the advance on the major market indexes are being tested right here and now.

The importance of the market’s current location is made apparent by using the Elliott Wave Theory. Elliott Wave is a theory that forecasts future movement, based on current price patterns. It can be applied to market indexes, individual stocks, or just about anything that can be plotted on a price chart. “Elliotticians”, or analysts that use this theory, look for specific price patterns to provide insight into what will happen next. All price movement can be categorized as either trending or counter trending movement. If an Elliottician is able to determine the nature of a price pattern, it will provide very valuable answers that can be used to consistently beat market returns. It may sound like the latest fad to succeed in the trading game, but it’s far from it. This theory has been around for over 75 years, and there is a well-established track record of success in respect to forecasting changes in market direction. While many investors chase market news and are then confused when seemingly positive events lead to negative stock movements, the Elliott Wave Theory identifies what is going to occur before the news or fundamentals hit the wire.

The current market advance finds itself at an important point in respect to its Elliott Wave pattern. What’s interesting about the current crossroads is that it will bring a major statement regarding price’s direction, either up or down. If the Dow Industrials Average, S&P 500, and Nasdaq 100 indexes continue to advance and move above 10100 Dow, 1110 SPX, and 1820 NDX, respectively, the wave pattern would indicate that this uptrend has significant work to do before it completes. It would be reasonable to then assume that the advance will continue at least into the early parts of 2010. But there’s another side to this coin. This is because the wave patterns of the market indexes are currently at a point where an advance high could occur. In that regard, the wave pattern tells us that price must stay above 9650 Dow, 1045 SPX, and 1690 NDX to keep the uptrend in good health. If these levels are taken out, it could only mean that an important high has been established, and that the 2009 advance has completed. This would portend a market decline that lasts for at least four months, but likely longer. All of this makes index price movement from here all the more exciting.

Best Stocks to Buy Right Now Aren’t Urgent

November 30, 2009 by  
Filed under Stock Market Articles

I can just hear people screaming “tell me the best stocks to buy right now!” They want to know, and they want to know in this instant. They not only want to know before anyone else, but they want to buy the stock the minute after you or someone else tells them. My friends, that is not the way to buy stock. You cannot rush out on some hot tip and make money on a couple stocks to buy now.

The people that demand the best stocks to buy right now are an interesting sort. They say they want to buy stock now, but really as soon as they do that, they want to sell. They are driven more so by emotion then common sense, and if they had the chance to measure themselves up against a superior comptition, they would do it instantly, and quickly claim they weren’t as good because of some excuse, or the other people cheated or it’s not fair. If you want the best stocks to buy right now, please just take a deep breath for a second. Roll your eyes up just towards your forhead and soften your attitude. Doing this will put your mind in a alpha state instead of your hyper active beta state. Now perhaps you will listen and realize that everything is okay, there’s no rush, and life will go on. Things will slow down and the best stocks to buy right now can be put off until later. Ask yourself, if they were really that good, wouldn’t they continue to go up for years and years?

For those that want to follow the hot tip to make money, the only way that will work is if other people follow that same tip and rush in just after you do, and you sell it right away. If you are a day trader, you may be able to trade news like that, but I’m telling you the fees will eat you alive. Think about it, $7 to buy a stock $7 to sell a stock (with scottrade one of the more popular brokerage firms). Now if every day you buy and sell a stock, that’s 365*14 or $5110 a year that you’ll be losing on fees alone. You would have to trade very very well to beat that, and most likely, it’s just not going to happen unless you have a very large account. The best stocks to buy right now aren’t neccesarily the best stocks to buy in 1 month. There’s always the “flavour of the week” Even if you did, wouldn’t you rather just have the same results without all the fees?

Okay, so now that you’re in the alpha state and not the beta state, you might actually be able to determine the best stocks to buy right now. As always, it depends on your time perspective. If you are willing to be a contrarian, you can buy beaten down stocks that others sell and continue to buy it as it goes lower. Or you can buy neglected stocks that already have been beaten down and are now forgotten. Or if you are a short term investor, you might want to buy breakouts. Or perhaps you want to focus on the fundamentals, and focus on stocks that will do better due to inflation. The point is, you can’t just identify the best stocks to buy right now, without knowing what works for you. Actually, if you react based on emotions, perhaps nothing will work for you unless you have some rules that keep you in check.

The golden rule of investing is that stocks that go up, won’t continue to go up forever, stocks that go down won’t continue to go down forever. That doesn’t mean stocks cant go to zero, or that they won’t over a long period of time continue to go up large amounts, but just understand that change happens. In any given moment a different sector is in a different cycle. Now the cycles say that inflation will occur. You go from stage of deflationary fears to printing money, to printing too much money, to needing to spend that money, to that money flowing until there’s no places for it to flow to, to other countries losing faith in the dollar with all the printing and they sell, to a panic among other owners of the doller. So I still think gold, silver, oil, and shipping stocks are best to own right now. That’s just an opinion, but I think that inflation will continue, and commodities will rise in value. There certainly could be a deflationary panic at some time that could hit hard, but that would only be an opportunity to capitalize on the coming inflation that will be a serious problem. Technically gold silver oil aren’t necessarily best STOCKS to buy right now because they’re commodities. But if I would have to guess, I would say that there’s more value in those commodities than most stocks, and if you need some of the best stocks, you should look for the names that do well in inflationary periods.

If you really want to find the best stocks to buy now, you will have to understand how companies do in different environments and understand which environment we’re currently in. Then you have to be able to screen down stocks from a list of thousands, and once you have a handful manually look at the numbers to decide which stocks are the best to buy right now. Without knowing what you’re doing, this process can take quite awhile. The best stock investors, will not buy stock until they know for sure, and that means that they will take there time. Therefore the best stocks to buy right now will still be good buys a week from now, so there’s not need to rush.

The best stocks to buy right now, aren’t necessarily worth buying unless you have taken the time to confirm that the stocks are worth it. You shouldn’t rush into a decision. If you understand the cycles, and know how to read a financial statement finding the best stocks to buy now can be worth doing.

The Best Way to Trade the Stock Market With Less Than $500

November 30, 2009 by  
Filed under Stock Market Articles

If you have ever traded the stock market, you know that it is really hard to make a consistent profit, and there is a perfectly good explanation for this.

Indeed, in order to make a profit trading stocks not only you need to be sure that the price is going to move in a given direction, but also, you must be right about the magnitude of such movement, because if you go long on a stock which is trading at $5 and it goes up to $5.05 you will not even have enough to pay for the commissions if you are trading with $500 account.

One of the problems is that in order to make a profit not only you must be right about where the price is going, but also about how far is it going, and the fact of the matter is that determining the direction of the price within a particular time frame is relatively easy, but assessing accurately how far is it going to go is really the hardest part of the equation.

Add the fact that each time you enter and exit a trade you have to pay a commission of around $7 to even $15 per trade, and you are already $14-$30 down on a trade the minute you place it.

If you are trading with $500, and you make a good trade (meaning that you successfully predicted the price movement as well as its magnitude) you might have gotten lucky and snapped a 10% increase in the price of the stock within a few days, which would be a really great trade.

In this scenario you would have earned $50, but before you can cash in you have to deduct the commissions you had to pay, which would have been around $14-$30, meaning that your actual profit ended up around $36-$20 which is about 4%-7% return on that particular trade.

However, it is unlikely that you will always snap 10% gains on a particular stock, because what will usually happen -even if you are very accurate predicting the market movements- is that you will make a good share of mistakes, and even when you are right, the stock will not always move as much as you would have expected in the direction you had planned.

Therefore, in order increase your chances of being profitable and growing your account, the best way to trade the stock market is through binary options. Why?

Well, because binary options allow you to trade in smaller sizes without having to worry about commissions, you can achieve returns around 70%-80% on each trade, and in order to do so you only need to be right about the direction of the price, regardless of the magnitude of the movement.

Indeed, when you trade binary options (also called "all or nothing options") the payout for each call or put option is fixed, meaning that unlike traditional options, your profit will always be 70%-80 of the invested amount regardless of how many points in the money you are, as long as you are in the money even if it is by $0.001.

On the other hand, binary options offer the advantage that they can be traded hourly, meaning that you can buy contracts that expire within 60 minutes thus allowing you to realize 70%-80% profits fast (something simply impossible to achieve trading stocks in the traditional fashion).

This certainly makes it easier to make a profit trading the stock market, because on one hand, all you need to do is determine the direction of the price movement, and on the other hand, you can get a far higher return on your investment without having to risk 100% of your account.

Got Spare Cash – Killer Tips to Help You Invest It

November 29, 2009 by  
Filed under Stock Market Articles

There are many options to invest money if you have spare cash. But be sure you don’t go for the first deal that is offered to you. Think smart and be smart – use this helpful advice to make sure you make the most out of your money.

Have you recently come in money? Or have got some hard earned cash that took many years to save up and now want to make it work for you? For people with inexperience in investing and who may be acquired money through, inheritance, redundancy or maybe a lotto win, it is advisable to stay well away from investing with stocks and shares. Even though the potential large returns may be tempting, there is too much risk involved for the novice so unless you know what you are doing with stocks and shares – leave well alone.

Probably the best single thing you could do with your lump sum of money is to pay off either part, or all of your mortgage with it. Clear your major debts first and you will save a ton of money in the long run. With the recent recession, don’t be tempted to play around with risky investment opportunities if you don’t know what you are doing.

But for those who are confident with taking advantage of the benefits of investing on stocks and shares then make sure you are careful and sensible. You don’t want to lose all of your lump sum of cash. In times of economic uncertainty, even experienced investors should be very wary of make large new investments. According to the experts, it is best to ‘drip feed’ your cash into the investments. So you take a gradual approach and invest carefully and steady. Doing this you are play safe and are minimizing the risk.

As with any investment, it is very wise not to put all of your eggs into one basket. You should look to diversify your investment. This spreads the risk around so if one of your investments suffers a loss – your other investments will be left unaffected. This highly valuable age-old piece of advice should be taken seriously, especially in today’s market where losses can be severe.

Of course you should know not to invest in something you don’t understand. The losses could be vast and you could potentially lose everything. Don’t gamble away not only your initial capital, but the money you have gained on your recent investments.

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