Trading education » Stock Trading

Ready, Set, Start Online Trading

admin — Wed, 16 Jun 2010 06:46:14 +0000

With a few bucks to spare and hopes of making more, you decide to try online stock trading. So where do you begin? If you were about to start tennis or golf lessons, you would start at the pro shop to get the right equipment. That’s the same approach needed to begin online trading.

Ok, you have a computer what else? Just any computer and dial up internet connection won’t do for online trading. Toss out the dinosaur hardware that is more than three years old and buy a computer with top speed. The old 256 megabyte models make great paperweights. Anything less than 1 gigabyte is not even in the game. For frequent travelers or commuters, consider spending more for a laptop computer to get portability that is necessary to stay on top of day trading. Online trading demands quick access and a reliable computer. Think of your computer as your business part for online trading.

RAM is the all important amount of memory that is available for programs in use. You need to set any software programs not essential for trading so that they will not run automatically when the computer turns on. Serious online traders use more than one trading site plus research so they need both RAM and speed.

Whether using a desktop computer or laptop computer, buy a flat screen monitor with the highest resolution you can afford. Online trading for day traders requires staring at a computer screen for hours which is rough on the eyes. The larger monitor is more comfortable to view and only needs a hookup to work with your laptop.

Traders who want to have instant access for online trading need a broadband wireless access card for their laptop computers. Another option is to purchase a wireless card from a major provider like Verizon or T-Mobile for a monthly fee or in increments of minutes. These cards are only useful at specific locations so know before you go whether your wireless card will work when you need it.

Set up your computer with files that are easy to access. Think of electronic files the same as manila files in the desk drawer. The more specific the file name, the faster you can find the file. This is very important when searching for the trend report or chart that you need this minute to make a buy or sell decision.

Subscribe to three to five online stock market newsletters. Start with free online news sources until you decide which is more useful. Keep what is helpful and delete the rest. Give yourself limited time for scanning newsletter or you’ll waste valuable online trading time reading.

That’s the basics necessary for online trading. You have a better chance of winning the online trading game when you start with the right equipment for the challenge.

By: Mark Crisp

Emini Trading – Margin in Emini Futures

admin — Thu, 27 May 2010 09:22:44 +0000

If you are familiar with the margin for stock trading, you know that this is the amount the broker allows you to borrow using your funds as a collateral. Usually, this is 100%, meaning if you hold $10,000 in your account, you can control $20,000 of stock. In some situations, that only pros or semi-pros are allowed to take advantage of, your margin can be greater.

While the margin for trading in stocks is simply your borrowing power for stocks, the margin on futures can be defined as a minimum cash requirement for your futures position. Similar to a performance bond or a good faith deposit, the margin on futures is set by the exchanges based on the corresponding market volatility and can be changed at anytime if this volatility changes. Generally, the margin rates range between 2-15 percent of the value of the futures contract, with most contracts having their margin set around the 5 percent.

Individual brokers can reduce the value of this margin for intraday positions, that is for positions open and close on the same day. Because of this, the margin varies, even widely, from one broker to another, being never higher than the value established by the exchanges that takes into account all kinds of positions, including those held overnight, for which the margin is bound to be higher to compensate for the higher volatility during the times when the trading is not very active.

There are two types of margins in futures: the initial margin and the maintenance margin. The former is the required amount of funds that must be deposited by you before your positions are initiated. The latter is the minimum amount of cash/buying power required in order to keep your position open.

While the initial margin requirements must be met at the time of the trade, the maintenance margin will only become a factor if the account value is decreasing. In the event that the account value falls below the maintenance margin requirement, you will receive a margin call for funds. In this case, you will need to add enough cash to satisfy the initial margin requirement of the position.

In order to illustrate the difference between the initial and the maintenance margin, let us consider the following example.

Suppose you had $5,000 in your futures trading account. You wish to open an intraday position in the E-mini S&P. In order to place this trade, you would need at least $2,250.00 in the account (if you were a customer with the Interactive Brokers, to keep this example realistic), which is the initial margin of one E-mini S&P futures contract set by this broker. Because your account balance exceeds the amount of the initial margin, you would be able to open your position and you would be able to purchase not just one, but even two futures contracts. Suppose though that you purchased only one, to keep this example simple.

Suppose now that after this purchase, the market moved against you causing the account value to fall to $1,700, however unlikely this may be. Since the account value is now less than the maintenance margin of $1,800, you would receive a margin call for $100, the difference between the initial margin and the account value.

By: Waldemar Puszkarz

Trading Strategy – Knowing What The Insiders’ Are Doing Is An Integral Part of Any Trading Strategy

admin — Tue, 18 May 2010 22:48:31 +0000

When it comes to leading the field of trading knowledge, we must look to the decision makers, the movers and shakers of any company you are looking to trade or invest in. It is common knowledge that directors, officers and high level personnel are the first to know about any positive or negative changes in a companies direction.

While there are restrictions in how an insider may trade their companies stock, insiders are allowed to buy and sell shares of that stock. Insiders’ trading is quite different from “insider trading”. Insiders’ trading is the legal buying and selling of stock of the companies that employ them. On the other hand, “insider trading” is the illegal buying and selling of securities based on information that has not been released to the general public.

When it comes to your trading strategy, there are two situations that can be of significance when the trades of insiders are concerned.

A sudden increase of insider purchases can be an insight into expected earnings or growth potential, expected positive changes in the company’s sector, seasonal expectations or a number of other positive expectations. A good rule of thumb to remember is this: Insiders sell stock for as many reasons as there are reasons but they only buy for one; to make money.

Another important situation to pay attention to is this: If the insiders’ trading has been significant enough to be discussed in the news, it shouts… “pay attention to me”.

The most important clue to look for is “clusters” of insider buying. A cluster of insider buying is when you see three or more insiders buying stock at the same time on the open market. This is a powerful indication that “positive expectations” are on the rise.

If becoming an elite trader, so that you can quickly, easily and intuitively determine what to do when insiders begin to buy their own stock, is something that naturally appeals to you; then we would like to invite you to visit http://www.dartthrowtrader.com and enroll in our free – DartThrowTrader.com weekly newsletter.

By: Jimmy Slagle

A Successful Stock Trading Plan

admin — Sun, 16 May 2010 14:09:31 +0000

Planning is very important in one’s life. For those who are successful in today’s competitive world, one always follows some plans and work accordingly. Without proper planning, no one will be able to execute the task in the right direction. Therefore, plan your life and be more organized and successful. Though it’s a broad term and covers all aspects of life, but it is true that this magic word definitely plays a crucial role – whether its your daily routine, career or financial matters, your organized and intelligent decisions help you achieve the goal without any hassle.

If you talk about financial matters, everyone knows the importance of money. To meet your needs and demands, financial backup is a must. Even if you are earning a handsome salary, you might not be able to save some part of it. Therefore, investment is must in order to build financial backup. However, if you talk about investment, the most reliable option you can have today is online trading. And this could only be possible with the invention of the Internet.

However, stock trading is not as easy as it seems. Planning in must for such kind of investment and involves the strategies that are practiced in order to mitigate the volatile nature of the market. Trading strategies are important and therefore a comprehensive marketing analysis is must. The analysis part is very important, and with the advancement of the technology, the analysis process has become easier than ever before. There are advanced analysis tools available online – simply feed some required data and find the analysis results in no time.

In addition, there are various stocks related terms that are often used in the trading process. It is therefore, important for all investors to learn all the terms and the different aspects of trading. First of all, investors need to educate themselves and then learn the market and the processes that are involved in Internet based stock trading. There are several things like charts, and stock quotes that are very essential to learn. Once you learn all these fundaments – trading would definitely be simple and hassle free.

For first time investors, it is important for them to find the answers to their innumerable questions. Some investors might ask: do I need an online account, how to buy and sell stocks, how to choose the stock company website, who can help them in case they have some doubts to clear? There are several other related questions that might strike in one’s mind. And you can find all the answers on the web. And in any case, you don’t – you can consult with online financial experts.

So, educate yourself, clear all your doubts and then invest your hard earned money in stocks. Those who are successful in the stock market are those who always take things positively. Therefore, whether you are a new or an experienced trader – you need to have that positive attitude towards the volatile market. Moreover, if you have done all the ground works before trading stocks – you are bound to make substantial profits from your trading. So, invest your money and enjoy your life in a better way without thinking about financial constraints.

By: Amit Malhotra

Stock Market Trading Strategies – Step Two of the Wyckoff Method

admin — Wed, 12 May 2010 00:46:05 +0000

Step two of the Wyckoff method is very simple, but yet so very important in achieving consistent success in the market.

Wyckoff teaches us to always trade stocks that are in harmony with the market. The trend of the market as indicated by the Wyckoff Wave indicates the line of least resistance. It reflects the direction in which most of the individual issues are moving. Traders who take positions that are in harmony with the line of least resistance are more likely to experience positive results than are traders who try to fight the trend. It is always better to have the market working for you than against you. There are always individual issues that make huge moves against the trend, but these are relatively rare.

The odds of finding one of these counter trend wonders are much smaller than are the odds of selecting an issue that is going to perform as well or better than the trend of the market.

Trading in harmony with the market means taking long positions when the market as measured by the Wyckoff Wave is in a defined up trend channel.

It means taking short positions when the market is in a defined down trend channel. When the defined trend is neutral or a trading range, trading in harmony with the market can mean standing aside and let the bulls and bears battle for control of the action, or consider opportunities on both sides of the market.

However, Wyckoff discourages being in positions on both sides of the market at the same time. Theoretically, trading both sides at once while the market is in a trading range is possible, but it is emotionally difficult. Whenever emotions enter the picture, the odds of making costly mistakes increases.

To avoid these errors make a commitment to never be long and short at the same time.

Just because the trend of the market and that of an individual issue are pointed in the same direction does not mean that the trader automatically has a green light to take a long position if the trends are pointed upward or a short position if the trends are pointed downward.

Remember what Wyckoff teaches in step one of the Wyckoff method. Knowing the position of the price in the trend is as important as knowing the direction of the trend. Situation where the market and an individual issue under consideration for a long position are both located near the top of their up trend channels should be avoided in favor of those where the positions are near the bottom of the trend channels. When short positions are being considered in down trends, it is best to locate those situations where both the market and the individual issue are positioned near the top of their down trend channels. If trading ranges are going to be traded, look for those instances where both the general market and the individual issue are positioned near the very top or the very bottom of their trading ranges.

An important concept in applying step two of the Wyckoff method is relative strength and/or weakness. Although most individual issues will be in the same trend as the general market and many of them will even be in the same position in their trends as the market, not all of these are the best candidates for new positions. All up trends and down trends are the result of a series of trusts in the direction of the trend separated by corrections. Some individual issues that are in harmony with the market from the stand point of the direction in which their trends are pointed will make relatively larger thrusts and experience relatively smaller corrections than the market as a whole.

These are the issues that are most likely to have the best potential to produce a profitable trade. Relative strength or weakness can be measured as soon as the first thrust in a trend has been completed. This will likely be even before the trend channel has been clearly defined. Those issues that have made larger thrusts than the market are the ones that should be watched closely as the prices make their first correction. The issues that have made the largest thrusts relative to that made by the market and that then make the smallest corrections relative to the market are most likely to perform well on the next thrust in the direction of the trend. These are the stocks that deserve the most consideration for new positions. This technique can also be used later in the development of an advance or decline when there are additional thrusts and corrections to consider. Those issues that most consistently out perform the market are most likely to produce a profitable trade.

The concept of relative strength and weakness can be helpful in locating trade candidates when the market is in a defined trading range. If the market is in a trading range, most individual issues will also be in trading ranges. However, some will be in up trends and some will be in down trends. Those that are trending up or down are relatively stronger or weaker than the market. These are the issues to consider first when looking for new positions. However, consideration must always be given to the position of the market in its trading range and the individual issue in its up or down trend. If both positions do not favor the likelihood of a rally or reaction, opening a position in that individual issue is discouraged. After the stocks that are trending up or down, attention can be directed to those that like the market are also in trading ranges. Here again, the positions of both the market and the stock are important issues to consider before opening a position.

The merits of trading in harmony with the market may seem obvious. However, most traders are exposed to a stream of market noise from brokers, friends, relatives, co-workers and the media. This bombardment of frequently conflicting information and misinformation can cause a trader to get distracted from those things that are really important. Step two of the Wyckoff method is one of those really important things. It along with the other four steps of the method are the best foundation on which to build a successful market operation.

© The Jamison Group, Inc.: Trade the Stock Market- Step two of the Wyckoff Method

By: Craig Schroeder

Stock Options Trading Overview

admin — Tue, 11 May 2010 22:04:48 +0000

The concept of Stock option trading was introduced in the 1970’s, and it became popular in 1980’s. However the market losses of 1990 caused a stop in this type of trading, the recent concept of electronic trading (online trading) made them again popular to the public.

Stock options are options, which use stocks as the fundamental instrument. Like all types, the stock options can be defined using several related phrases that are unique to options trading markets. Strike Price, also known as Exercise Price, is a common word used to describe stock options.

Strike Price is the fixed price at which the owner of an option can buy (’call option’) or sell (’put option’) the underlying commodity. A call option and a put option is the right to purchase and sell 100 shares of a particular stock respectively.

It is not allowed to own puts or calls indefinitely. The expiration time ranges from one month to three years, and many points in time in between. These periods depend on which stock they represent.

There are a lot of risks coming with the stock options trading. One major risk is that the customer is obligated to trade in the strike price. That is, if a customer wants to buy the underlying stocks, he or she must do it on the strike price though the actual market stock price is lesser than that. Likewise, the customer needs to sell his stock at the strike price though the actual stock market price is far higher.

By: Russel Rashid

Trading Stocks – Simple Uses of Moving Averages For Trading Stocks

admin — Sun, 18 Apr 2010 23:16:22 +0000

Trading stocks can be a profitable occupation provided you have mastered it first. The convenience of trading stocks or other markets, for that matter, has never been greater. These days it takes literally a click or two to place a trade from the comfort of your home office. Or even from your cell phone. It takes another click or two to close your position. The growing number of online brokerages and the continuing progress in the Internet technology make trading stocks, bonds, futures or Forex a snap, not to mention that this also gives rise to lower and lower commissions and other fees as well.

Still, if you are a beginner you may find the whole thing a bit intimidating. You may be overwhelmed by the always growing number of trading ideas, strategies, methods, systems, each one seeming to be better than the other. Or by the always evolving technology: stock screeners, stock charts, stock trading services, and all that jazz.

How do you start? Where do you start? You begin to feel confused if not frustrated.

That’s understandable. The beginnings can be, and usually are, challenging. But it’s easy to handle this if you simplify things. Simple things are not necessarily worse than complex ones, so before you decide to embark on using the top notch trading technology, I suggest that you explore some really simple options, some basic yet solid elements that has been around for a very long time and are here to stay.

Moving averages are among such things. There are a few kinds of those, such as simple, exponential, weighted, and a few other types, but the difference between them is not what we are after here. In many cases, we will do just fine with the most basic of them: the simple moving averages.

So how can we use moving averages?

One way is to determine the trend. Take two moving averages of distinctly different periods. Say, 100 days and 50 days. To determine if the trend is up or down in a given market, just check if the 50 period average is above or below the 100 period average. In the latter case, the trend would be down. In the former one, it would be up. You can also use a longer period average, say 200 days, to find even stronger trending stocks in the broad market using exactly the same approach.

If you add one more moving average to the mix, you can create a simple trading system. This average should have the shortest period of all. Say, 20 days. We will use the other two moving averages to determine the trend and the new moving average to trigger the entry in our system. Namely, when this average crosses the 50 period moving average on the way up, we would open our position in the market. We will liquidate it when, for instance, the stock price closes below the main moving average, the one with the period of 100 or 200 days depending on how strong trending a stock you want to choose. Other exit strategies can be considered as well, but it is certainly a good idea to let the profits run and so too tight a stop-loss may not be advisable. Too generous one is not good either, though.

By: Waldemar Puszkarz

Trading Stocks – Should You Trade Stocks on Margin

admin — Sat, 10 Apr 2010 06:14:26 +0000

So you have this great stock trading idea and have just found a stock that you believe would make you tons of money if you applied this idea to it. You have some cash in your account, but not enough to really make a killing with this idea of yours. Is there a good and quick way to get some more funds to capitalize on your brilliant idea?

Well, it turns out that there is such a way. Just ask your broker to lend you some money. This can be done totally over the counter, it’s absolutely legal, has been in use for many decades, and virtually everyone can take advantage of it. No special application is needed for this, either. You simply use more funds than you have in your account and keep on living your life as if nothing really happened. This sort of stock trading when the broker’s money is used in addition to your own funds is called trading on margin.

You need to have a margin account for this, though, which is pretty much the same as the ordinary stock trading account, but it’s just called a margin account as it comes with the privilage of borrowing money from your brokerage. And you need to apply for it first. In fact, if you don’t have a regular stock trading account yet and plan on opening it, I suggest you simply open a margin account to make your life easier in future. Because if you ever decide that it’s a good idea to put some of your broker’s money to work for you, you will find this account just handy. You can do in this account everything you could do in a regular trading account, plus more. And this more includes not only trading stocks on margin, but also trading stock options. In fact, you cannot trade options in a regular stock trading account. A margin account is necessary for that.

Now, you can borrow against the cash or the securities you hold in your account, treating them simply as a collateral. Ordinarily, you can borrow up to the amount that is the combined value of cash plus the securities you have in your account. In some cases, if you qualify for a day trading stock account, you can use 3 times the amount of cash and securities you have in your account. In the first case, if you have only $5,000 you can borrow another $5,000. In the other case, you could extend your purchasing power by an extra $15,000, so your leverage would be 4 times what your cash (and securities) could offer you.

Sounds great, doesn’t it? Well, yes, at least at first. But when you realize that you could be losing your money 2 or even 4 times faster had the market refused to cooperate, you may as well change your mind.

The thing is that while using margin to boost your stock trading profits is not a bad idea, an excessive leverage is definitely a bad idea, so if you ever decide to choose this path, you may want to tread lightly here and limit your margin exposure to not more than 50% of your account cash value.

Trading stocks on margin is not for the faint of heart. It requires you to have strong nerves, good trading discipline and a solid trading method. Without these elements, you don’t even think about using your broker’s money.

Before you ever use margin, make sure that you have traded without it for a while and you are experienced enough to handle an additional risk of potentially losing not only your money but also the broker’s. Well, the latter will usually not happen for if the brokers money were at risk, your position would be liquidated and you might also receive a margin call asking you to pay for what you own your broker. Just as I said: tread carefully here.

By: Waldemar Puszkarz

Trading Stocks – The Latest Bold Stock Trading Scam

admin — Fri, 09 Apr 2010 09:45:33 +0000

It has recently been revealed that a few so-called clever individuals scammed quite a few other individuals in a stock scam operation. It was a high tech operation involving hackers and the people affected by it had apparently no clue of what was going on for quite a while. At least 60 people, probably more, were victimized, their brokerage accounts having been broken into and their funds having been used for trading by the perpetrators.

The leader of the group of hackers, a 35 year old man, is from India. He was sentenced to two years in prison by a U.S. judge for starting the whole scheme. He pleaded guilty and agreed to pay a restitution and to cooperate. He worked with two other perpetrators who have also been indicted in the overseas conspiracy to defraud U.S. investors.

It is not known how exactly this scam was conducted, but here is one plausible scenario.

1. Suppose that Joe Doe owns an account at Ameritrade or at some other online broker.

2. Suppose that the hackers get Joe Doe’s account information along with the same information of 59 other people just like him.

3. Suppose that the hackers purchase 100,000 shares of company ABC at 2 cents a share using their own funds, which would cost them only $2000 plus commission and could likely push the price of the stock to 4 cents a share and alert many penny stock fortune seekers that there is action in the stock. They might now join the perpetrators and unwittingly inflate the price of the stock even more, to, say, 5 cents a share.

4. Suppose that the hackers use their 60 infiltrated accounts to purchase 5000 shares in each of them, now at 5 cents a share. The owners of hacked accounts are not likely to notice this quickly as it’s only a $250 transaction and it’s unlikely to be flagged as unusual.

5. Suppose that this sudden coordinated purchase of 300,000 shares at 5 cents a share pushes their price to 10 cents a share, which is quite likely considering others pumping this stock at this point as well.

6. Suppose that the hackers sell their original 100,000 shares, purchased at 2 cents each, for 10 cents each. Notice that as a result of this operation, they would have gotten $10,000 on the initial investment of $2000 minus commissions that are not particularly significant, being probably only a few hundred dollars that would mostly come from the compromised accounts, anyway.

7. Now, since a lot of shares would have been sold, and there was really no fundamental reason for this hypothetical penny stock to rise, its price is likely to drop back to 2-3 cents a share.

8. The whole operation can be repeated again until the owners of the hacked accounts eventually figure out that something wrong is going on here.

But by then they might have lost a grand or two. Eventually though, hackers usually get caught for sooner or later, greed leads to the downfall of such operations. Had those hackers stopped after one or two pump and dump schemes like that, they might have escaped the long arm of justice. Perhaps… Fortunately, this was not the case.

By: Waldemar Puszkarz

Learn Stock Trading Or Use a Stock Trading Robot? – Which is Best For Stock Trading Success?

admin — Thu, 08 Apr 2010 16:30:20 +0000

Many people are now flocking to trade in the stock market. The ease and convenience of online trading has made it simple for individuals to trade from the comfort of their own home or office. With so many new advances in trading technology many beginners find it difficult to know where to start.

There is no reason why a beginning trader could not learn stock trading and use a Stock trading robot. It should go without saying that it’s logical to learn stock trading if you do expect to profit. It would also be great to be able to use a completely automated robot that will make the trading decisions as well as place the trades for you.

Trading using a robot sounds like a dream come true to many. In reality really is a dream come true, but the challenge is finding a robot that actually will be profitable in the future.

Beginning traders need to exercise caution when considering using a trading robot. It is very easy to become mesmerized by the technology and automation. Levels of sophisticated automation should never overshadow a trader’s primary goal. That primary goal is to trade stocks profitably. Regardless of how sophisticated a robot may be it will be a waste of time if it cannot perform profitably. The challenge with most robots is that they were designed using past stock market data. They were also evaluated on their performance in past market conditions. It should be noted that this does not necessarily translate into how well the robot may function in the future.

Those starting out are devised to build a solid foundation and learn stock trading. With this solid foundation traders can grow and adapt to the ever changing market conditions. It is less likely stock trading robot will be able to do so.

By: Carl G. Robertts