Candlestick Trading Blog
December 31, 2007
Forex Currency Trading
What is Forex Currency Trading? Forex currency trading is short for “foreign exchange” so trading the forex markets is simply trading foreign currency. The Forex or Foreign Exchange market is the world’s largest financial market, in which the currency of one country is exchanged with another country through a currency exchange rate system. The purpose of successful forex traders is to obtain profit as a result of purchase and sale when foreign currency trading. Through the development of technology forex currency trading is no longer reserved only for the large banking and institutional firms, but is now available to the individual forex investor on a variety of trading platforms. The goal of forex currency trading is to hold a currency that appreciates in value in relation to the other currencies. Forex currency trading is open for trades 24 hours a day and is dominated by four currency pairs. Those include the Euro vs. the U.S. Dollar, the U.S. dollar vs. the Japanese Yen, the U.S. Dollar vs. the Swiss Frand, and the U.S. Dollar vs. the British Pound. Forex currency trading is different from other markets such as stock trading, futures trading, or options trading, because it does not take place on a regulated exchange. When trading forex all members trade with each other based on credit agreements. It is purely speculative and there is no physical exchange of currencies. All profits or losses are calculated in dollars, depending on the market price, and are recorded on the trader’s account as computer entries. In forex currency trading there are not limits on the size of your position and there is no such thing as insider trading. In fact, some economic date is actually leaked on days before it is officially released! With internet trading, came the advent of the forex currency broker. When trading stocks, online discount brokers are often paid a commission in return for executing the trade per the customer’s instructions. Brokers, that conduct forex currency trading, actually do not obtain a commission but rather obtain their money through the bid-ask spread. They actually act more as dealers because they assume market risk by serving as a counter part to the investor’s trade. When conducting forex currency trading there are various terms that you should be familiar with. Greenback, and buck are a couple of terms. These are nicknames for the U.S. dollar used to trade currency. Aussie is the nickname for the Australian dollar, and Kiwi is the nickname for the There are also certain things to avoid when forex currency trading. You should avoid strict margin rules because your broker can buy or sell at their discretion. This is a bad thing for you because some brokers will liquidate your position on a margin call that is low even if you have enough cash to cover it. When conducting forex currency trading you should also avoid hunting or sniping. This is the premature buying or selling near preset points. If a broker resorts to a forex trading strategy of this nature, this is very bad news for you. These acts are shady and no broker will ever admit to doing them. Online currency trading requires that you talk to other forex investors and that you also visit online discussion forums for recommendations of honest brokers. While it is easier to conduct forex currency trading due to the internet it is still a very complicated and complex market. Be sure to study hard and learn forex trading before investing your money. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 11:39 AM
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December 23, 2007
Online Option Trading
Online Option Trading for New Investors Online option trading is the trading of option contracts over an exchange and is most often conducted through online trading brokers. Options trading is an activity that has benefited from the internet and continues to do so as online discount brokers compete for business. The accessibility that the internet provides makes it easier to find a broker that fits your needs and your price so that you can participate in online option trading. The internet provides so many choices for you to choose from when selecting a brokerage firm, and you can find one pretty quickly. The investor who practices online option trading also benefits from the vast amount of information available on the internet and no longer has to rely on a small amount of data mixed with gut instinct. There are currently six exchanges in the There are two classes of options that take care of the bull and the bear markets, but also can be longed as well as shorted similar to stock. To be longed when online option trading means to “buy in order to establish a position,” and to be shorted means to “sell in order to establish a position.” These two classes are referred to as “call options,” and “put options.” A call option is a contract that that allows an option trader to buy stock at the fixed price no matter what the price of the stock may be trading at now. It expires when its fixed date is reached. In online option trading, a put option behaves opposite of a call option and it allows you to sell stock at a fixed price before the contract expires. When an investor decides to participate in online option trading, he must first research option strategies and then develop an options trading plan. Options strategies are calculated ways of using options in order to profit from one or more of the market movements, and are a great alternative to the more traditional methods of buying stock and selling stock. There are many strategies however, in this article we will discuss two that are often used to trade options. There are two types of vertical spreads possible when participating in online option trading. There is the vertical call spread and the vertical put spread. Investors can do two things with these two types of spreads. They can buy it and long the vertical spread, and they can also sell it and short the vertical spread when online option trading. Basically, each of these two positions allows for two positions, long and short. The long vertical call spread is a bullish trade and is constructed by buying one call option with a lower strike price. The investors make this move when it is expected that the stock will increase in value when trading options. A short vertical call spread is a bearish trade and is constructed by selling a call with a lower strike price, while also buying a call in the same month a higher strike price, all at the same time. The investor who makes this move while conducting online option trading anticipates a decrease in the price of a stock. The vertical put spread functions very much in the same manner as the vertical call, but it is just the opposite. Basically, the maximum value is reached when the stock trades at or below the lower strike and the minimum value is reached when the stock trades to the higher strike. Online option trading gives investors the ability to participate when the stock market is moving uptrends, downtrends or sideways. It also gives investors the ability to control dollars by trading from anywhere in the world. Online option trading is quickly becoming one the most popular method for investors to make money. Enroll in a beginners options trading course if you are interested in participating in online option trading. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 10:56 AM
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December 21, 2007
Investing in Mutual Funds
What You Need to Begin Investing in Mutual Funds Mutual fund investing requires minimum investments anywhere from a few hundred dollars to a few thousand. This allows investors to build a diversified strong portfolio much more cheaply than they could otherwise on their own. If you are interested in investing in mutual funds, then you should know what a mutual fund is and what it does. A mutual fund pools money from investors in order to construct a portfolio consisting of stocks and bonds, real estate, and other securities. Each investor participating in the fund gets a portion. Most mutual funds are actively managed, meaning that the shareholders investing in the mutual funds pay a mutual fund manager to actively buy stocks and bonds and sell stocks and bonds as well. There are many advantages and disadvantages to investing in mutual funds. One advantage is that mutual funds provides instant holding of several different companies. This leads to portfolio diversification. Another advantage is that mutual funds are very liquid, like individual stocks, mutual funds can converted into cash as requested by the investor. Some disadvantages to investing in mutual funds include the fact that many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to the clients they are servicing. Another disadvantage is sad but true in that the average mutual fund manager is no better at picking stocks than the average non-professional investor, but will charge fees as though they are. There is also the dilution when investing in mutual funds, that a great performance by a mutual fund will reap great rewards. The truth is that mutual funds typically have such small holdings of so many different stock that is doesn’t make much of a difference in relation to a mutual fund’s total performance. When investing in mutual funds it is important to look at more than just the past performance of the funds. There are other factors to consider that are listed below. • It is important to consider the size and the age of the fund. Be sure to read the prospectus and perform stock research. Mutual funds that are new or that are small will often have excellent short-term performance records. It is important to keep an eye on these when investing in mutual funds as they grow larger. It may not sustain its results due to pattern mentioned above, because as funds grow in size and increase the number of stocks, each stock will potentially have less impact on the funds performance. • When investing in mutual funds it is important to know how the fund will impact your tax bill. The law requires a fund to make a capital gains distribution to shareholders if it sells a security for a profit that cannot be offset by a loss. You will own taxes on a capital gains distribution from a fund, even if the fund had a negative return on investment. • Be sure to pay attention to the fund’s portfolio turnover rate when investing in mutual funds. This measures the frequency in which it buys and sells securities. If the fund rapidly buys and sells securities it may generate higher trading costs and capital gains taxes. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 3:55 PM
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December 18, 2007
Investing in Gold
| Gold prices, just like other commodities or stock, are ultimately driven by supply and demand. If you are interested in investing in gold it is important for you to understand basic economics in order for you build a strong portfolio. Centuries of evidence prove a shortage of gold will inevitably lead to higher prices, thus causing the price of gold to increase as well as the production of gold to increase. Once the supply catches up with the demand, then the price of gold will begin to decrease. This sounds easy enough, however, investing in gold, is more complicated than it sounds, and it is important to understand in great detail to avoid making investing mistakes. There are many ways to participate in investing in gold including buying gold itself, buying gold stocks, investing in gold futures, or buying gold derivatives. Before you begin be sure to determine how much of your portfolio should be invested in gold. Portfolio diversification is a must so do your homework to determine what makes sense once you have a better understanding of the gold market. When investing in gold, it is important to understand the different strategies used to do it successfully. Some investors use technical analysis and some use fundamental analysis. Technical analysis tools such as chart patters, moving averages, and market trends are used to speculate on the future price of gold. The economic cycle mentioned above is also used when investing in gold using this type of analysis. Investors may also use fundamental analysis meaning they use macroeconomics including things such as inflation, interest rates, GDP growth rates, and energy prices. They also analyze the global gold supply versus the demand. The performance of gold bullion, when investing in gold, is often compared to stocks. They are in fundamentally different asset classes in that gold is a store of value where stocks are a return on value. Stocks and bonds also perform best in a stable political environment with strong property rights and little turmoil. Some analysts argue that while gold may preserve wealth against inflation, it does not present the long term growth potential that stocks do. Five Rules for Investing in Gold: 1) Excessive reliance on trading strategies can be dangerous and counterproductive. Do not try to outsmart the market in order to generate returns by hyperactive trading.Returns from a buy and hold strategy are more than enough to compensate forinherent volatility when gold investing. 2) Investing in gold should be based on macroeconomic considerations. Gold will do well and exposure will be warranted if one suspects rising inflation, bear market in stocks and bonds, or destabilizing deflation. 3) Bullion or coins are a more conservative approach to investing in gold than through equities. With this investing strategy there is no need to scrutinize the worthiness of the financial institution. 4) Investing in gold in still controversial and seen as an anti-establishment type of investment. It is imperative that the investor does not rely on the financial media’s commentary or on the brokerage firm’s misleading information either. 5) Be sure to understand internal dynamics of the gold market as well as the investment timing issues. Pay attention to the weekly position reports of commodity trading funds, and the physical demand for industrial and jewelry. For many years the central banks around the globe were willing to sell enough gold into the open market to more than cover the huge supply deficit between the mined supply and the world demand. This marginal supply was more than enough to offset the gold deficit each year since the mid 1990’s. However, since 2001 the gold price has been running higher and higher, indicating that the central banks are no longer selling sufficient amounts of gold to make up for the global demand. If you are interested in investing in gold, now is the time to do it. The investment timing is crucial in that the price of gold will inevitably have to be re priced to a higher level to eliminate the gold shortage. Supply and demand will inevitably need to meet and offset each other in order to do this. If you are still interested in investing in gold, you will be surprised at the high amount of bullish factors that will contribute to your decision. Find investment strategies that work for you and develop them until you are ready to begin investing in the gold market. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 10:16 AM
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December 14, 2007
Trading Futures
Trading futures is also known as trading commodities. When you trade futures, you are speculating on the future direction of the price for the commodity that you are trading. You don’t actually own anything like when you buy stock, but instead you are betting on whether the price of the commodities that you are trading will go up or down. Trading futures is the trading of futures contracts that provides the owner the power to trade the commodity at some point in the future, for a fixed rate. Typically the rate is the price rate of the contact creation. Future trades are similar to stock and options trading because they are traded in precise futures commodity trading markets. There are three types of people who trade futures. They include the Floor Traders, the Hedgers, and the speculators. When trading futures it is important to know the difference between these three types of traders. The floor trader buys and sells from their individual accounts directly on the trading floors of the futures exchanges. They are responsible for giving the futures market the liquidity that is needs in order to function. The Hedgers are companies, or individuals, that trade in the futures market so that they can establish a known price level in order to satisfy a future need to buy or sell the underlying futures commodity. They are the actual issuers of the futures contracts. When trading futures, hedgers take action in efforts to protect themselves against the risk of a price change that is unfavorable to them. Speculators act more like stock traders in that they try to make a profit from the price fluctuations of the underlying commodity. They include all types of futures trading including futures day trading, futures swing trading, and futures position traders. There is always someone that is taking the opposite position against the speculator when trading futures. This type of trading is becoming more popular each day. There are several factors contributing to this popularity. One reason is that it is relatively easy to set up and account and conduct online futures trading. Other reasons that trading futures is becoming more popular include the low transfer rates imposed by futures brokers, the requirement of relatively small initial investments, and the liquidity of the market due to a high volume of trades conducted each day. The main reason goes back to the ease of setting up an online account to trade in that the simplicity of this type of trading allows anyone to trade online that has access to the internet. When trading futures there are basically two types of contracts. They include a financial futures contract and a commodity futures contract. Financial futures contracts include contracts that end in cash settlement. They could include mutual funds, bonds, treasury notes, and the like. Commodity futures contracts actually end in physical delivery. They could include agricultural commodities such as wheat, oats, rice, or they could be animals, crude oil, metals, etc. When trading futures, no one really ever has to take, make, or deliver the underlying product that the contract represents. Most of the time, successful traders actually offset their position at some point in time before the date of the contract is due. When trading futures, there are two types of commodity brokers that are monitored by the federal agency Commodity Futures Trading Commission (CFTC). These two brokers include fa ull-services broker, and a discount broker. The brokers will charge a fee for maintaining trader records, and the fee depends on the trading frequency, trading volume and the account status of the futures trader. Regardless of the type of broker you use when trading futures, they are responsible for maintaining the trader’s margin deposits, their money balances, and the open futures and transaction completed. There is inconsistency in futures trading in that most people think of it as a way to get-rich quick. It is true that many investors do get rich as a result of trading futures, however, most investors end up losing money. Trading futures is a practice that requires experience, training and extensive knowledge of technical analysis. If you are willing to put in the time and practice necessary to educate yourself in trading futures, you should be well on your way to success! Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 10:00 AM
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December 11, 2007
Forex Trading Strategy
Forex trading involves the trading of international currencies on the forex markets. It is the most liquid of all the markets therefore requiring a forex trading strategy. There are two types of strategies that you can use when trading forex. They include technical analysis as the first forex trading strategy and fundamental analysis as the second. In this article we will discuss both fundamental and technical analysis as well as the most important part of forex trading. The most important part of trading to a forex investor is the “exit” strategy. We will also list in this article the major currencies that you can choose from to trade. Many successful traders prefer to use technical analysis tools as a forex trading strategy because it uses historical economic data to predict movements in the forex market. With stock technical analysis many traders like to work with support and resistance levels. Both levels are important because once a currency prices drops below its support level it will most likely continue to fall. Likewise, once the price exceeds its resistance level it will most likely continue to climb. A support price is a low price to which a currency repeatedly returns. This represents the bottom of the market. The resistance price, on the other hand, is the high price that currency reaches at times, but above that which it tends to resist. Stock market technical analysis used as a forex trading strategy also includes the use of moving averages that will show the average price of a currency over a specific period of time within a longer period. When using moving averages you can get a clear picture of a currency over time and can eliminate short-term fluctuations in a currency price. The other forex trading strategy is stock fundamental analysis. This type of stock analysis examines current political and economic events in order to predict movements in currencies. It also requires extensive knowledge in relation to changes in trade agreements, trading patterns, interest rates, and employment figures. The problem with fundamental analysis as a forex trading strategy is that it requires a lot of detailed information. The amount of detailed information that must be known to do this successfully is seen to many successful forex traders as impractical. Technical analysis is an alternative approach that can be applied across many different markets and currencies at the same time. The last forex trading strategy discussed in this article is the “exit” strategy. This strategy deals with understanding when to exit the market and is most often the hardest of all of the trading strategies. The reason this forex trading strategy is the hardest is not due to its complexity but rather the emotion involved that will often pull you in the wrong direction. This is referred to as Greed and Fear and it will get you into trouble if you do not practice a strong exit strategy. There are a few techniques within this forex trading strategy that will help avoid this pitfall. First of all, don’t make it too complicated. Create a few simple rules based on the time-frame of the stock charts that you are using, and stick to it. By making a rule this ensures that you don’t have to consult with your emotions each time you need to exit the stock market, but instead you commit to your exit strategy. (It only works of course if you in fact, do commit to the strategy you have devised.) As promised, below is a listing of the major currencies that you should choose from when practicing your forex trading strategy. 2) Japanese Yen (JPY) 3) US Dollar (USD) 4) Swiss Franc (CHF) 5) European Union Euro (EUR 6) Australian Dollar (AUD) 7) 8) Canadian Dollar (CAD) Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 9:25 AM
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December 7, 2007
Online Discount Brokers
Diving Deeper into Online Discount Brokers When looking to begin investing in the stock market, it is important to understand the different types of stock brokers available for you to work with. There is the full-service broker, the online discount broker, and the deep-discount broker. Below is an explanation of the three types of brokers in which we will focus mainly on the online discount broker. Full-Service Broker: These brokers offer a variety of financial products, as well as investing advice, investment strategies, and research. They charge higher fees than online discount brokers, and they may offer stocks and bonds, annuities, derivatives, and insurance. A full-service stock broker is compensated by how often you trade, and not according to how well your stock portfolio performs. Online Discount Broker: These brokers offer lower commission rates which are primarily achieved through the automation of trading and investing and customer service. They can often charge lower fees for the investor they are servicing in a couple of ways. Online discount brokers often specialize in high volume stock trading which reduces rates by offering ECN rebates to traders providing liquidity. They also will often have access to alternate quotation services, allowing trades to execute without incurring exchange fees. Rather than make money on commission, the online discount broker makes money by widening the spread, or by selling the right to execute the order to a market maker who can widen the spread. Deep Discount Broker: If price is your primary concern, then you will want to trade stock using a deep discount broker. Online discount brokers of this nature offer a one-way trade for a set price per trade and most of them have an 800 number that functions as an automated trading service. This allows you to place your orders over the phone without actually having to talk to a real person when you are buying stock, or selling stock. Mostly all of these types of brokerage firms offer an online stock trading program where you can buy stock and sell stock right on your computer. Online discount brokers (deep discount brokers) also provide easy access to your stock portfolio. Tips for Choosing and Online Discount Broker: Tip #1: Be sure to check out the websites to ensure that each site’s interface is easy for you to follow. It should be instinctual and intuitive (in comparison to other sites) and should be a site that you can see yourself working with every day when you are trading stock online. Tip #2: Customer service is the key to choosing an online discount broker. You can test this by requesting information or materials online from the brokerage firm to see how fast they reply and to see how relevant and helpful the material is in relation to online stock market trading. Tip #3: Check out the fees. Many of the fees associated with picking an online discount broker focus on the price per trade. You have to determine if you want the cheapest price per trade, a middle of the road fee, or the highest fee. There is no right or wrong answer, but you must differentiate between what is associated with the costs and the level of service in order to determine your needs for successful trading through an online discount broker. Tip #4: Take a peek at any perks and freebies. Sometimes online discount brokers can give you stock market advice books, internet access, money, or frequent flier miles through their firms as an added bonus. This shouldn’t determine your answer, but may sway you in one direction if you need a tie-breaker. When deciding which online discount broker you will use, please note that it is a highly competitive business due to the great number of online discount brokers available. For those of you who don’t want to invest a lot of money, and wish to do your own research in the stock market, an online discount broker is the way to go. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 11:15 AM
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December 4, 2007
Stock Market Charts
Stock Market Charts and Other Trading Concepts Technical analysts and/or chartists use stock market charts to analyze a wide array of securities and to forecast future price movements. Chartists use technical analysis which is the research and examination of the stock market and securities as it relates to their supply and demand in the marketplace. Chartists believe that recurring trading patterns can assist them in forecasting future price movements. Chartists use stock market charts along with computer programs and they do not consider a company’s financial data to be of significance when reading stock charts. Stock market charts are actually price charts. These charts plot technical indicators such as the closing price, moving averages, and trading volume to assist in determining stock market trends. When learning how to read stock charts you should know that price charts are offered with intra-day, daily, weekly, and monthly resolution to provide multiple views of the most recent price data. There are four types stock market charts that are the most commonly used among traders. These include the line chart, the bar chart, the point and figure chart, and the Japanese candlestick chart. Line Chart: Stock market charts such as the line chart is used when the investors considers the closing level to be more important that the open, high or low and also when the open, high, and low data points are not available. Bar Chart: On stock market charts such as the bar chart each bar represents price performance for a specific period. Daily bar charts are the most popular bar charts used when stock charting. The top of the bar represents the high, the bottom of the bar represents the low, and the line sticking out from the right of the bar represents the close. Point & Figure Chart: Stock market charts such as the point and figure charts are used to identify support levels, resistance levels, and the stock chart patterns. These charts ignore the time factor and concentrate only on movements in price. Japanese Candlestick Chart: The Japanese have used candlesticks since the 17th century to analyze the price of rice! The use of candlestick chart patterns was introduced into modern stock technical analysis and is one of the most popular stock market charts used today. Candlestick chart analysis is similar to bar chart analysis accept that it highlights the relationship between opening and closing prices. Candlestick chart formations are much more visually appealing and informative than a standard two-dimensional bar chart. It is important to know when studying stock market charts, that bar charts cannot reflect the difference between a price extreme and a high or low and lack the shadows of a basic candlestick chart, For example, a stock that opened high, but traded low for the day would not be accurately depicted in a bar chart. In a basic Candlestick chart, however, the Upper Shadow would show the extreme of the opening price as well as the trading range for the day. A typical bar chart is simply unable to provide as detailed information when compared to the candlestick chart. Candlestick charts are often the most preferred when deciding which of the stock market charts an investor would like to use. When utilizing stock market charts traders look for the technical indicators. Technical indicators are a series of data points that are derived by applying a formula to the price data of a security. In other words technical indicators, used with one of the above mentioned stock market charts, are what traders use to predict the direction of future prices when stock trading. Technical indicators can be used to confirm other technical analysis tools. For instance, if there is a breakout on the price chart, a corresponding moving average crossover could serve to confirm the stock price breakouts. Before you begin investing in the stock market, it is important to study stock market charts. Understanding the different types of charts, and the methodologies involved in reading them is crucial to investors to become successful traders. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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posted by Stephen W. Bigalow at 10:31 AM
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