By Rex Morris
In this post, I explain some of the commonly used economic indicators that can influence the general direction of the market. If you are new to investing, these indicators will enhance your knowledge and affect your investments. So the next time you hear these terms in the media or financial press, you can use the information in this article to evaluate their potential effect on the economy and ultimately your trading strategy.
Beige Book
Formally called as "Summary of Commentary on Current Economic Conditions" is published eight times a year less than 2 weeks prior to the FOMC meeting on Wednesdays at 2:00 pm ET. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from banks and branch directors and interviews with key businessmen, economists, and other sources. The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings.
If the Beige Book indicates inflationary pressure, the Fed may raise interest rates. Conversely, if it indicates recessionary conditions, the Fed may lower interest rates.
Source: Website listed below in the resource section.
Chicago Purchasing Managers Index (PMI)
Released on the last business day of the month at 10:00am ET. It's based on surveys of more than 200 purchasing managers regarding the manufacturing industry in the Chicago area whose distribution of manufacturing firms mirrors the national distribution.
Readings above 50 percent indicate an expanding factory sector, while below 50 indicates contraction.
Consumer Confidence Index
Published on last Tuesday of the month at 10:00 am ET for prior month data. It's a survey of about 5000 consumers about their attitudes concerning the present situation and expectations regarding economic conditions conducted.
This report can be helpful in determining the shifts in consumption patterns and giving us insights about the direction of the economy. This data can be revised monthly based on a more complete survey.
Consumer Price Index (CPI)
Released around 13th of the month at 8:30am ET for prior month. It measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. Also known as the cost-of-living index.
The variance of CPI called "core CPI" which excludes food and energy prices is primarily used to gauge the underlying inflation trend. Inflationary pressure is generated when the core CPI posts larger-than-expected gains.
Source: Website listed below in the resource section.
Producer Price Index (PPI)
Released around 11th of each month at 8:30am ET for prior month data. The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level.
Similar to CPI, there is a variance of PPI, called as "core PPI" which excludes the prices for food and energy to give a clearer picture of the underlying inflation trend. Inflationary pressure is generated when the core PPI posts larger-than-expected gains.
Source: Website listed below in the resource section.
Durable Goods Orders
Officially called as "Advance Report on Durable Goods Manufacturers' Shipments and Orders", released around 26th of the month at 8:30am ET.
This is government index that measures the dollar volume of orders, shipments and unfilled orders of durable goods. Durable goods are new or used items with normal life expectancy of 3 years or more.
This report gives information on the strength of demand for US manufactured durable goods in domestic and international markets. When the index is increasing, it indicates demand is growing, which will result in rising production and employment.
Employment Situation
Published on 1st Friday of the month at 8:30am ET for prior month data. This report lists the number of payroll jobs at all non-farm businesses and government agencies. The unemployment rate, average hourly and weekly earnings, and the length of the average workweek are also listed in this report. This report is the single most closely watched economic statistic as an indicator of economic activity. Therefore, it plays a big role in influencing the market psychology during the month.
Its obvious from the report that the greater the increase in employment, the faster the total economic growth. An increasing unemployment rate is associated with a contracting economy.
If the average earnings are rising sharply, it may be an indication of potential inflation.
Source: Website listed below in the resource section.
Existing Home Sales
Published on the 25th of the month at 10:00am ET for prior month data. This report measures the selling rate of pre-owned houses. Its considered a decent indicator of activity in the housing sector.
This provides a gauge of not only the demand for housing, but the economic momentum. The data is revised monthly for the preceding month. There can be annual revisions for the preceding 3 years.
Gross Domestic Product (GDP)
Released in 4th week of the month at 8:30am ET for prior quarter, with subsequent revisions released in the 2nd and 3rd month of the quarter. GDP measures the dollar value of all goods and services produced within the borders of the United States.
This is the most comprehensive measure of the performance of the US economy. A higher GDP growth leads to accelerating inflation, while the lower growth indicates a weak economy.
Source: Website listed below in the resource section.
Housing Starts and Building Permits
Released around 16th of the month at 8:30am ET for prior month data. It's a measure of the number of residential units on which construction has begun.
It can be helpful to predict the changes in GDP. While residential investments represents just 4% of the level of GDP, due to its volatility it frequently represents a much higher portion of changes in GDP over relatively short periods of time.
Initial Claims
Published on Thursday at 8:30am for week ended prior Saturday. It's a government index that tracks the number of people filing first-time claims for state unemployment insurance.
Investors use this indicator's 4-week moving average to predict trends in the labor market. A move of 30000 or more in claims shows a substantial change in job growth. The lower the number of claims, the stronger the job market and vice-versa.
ISM Manufacturing Index
Released on the 1st business day of the month at 10:00am ET for prior month data. It's based on surveys of 300 purchasing managers nationwide representing 20 industries regarding manufacturing activities. It covers data such as new orders, production, employment, inventories, delivery times, prices, export orders and import orders.
It's considered to be a major economic indicator of all manufacturing indices. Readings of 50% or above are typically associated with and expanding manufacturing sector and healthy economy, while below 50 are indications of contraction.
ISM Services Index
Also known as Non-Manufacturing ISM is published on 3rd business day of the month at 10:00am ET for prior month data. This index is based on a survey of about 370 purchasing executives in industries including finance, insurance, real-estate, communications and utilities. It reports on business activity in the service sector.
Readings above 50% indicate expansion in the service sector of the economy. While below 50% indicate contraction.
Retail Sales
Published around 12th of the month at 8:30am ET for the prior month data. This index measures the total sales of goods by all retail establishments in the US. These figures are in current dollars, that is, they are not adjusted for inflation. However, that data are adjusted for seasonal, holiday -differences between the months of the year.
This is considered the most timely indicator of broad consumer spending patterns. It gives a sense of the trends among different types of retailers.
For complete resource listing, visit our blog at Stock Trading Ideas.
Stock Trading Ideas
Resources:
Sorry for the inconvenience, as we cannot post more than 4 links in our article. Please visit our blog http://stock-trading-ideas.com and under "Trading Resources" section, you can get the appropriate websites for up-to-date economic data.
Article Source: http://EzineArticles.com/?expert=Rex_Morris
Thursday, September 18, 2008
Wednesday, September 17, 2008
Behavior of Stock and Forex Markets and The Characteristics of a Profitable Trading System
By Uma Bhavani
Anyone who really follows these markets knows that the underlying prices fluctuate, often violently, due to changes, and equally effectively, due to rumors about changes in various factors. These factors include not only the company and sector-specific conditions, but also economic and geopolitical as well as the general market environment. Thus a nice looking trading system that promises to achieve a desired goal somewhere along the yellow brick road as long we follow the buy and sell arrows, may be totally misleading.
An example of where we are misled by some of the trading myths is the way of advertising a presumably sound method of controlling the losses. Such advertisements claim that we can never lose, for example, more than two percent in any trade when we put our stop loss limit at two percent below our purchase price. As explained in the following paragraph, the concept is not that simple in practice.
Let us say I buy one hundred shares of a stock at a price of one hundred dollars each, and put a stop loss limit of two percent below the purchase price. This means that the stock automatically sells at the market price when its price decreases to ninety-eight dollars or less. If the price gaps down to eighty dollars, which is very likely in any of the markets, it will immediately sell at a price of eighty dollars or less, resulting in a loss of at least twenty percent, and ruthlessly reducing my original investment of ten thousand dollars to at most eight thousand dollars less commissions. A similar experience is possible in the currency trading.
There are two major types of market analyses - fundamental and technical. The former analysis relies on the company's earnings per share, price earnings ratio, growth adjusted ratios, dividends, and forecasts of one or more of these measures as well as on the general market and economic conditions including the interest rate environment. The technical analysis applies both to the stock and forex markets, and examines statistics such as moving averages, relative strength indicators, cumulative distributions, price oscillators, stochastic measures and host of similar other factors. However, the market conditions may occasionally prove some or all of these measures to be somewhat irrelevant. The following paragraph briefly describes the application of moving averages.
A moving average (MA) is an average of prices over a period of time, and may be used to determine trend direction or to indicate support and resistance areas. Thus when the MA rises, it is a buy signal when prices dip near or bit below the MA. When the MA falls, it is a sell signal when prices rally towards or a bit above the MA. In addition, a rising MA tends to support the price action and a falling MA tends to provide resistance to the price action. There are two types of moving averages, a simple moving average (SMA), and an exponential moving average (EPA). EPA applies more weight to the more recent prices, and thus follows the prices more closely than SMA. Moving averages do not get us into a trade at the exact bottom and out of it at the exact top. They tend to ensure we're trading in the general direction of the trend, usually with a delay at the entry and exit, EMA resulting a shorter delay than the SMA.
A viable system for trading the markets, while based on a solid mathematical foundation, has to be dynamic enough to take into account the possibility of any of the unforeseen events. It should be designed to incorporate the latest possible information, and the support system should be flexible and continuous. There should be a provision to correct a wrong move before it becomes too expensive. It is always good to remember that past performance is not indicative of future results, and while there is potential for huge profits, it is also possible to lose money in each of these two markets.
[Source: Money and Investment page of http://onlinesalesplus.synthasite.com]
http://onlinesalesplus.synthasite.com
Article Source: http://EzineArticles.com/?expert=Uma_Bhavani
Anyone who really follows these markets knows that the underlying prices fluctuate, often violently, due to changes, and equally effectively, due to rumors about changes in various factors. These factors include not only the company and sector-specific conditions, but also economic and geopolitical as well as the general market environment. Thus a nice looking trading system that promises to achieve a desired goal somewhere along the yellow brick road as long we follow the buy and sell arrows, may be totally misleading.
An example of where we are misled by some of the trading myths is the way of advertising a presumably sound method of controlling the losses. Such advertisements claim that we can never lose, for example, more than two percent in any trade when we put our stop loss limit at two percent below our purchase price. As explained in the following paragraph, the concept is not that simple in practice.
Let us say I buy one hundred shares of a stock at a price of one hundred dollars each, and put a stop loss limit of two percent below the purchase price. This means that the stock automatically sells at the market price when its price decreases to ninety-eight dollars or less. If the price gaps down to eighty dollars, which is very likely in any of the markets, it will immediately sell at a price of eighty dollars or less, resulting in a loss of at least twenty percent, and ruthlessly reducing my original investment of ten thousand dollars to at most eight thousand dollars less commissions. A similar experience is possible in the currency trading.
There are two major types of market analyses - fundamental and technical. The former analysis relies on the company's earnings per share, price earnings ratio, growth adjusted ratios, dividends, and forecasts of one or more of these measures as well as on the general market and economic conditions including the interest rate environment. The technical analysis applies both to the stock and forex markets, and examines statistics such as moving averages, relative strength indicators, cumulative distributions, price oscillators, stochastic measures and host of similar other factors. However, the market conditions may occasionally prove some or all of these measures to be somewhat irrelevant. The following paragraph briefly describes the application of moving averages.
A moving average (MA) is an average of prices over a period of time, and may be used to determine trend direction or to indicate support and resistance areas. Thus when the MA rises, it is a buy signal when prices dip near or bit below the MA. When the MA falls, it is a sell signal when prices rally towards or a bit above the MA. In addition, a rising MA tends to support the price action and a falling MA tends to provide resistance to the price action. There are two types of moving averages, a simple moving average (SMA), and an exponential moving average (EPA). EPA applies more weight to the more recent prices, and thus follows the prices more closely than SMA. Moving averages do not get us into a trade at the exact bottom and out of it at the exact top. They tend to ensure we're trading in the general direction of the trend, usually with a delay at the entry and exit, EMA resulting a shorter delay than the SMA.
A viable system for trading the markets, while based on a solid mathematical foundation, has to be dynamic enough to take into account the possibility of any of the unforeseen events. It should be designed to incorporate the latest possible information, and the support system should be flexible and continuous. There should be a provision to correct a wrong move before it becomes too expensive. It is always good to remember that past performance is not indicative of future results, and while there is potential for huge profits, it is also possible to lose money in each of these two markets.
[Source: Money and Investment page of http://onlinesalesplus.synthasite.com]
http://onlinesalesplus.synthasite.com
Article Source: http://EzineArticles.com/?expert=Uma_Bhavani
Tuesday, September 16, 2008
How to Trade Stocks For Money
By Michael Comeau
Having traded stocks for over 20 years I can tell you this is not a question taken lightly. If I had to think of one word that makes the difference between a successful stock trader and one that looses money it would be discipline.
You are probably asking yourself discipline what do you mean? Most people end up loosing money in the stock market, because they don't have the discipline to create a plan for any stock they may invest in, set a stop and have the discipline to take a small loss and move on. In most cases whether you make money-trading stocks or not is determined by how you handle your losses. Anyone can make a profit, although you do need the discipline to take a profit at the right time, not acting out of greed and hanging on.
Many times people will see their stocks go up whereby they have made a nice profit, hang on for more out of greed, only to end up seeing it drop back below the price they paid for it. When this happens the stock has normally gone through one or more stages where it should have been sold and will head lower. These same people will hang on, because they don't have the discipline to pull the trigger and sell it until the last minute. When they do eventually sell it the one time profitable stock has turned into a huge loss wiping out he gains of many other stocks and pulling their portfolio lower and lower until there is nothing left.
I will be writing many articles on this subject, but I decided to do some research to see if I could find a piece of software that could help people overcome some of the problems that are common to most of us and help us determine when to buy and sell.
I am happy to say that if you do your research you can indeed find software out there that will give you entry and exit points so that you have a much better chance for success.
When doing my research I came across one piece of software that I found very interesting. It offers a Revolutionary Trading Software Guaranteed To Generate Profitable Winning Trades On Autopilot In Only An Hour A Day Using State-Of-The-Art Artificial Intelligence.
The beauty of it is that the cost is minimal and you can get a demo right online. Now days with many people are looking to handle their own investment portfolios I believe this can be an invaluable asset. This program runs in the background evaluating stocks giving you the important buy and sell signals. This can saves hours of time researching data on stocks and really opens up the stock market in a very unique way to the people that may only have a minimal amount of time to trade stocks for money. Very interesting indeed. Please feel free to read both this article or one of my many others by visiting my link in the resource box below. I always enjoy getting emails pertaining to my articles or my site. Your feedback is important to me.
I wish you the very best.
Michael Comeau has been owner of many successful businesses over the years including his current online business which can be viewed at http://www.workfromhome4dollars.com/Article-How-To-Trade-Stocks-For-Money.php You may also find more articles by Michael Comeau at http://www.workfromhome4dollars.com
Article Source: http://EzineArticles.com/?expert=Michael_Comeau
Having traded stocks for over 20 years I can tell you this is not a question taken lightly. If I had to think of one word that makes the difference between a successful stock trader and one that looses money it would be discipline.
You are probably asking yourself discipline what do you mean? Most people end up loosing money in the stock market, because they don't have the discipline to create a plan for any stock they may invest in, set a stop and have the discipline to take a small loss and move on. In most cases whether you make money-trading stocks or not is determined by how you handle your losses. Anyone can make a profit, although you do need the discipline to take a profit at the right time, not acting out of greed and hanging on.
Many times people will see their stocks go up whereby they have made a nice profit, hang on for more out of greed, only to end up seeing it drop back below the price they paid for it. When this happens the stock has normally gone through one or more stages where it should have been sold and will head lower. These same people will hang on, because they don't have the discipline to pull the trigger and sell it until the last minute. When they do eventually sell it the one time profitable stock has turned into a huge loss wiping out he gains of many other stocks and pulling their portfolio lower and lower until there is nothing left.
I will be writing many articles on this subject, but I decided to do some research to see if I could find a piece of software that could help people overcome some of the problems that are common to most of us and help us determine when to buy and sell.
I am happy to say that if you do your research you can indeed find software out there that will give you entry and exit points so that you have a much better chance for success.
When doing my research I came across one piece of software that I found very interesting. It offers a Revolutionary Trading Software Guaranteed To Generate Profitable Winning Trades On Autopilot In Only An Hour A Day Using State-Of-The-Art Artificial Intelligence.
The beauty of it is that the cost is minimal and you can get a demo right online. Now days with many people are looking to handle their own investment portfolios I believe this can be an invaluable asset. This program runs in the background evaluating stocks giving you the important buy and sell signals. This can saves hours of time researching data on stocks and really opens up the stock market in a very unique way to the people that may only have a minimal amount of time to trade stocks for money. Very interesting indeed. Please feel free to read both this article or one of my many others by visiting my link in the resource box below. I always enjoy getting emails pertaining to my articles or my site. Your feedback is important to me.
I wish you the very best.
Michael Comeau has been owner of many successful businesses over the years including his current online business which can be viewed at http://www.workfromhome4dollars.com/Article-How-To-Trade-Stocks-For-Money.php You may also find more articles by Michael Comeau at http://www.workfromhome4dollars.com
Article Source: http://EzineArticles.com/?expert=Michael_Comeau
Monday, September 15, 2008
How to Find Stocks Ready to Win Olympic Gold
By Steve D. Martin
Do you own stocks worthy of winning an Olympic Gold Medal? Do your stocks have the heart of a champion? Are they poised to break new world records? If you could own a stock named Michael Phelps would you? We can take the same characteristics that make up Gold Medal Olympic Champions and apply them towards selecting Gold Medal Winning Stocks.
When we look at our Gold Medal Olympic Champions three distinct characteristics stand out. First, they have mastered the Foundations or Fundamentals of their sport. Second, they are innovators or leaders within their sport. Finally third, they are technically sound as they perform creating effortless efficiency. These 3 variables can also be used to select Gold Medal Winning Stocks.
First, choose stocks with superior fundamentals and a sound foundation. Olympians test their skills everyday against themselves and their competition. Those athletes that constantly work to improve their speed, strength, conditioning, and nutrition can usually measure this success through faster times, longer distances, and stay healthier and in the sport longer. The same can be said for a gold medal winning stock. These companies are constantly looking to improve their fundamentals. In stocks we see this through increased earnings, stronger sales, and larger profit margins. In Gold medal winning stocks you would like to see these fundamentals increasing on a quarterly basis and on a yearly basis.
Second, choose stocks that are innovators or leaders within their industry. An industry is just a way to group businesses that are alike together. Michael Phelps is in the swimming industry, IBM is in the Computer Technical Services industry. Gold Medal winning stocks will be the best in their industry. They get to the top of the industry by being innovative. These stocks may have created a new product, changed the way they do business, or have an existing product that has become more in demand. Apple computers are a great example of a company that has become a Gold Medal winning stock. Apple created the iPod, then the iPhone, and is now, for the first time, taking the lead over DELL on its computers for educational services.
Third, is the stock you choose technically sound? We can measure or see the health of a stock through a stock chart. As they say a picture is worth a thousand words. Athletes have coaches, video imaging, stat sheets, and chalk boards to continually track the progress of their athletes, to fix problems in technique, and to monitor success. To choose gold medal winning stocks you must be the coach of your stock and monitor the health and strength of the stock you are looking at through stock charts. The stock chart of a gold medal winning stock will have prices that are continuously reaching to new highs. When the stock moves up in price it will do so on strong volume. When the stock has an off day, it will do so on light volume. With the gold medal winning athlete, they are always the first one to be picked by the captains or the coaches, everybody wanted them. The same is true of a gold medal winning stock, everyone will want to buy this stock for their team (portfolio) and this action is seen on the stock chart by an increase in price and volume.
Just like the Olympics there are thousands of potential gold medal winning stocks waiting for their moment to shine. Only a few will rise to the surface, surpass all others, and cross the finish to be considered the Gold Medal Champion. Find your next gold medal winning stock by demanding superior fundamentals, industry leadership and innovative products, and ever improving technical stock charts. Stick to these three characteristics of finding Gold Medal Winning Stocks and soon you may be standing on the podium as a gold medal winning investor.
Steve Martin went from a tennis pro struggling to make ends meet, to a successful growth stock investor, and developed the F.I.T. Stock Investment System. To find out more about F.I.T. Stocks and our weekly Investment Newsletter service visit us at http://www.fitstocks.com/
Article Source: http://EzineArticles.com/?expert=Steve_D._Martin
Do you own stocks worthy of winning an Olympic Gold Medal? Do your stocks have the heart of a champion? Are they poised to break new world records? If you could own a stock named Michael Phelps would you? We can take the same characteristics that make up Gold Medal Olympic Champions and apply them towards selecting Gold Medal Winning Stocks.
When we look at our Gold Medal Olympic Champions three distinct characteristics stand out. First, they have mastered the Foundations or Fundamentals of their sport. Second, they are innovators or leaders within their sport. Finally third, they are technically sound as they perform creating effortless efficiency. These 3 variables can also be used to select Gold Medal Winning Stocks.
First, choose stocks with superior fundamentals and a sound foundation. Olympians test their skills everyday against themselves and their competition. Those athletes that constantly work to improve their speed, strength, conditioning, and nutrition can usually measure this success through faster times, longer distances, and stay healthier and in the sport longer. The same can be said for a gold medal winning stock. These companies are constantly looking to improve their fundamentals. In stocks we see this through increased earnings, stronger sales, and larger profit margins. In Gold medal winning stocks you would like to see these fundamentals increasing on a quarterly basis and on a yearly basis.
Second, choose stocks that are innovators or leaders within their industry. An industry is just a way to group businesses that are alike together. Michael Phelps is in the swimming industry, IBM is in the Computer Technical Services industry. Gold Medal winning stocks will be the best in their industry. They get to the top of the industry by being innovative. These stocks may have created a new product, changed the way they do business, or have an existing product that has become more in demand. Apple computers are a great example of a company that has become a Gold Medal winning stock. Apple created the iPod, then the iPhone, and is now, for the first time, taking the lead over DELL on its computers for educational services.
Third, is the stock you choose technically sound? We can measure or see the health of a stock through a stock chart. As they say a picture is worth a thousand words. Athletes have coaches, video imaging, stat sheets, and chalk boards to continually track the progress of their athletes, to fix problems in technique, and to monitor success. To choose gold medal winning stocks you must be the coach of your stock and monitor the health and strength of the stock you are looking at through stock charts. The stock chart of a gold medal winning stock will have prices that are continuously reaching to new highs. When the stock moves up in price it will do so on strong volume. When the stock has an off day, it will do so on light volume. With the gold medal winning athlete, they are always the first one to be picked by the captains or the coaches, everybody wanted them. The same is true of a gold medal winning stock, everyone will want to buy this stock for their team (portfolio) and this action is seen on the stock chart by an increase in price and volume.
Just like the Olympics there are thousands of potential gold medal winning stocks waiting for their moment to shine. Only a few will rise to the surface, surpass all others, and cross the finish to be considered the Gold Medal Champion. Find your next gold medal winning stock by demanding superior fundamentals, industry leadership and innovative products, and ever improving technical stock charts. Stick to these three characteristics of finding Gold Medal Winning Stocks and soon you may be standing on the podium as a gold medal winning investor.
Steve Martin went from a tennis pro struggling to make ends meet, to a successful growth stock investor, and developed the F.I.T. Stock Investment System. To find out more about F.I.T. Stocks and our weekly Investment Newsletter service visit us at http://www.fitstocks.com/
Article Source: http://EzineArticles.com/?expert=Steve_D._Martin
Friday, September 12, 2008
Researching Stock Trades
By Shaun Rosenberg
It is important to keep track of stock market events when trading. If you do not you may often encounter sudden suppresses.
The first thing you want to be aware of is the federal meetings. Every now and then the feds cut or raise interest rates. This can have a big impact on the movement of the market. Stocks may rally on the news of an interest rate cut and fall on news of an increase in the interest rate. This due to the fact that lower interest rates help businesses and aid growth, higher interest rates can hurt growth.
Another thing you may want to keep an eye out for is earnings announcements. If a company has good earnings there stock is likely to go up. If they have bad earnings there stock is likely to go down. Predicting earnings can be risky, it can be a good idea to stay away from a stock announcing its earnings.
You may also want to check on the company itself to make sure that it is a good company. Every time I place a trade I take a quick look at the company itself to see how they are doing. You do not want to buy a stock that is going to go bankrupt tomorrow.
Finally you always want to check out the technicals of a given stock before you buy it. Is it up trending? Forming any chart patterns or candlestick patterns? That can be very important in deciding which way to trade the stock, or if to trade the stock at all. Checking the trend of the industry group and overall market may be helpful as well.
There is a lot of homework to be done for every trade. Just remember not to overdo it. While it is important to put the odds in your favor, you need to pull the trigger if you want to make money. You can't wait until everything is perfectly aligned before you act.
For more information about stocks visit http://www.stocks-simplified.com
Article Source: http://EzineArticles.com/?expert=Shaun_Rosenberg
It is important to keep track of stock market events when trading. If you do not you may often encounter sudden suppresses.
The first thing you want to be aware of is the federal meetings. Every now and then the feds cut or raise interest rates. This can have a big impact on the movement of the market. Stocks may rally on the news of an interest rate cut and fall on news of an increase in the interest rate. This due to the fact that lower interest rates help businesses and aid growth, higher interest rates can hurt growth.
Another thing you may want to keep an eye out for is earnings announcements. If a company has good earnings there stock is likely to go up. If they have bad earnings there stock is likely to go down. Predicting earnings can be risky, it can be a good idea to stay away from a stock announcing its earnings.
You may also want to check on the company itself to make sure that it is a good company. Every time I place a trade I take a quick look at the company itself to see how they are doing. You do not want to buy a stock that is going to go bankrupt tomorrow.
Finally you always want to check out the technicals of a given stock before you buy it. Is it up trending? Forming any chart patterns or candlestick patterns? That can be very important in deciding which way to trade the stock, or if to trade the stock at all. Checking the trend of the industry group and overall market may be helpful as well.
There is a lot of homework to be done for every trade. Just remember not to overdo it. While it is important to put the odds in your favor, you need to pull the trigger if you want to make money. You can't wait until everything is perfectly aligned before you act.
For more information about stocks visit http://www.stocks-simplified.com
Article Source: http://EzineArticles.com/?expert=Shaun_Rosenberg
Thursday, September 11, 2008
Secrets to Achieving Big Returns in the Stock Market
By W. Henry Boyett
Are you tired of losing money or perhaps only making 5% to 10% a year in the stock market? I know I was. I was so desperate I even paid one of those expensive financial advisors to show me how to retire wealthy.
My financial advisor talked about compounding my money ANNUALLY in order to grow my money. He spoke of the "Rule of 72", which tells you how many YEARS it will take you to double your money. He spoke of accounting for my profits ANNUALLY and paying taxes. He also told me what the average ANNUAL return on the stock market has been historically. His plan required forty years of investing. I just knew there had to be a better way.
After leaving his office, something just went off in my head. It was then I discovered the secret that I use today to make big returns in the stock market.
I finally figured that what my financial advisor was doing was brainwashing me. He was probably brainwashed himself and didn't know any better. Chances are you have been brainwashed too and still haven't figured out the secret.
What I had to do was to overcome my thinking and think outside the box. What if I did everything monthly instead of yearly? There was the secret. Using compounding on a monthly basis instead of yearly I could take a 10% return and double my money in 7.2 months instead of 7.2 years!
Now you are probably thinking it sounds great but making 10% monthly is hard. Not true. Just use a stock screener on any given day and list all stocks that have risen 10% or more in one day. I'm sure you'll find quite a lot. I like to look at stocks that have a price of $2 or more. This eliminates all the penny stocks and you end up with a much more manageable list.
The next step is to try and see what all these stock have in common. What Industry are they in? Are they making profits? Are they small caps or big caps? After pinpointing the common denominators you should now know where the money is flowing. That is where you want to be. Look for stocks that have liquidity (trades an average of 100,000 or more shares per day) and may currently be beaten down in price. If you get in on these before the big money gets there, you will be in a position to ride the stock up as the buyers step in.
I have developed a few stock trading systems that I personally use to make 3% to 5% weekly (comes out to 12% to 20% monthly). To get one of my systems for FREE, visit my website at http://www.stocklocater.com and sign up today.
Article Source: http://EzineArticles.com/?expert=W._Henry_Boyett
Are you tired of losing money or perhaps only making 5% to 10% a year in the stock market? I know I was. I was so desperate I even paid one of those expensive financial advisors to show me how to retire wealthy.
My financial advisor talked about compounding my money ANNUALLY in order to grow my money. He spoke of the "Rule of 72", which tells you how many YEARS it will take you to double your money. He spoke of accounting for my profits ANNUALLY and paying taxes. He also told me what the average ANNUAL return on the stock market has been historically. His plan required forty years of investing. I just knew there had to be a better way.
After leaving his office, something just went off in my head. It was then I discovered the secret that I use today to make big returns in the stock market.
I finally figured that what my financial advisor was doing was brainwashing me. He was probably brainwashed himself and didn't know any better. Chances are you have been brainwashed too and still haven't figured out the secret.
What I had to do was to overcome my thinking and think outside the box. What if I did everything monthly instead of yearly? There was the secret. Using compounding on a monthly basis instead of yearly I could take a 10% return and double my money in 7.2 months instead of 7.2 years!
Now you are probably thinking it sounds great but making 10% monthly is hard. Not true. Just use a stock screener on any given day and list all stocks that have risen 10% or more in one day. I'm sure you'll find quite a lot. I like to look at stocks that have a price of $2 or more. This eliminates all the penny stocks and you end up with a much more manageable list.
The next step is to try and see what all these stock have in common. What Industry are they in? Are they making profits? Are they small caps or big caps? After pinpointing the common denominators you should now know where the money is flowing. That is where you want to be. Look for stocks that have liquidity (trades an average of 100,000 or more shares per day) and may currently be beaten down in price. If you get in on these before the big money gets there, you will be in a position to ride the stock up as the buyers step in.
I have developed a few stock trading systems that I personally use to make 3% to 5% weekly (comes out to 12% to 20% monthly). To get one of my systems for FREE, visit my website at http://www.stocklocater.com and sign up today.
Article Source: http://EzineArticles.com/?expert=W._Henry_Boyett
Wednesday, September 10, 2008
How to Choose the Best Options Trading Strategy
By Rob Forbes
The magic of options trading is that allows for a variety of strategies to be matched with different stock trading philosophies. Each strategy has a different profitability and risk tolerance level, and using a variety of strategies can spice up a portfolio very nicely! In this article, I will outline four different stock trading strategies, and how they can be matched with corresponding options trading strategies which you can apply to your portfolio. The main idea is to first focus on an underlying stock trading strategy, and then add significant leverage and power to the trade by using options.
The most important factor when considering each of these strategies is the concept of TIME DECAY. The value of any option declines over time, until the day the option expires. This concept can be the major enemy of any option trade, eating into its profits, or it can be the key to successful and profitable option trading.
Firstly, which Strategy?
There are generally four different strategies employed by stock traders, each of which has implications when applied to options:
(i) Position Trading
Traders buy a stock and hold it for long periods of time, based on good fundamentals of the company. They will often wait for a stock to reach really good value, and then watch for institutional or insider buying before making a move. As the stock price increases, they look out for other buyers to step in and move the price even further.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which could be wiped out over time even as the stock gains in price. TIME DECAY is your enemy.
Selling covered calls each month in the option cycle on the stock you already own can significantly reduce the cost you paid for the stock in the first trade. Even if the stock goes down, you can still come out a winner!
(ii) Momentum or Trend trading
Once a stock has made clear move or breakout, the Momentum traders step in, and ride the stock up along a trend to its first major reversal. They hope to make shorter term profits from a rapid move in the price. Holding periods range from six weeks to six months.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which will be wiped out over time even as the stock gains in price. TIME DECAY is your enemy with Momentum Trading, unless you have a particularly strong and fast moving trend.
Selling Credit Spreads is a good strategy, and in fact can be very profitable, because as you sell spreads on the opposite leg from the stock's direction of momentum (e.g. selling put credit spreads in stock with a strongly bullish trend), you can repeatedly buy back the spreads for minimum cost and sell another spread closer in. This strategy can easily yield 10-15% profit per month. Time Decay is your secret weapon for trading this strategy.
Selling Naked Puts is a good strategy, and can be even more profitable than selling credit spreads. However, it leaves you a position of possibly having to buy a lot of stock if the trade goes against you, and so your broker requires you to have a lot of margin.
(iii) Swing Trading
Swing Traders buy and sell swings or oscillations within a trend. Holding times are from between 2 and ten days. This is a shorter term trading technique that is more dependent on the trend direction than it is on fundamentals or technical indicators.
APPROPRIATE OPTION STRATEGY
If you have mastered the skill of identifying reversals or swings within a trend, and know how to plan an exit strategy, you will be able to start buying calls and puts, or DITM options, which will take you to real profits! With Swing Trading, holding times are short (2-10 days) and so you minimise the effect of your arch enemy, TIME DECAY.
(iv) Day Trading
Day traders focus on the many small moves that happen during the trading day, mainly shown up by candlestick patterns. This strategy has a broker's requirement of a minimum of $25,000 to qualify, which knocks out many beginners.
APPROPRIATE OPTION STRATEGY
Option trading is not appropriate with this strategy. Broker fees for options trading are quite high, and Day Traders end up paying vast sums to their brokers.
In Summary:
If you own at least 100 units of a stock that is not particularly trending in any particular direction, sell Covered Calls each month in the option cycle. You can reduce the net price that you originally paid for the stock by between 5-12% each month.
If you have at least $1,000 in your account, and can identify a trend, you can easily sell Credit Spreads or Sell Naked Puts each month in the option cycle.
If you have mastered Swing Trading principles, especially the idea of planning entries and exits, you can start to buy Calls and Puts, or DITM options and make phenomenal profits.
To learn more, go to this site: http://www.swing-trading-options.com
Article Source: http://EzineArticles.com/?expert=Rob_Forbes
The magic of options trading is that allows for a variety of strategies to be matched with different stock trading philosophies. Each strategy has a different profitability and risk tolerance level, and using a variety of strategies can spice up a portfolio very nicely! In this article, I will outline four different stock trading strategies, and how they can be matched with corresponding options trading strategies which you can apply to your portfolio. The main idea is to first focus on an underlying stock trading strategy, and then add significant leverage and power to the trade by using options.
The most important factor when considering each of these strategies is the concept of TIME DECAY. The value of any option declines over time, until the day the option expires. This concept can be the major enemy of any option trade, eating into its profits, or it can be the key to successful and profitable option trading.
Firstly, which Strategy?
There are generally four different strategies employed by stock traders, each of which has implications when applied to options:
(i) Position Trading
Traders buy a stock and hold it for long periods of time, based on good fundamentals of the company. They will often wait for a stock to reach really good value, and then watch for institutional or insider buying before making a move. As the stock price increases, they look out for other buyers to step in and move the price even further.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which could be wiped out over time even as the stock gains in price. TIME DECAY is your enemy.
Selling covered calls each month in the option cycle on the stock you already own can significantly reduce the cost you paid for the stock in the first trade. Even if the stock goes down, you can still come out a winner!
(ii) Momentum or Trend trading
Once a stock has made clear move or breakout, the Momentum traders step in, and ride the stock up along a trend to its first major reversal. They hope to make shorter term profits from a rapid move in the price. Holding periods range from six weeks to six months.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which will be wiped out over time even as the stock gains in price. TIME DECAY is your enemy with Momentum Trading, unless you have a particularly strong and fast moving trend.
Selling Credit Spreads is a good strategy, and in fact can be very profitable, because as you sell spreads on the opposite leg from the stock's direction of momentum (e.g. selling put credit spreads in stock with a strongly bullish trend), you can repeatedly buy back the spreads for minimum cost and sell another spread closer in. This strategy can easily yield 10-15% profit per month. Time Decay is your secret weapon for trading this strategy.
Selling Naked Puts is a good strategy, and can be even more profitable than selling credit spreads. However, it leaves you a position of possibly having to buy a lot of stock if the trade goes against you, and so your broker requires you to have a lot of margin.
(iii) Swing Trading
Swing Traders buy and sell swings or oscillations within a trend. Holding times are from between 2 and ten days. This is a shorter term trading technique that is more dependent on the trend direction than it is on fundamentals or technical indicators.
APPROPRIATE OPTION STRATEGY
If you have mastered the skill of identifying reversals or swings within a trend, and know how to plan an exit strategy, you will be able to start buying calls and puts, or DITM options, which will take you to real profits! With Swing Trading, holding times are short (2-10 days) and so you minimise the effect of your arch enemy, TIME DECAY.
(iv) Day Trading
Day traders focus on the many small moves that happen during the trading day, mainly shown up by candlestick patterns. This strategy has a broker's requirement of a minimum of $25,000 to qualify, which knocks out many beginners.
APPROPRIATE OPTION STRATEGY
Option trading is not appropriate with this strategy. Broker fees for options trading are quite high, and Day Traders end up paying vast sums to their brokers.
In Summary:
If you own at least 100 units of a stock that is not particularly trending in any particular direction, sell Covered Calls each month in the option cycle. You can reduce the net price that you originally paid for the stock by between 5-12% each month.
If you have at least $1,000 in your account, and can identify a trend, you can easily sell Credit Spreads or Sell Naked Puts each month in the option cycle.
If you have mastered Swing Trading principles, especially the idea of planning entries and exits, you can start to buy Calls and Puts, or DITM options and make phenomenal profits.
To learn more, go to this site: http://www.swing-trading-options.com
Article Source: http://EzineArticles.com/?expert=Rob_Forbes
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