By Mark Crisp
Momentum stocks are stocks with high returns over the past three to 12 months. Momentum investors seek out stocks with the potential to double or triple within just a few months. Momentum investors generally hold a stock for a few months and monitor their holdings daily. They tend to sell their stocks with a few months after acquiring it.
There are many stocks in the market that accelerate in price that go on to make 100% to 300% returns in less than year or even in a few months.
However, for the investors who are just starting, momentum investing can be a confusing and frustrating experience to find these stocks. Here are some keys to spot momentum stocks. One of the things to spot momentum stocks is the relative strength of the stock compared to the overall market over a specific timeframe. Most momentum investors seek at a stock which has outperformed at least 90% of all stocks over the past 12 months. When major indices declines, a great momentum stock exhibit strength by holding or even exceeding their highs. When the major indices rally, momentum stocks typically lead the rally and make new highs outpacing the market. Potential momentum stocks should show in their balance sheet that they are growing at an accelerated rate.
Another factor is the Earnings per Share growth. At least a 15% year-over-year earnings per share growth is needed to qualify a momentum stock. Stocks with accelerating rates of EPS growth over previous quarters are also considered.
In addition, a positive forecast by at least some analysts regarding the Company's earnings in necessary for identifying momentum stocks. Further, momentum investors also looks at whether the reported earnings exceeded the analysts forecasts compared to the last quarter. A company can't grow its earnings faster than its Return on Equity, which is the Company's net income divided by the number of shares held by investors, without raising cash by borrowing or selling more shares. Many companies raise cash by issuing stock or borrowing, but both alternatives reduce earnings-per-share growth. For momentum investors, a potential stock should show an ROE of 17% or better.
The share price and trading volume of the stock are also factors to spot a momentum stock. The only reason for stocks that trade at very low prices is that they are already out of favor with the market. Avoid stocks trading below US$5.
Momentum investors seek stocks that have high trading volumes, the number of shares traded daily on the average. Very low trading volumes indicate the markets lack of interest. Generally, momentum investors seek those with a minimum volume of 100,000 shares or at least see their average daily volume increases as the value of the stock rises.
Start keeping a list of potential momentum stocks and track their performance in the market. In time, you will be able to spot the stocks that go on to make 100% to 300% returns in less than year or even in a few months.
Get your Momentum Stock Trading System and sign up for my free weekly online trading system newsletter here at: http://www.stressfreetrading.com/.
Article Source: http://EzineArticles.com/?expert=Mark_Crisp
Friday, August 29, 2008
Thursday, August 28, 2008
How Do I Pick Stocks?
By Brendan Lee
Many investors identified stock investment as trading, but I identify stock investment as investing into the business of the company. Let me share how do I pick my stocks.
First I'll do a business analysis on the companies:
Company A sold 100 million units of product A at $1. Then the next year, company A sold 120 million units of product A at $1.20 (sold more products at higher price). Company B sold 100 million units of product B at $1. Then the next year, company B sold 120 million units of product B at $0.80 (sold more products at discounted price). Which is a better company?
Looking from a profitability perceptive, Company A is a better company. This is because despite rising the price of its goods, it is still able to sell more of its product, and resulted in expansion of its profit margin. This is a sign that the quality offers by the product is of superior quality, or this is a sign that the company possess certain competitive advantages.
As for company B, it tries to sell more of its products by lower down the price of its product (giving discount), thereby attracting more customers to buy its products. There is nothing fantastic about its business and management. Does this company sounds like some of the shopping malls in your neighborhood? Some shopping malls are only crowded with people when there is sales going on, when it has no sales, the shopping malls are so much quiet.
So what kind of business or industry will consumers willing to pay a higher price and possibly buying more at the same time?
1. Iron ore & copper suppliers (CVRD, Rio Tinto, BHP Billiton, Freeport Mcmoran, Southern Copper) Iron ore and copper supplies are mainly controlled by a few huge miner companies. So steel makers do not have much choice but end paying a higher price for the iron ore year after year.
2. Strong branding retailers (Apple) iPod from Apple costs $200 - $300 plus, somehow consumers are still willing to pay for this kind of price. Innovation is recession free, ever since Steve Jobs goes back to Apple, we have seen more and more innovative products coming out from Apple.
3. Oil rig contractors and oil services companies (Diamond Offshore, Transocean, Swiber Holdings, Schlumberger) As price of oil rises, demand for oil rigs increase as well. Oil rig contractors rise the rental of oil rigs to as high as USD600,000 a day now, and yet there are still demand for oil rigs.
4. Toll road companies (Anhui Expressway, listed in Hong Kong) If you need to drive from point A to point B, and the road that leads to point B is an expressway, you still have to go through this road even though price of toll fees increase.
5. Healthcare (United Healthcare) High price of healthcare services do not reduce the number of patients.
6. Niche industrial companies (Tai Sin, Armstrong Industrial, Yip's Chemical, Garmin Ltd and Google) Some industrial companies that have niche technology or competitive advantage enable them to command a higher premium for their goods and services.
After identifying the industry or companies that I'm interested in, then I'll do a financial analysis, reviewing their cashflows, debt level and valuation. I do not want to overpay a stock even though the company looks very solid.
If all looks ok, I'll invest some first, and buy more if fundamental continues to look strong.
Article Source: http://EzineArticles.com/?expert=Brendan_Lee
Many investors identified stock investment as trading, but I identify stock investment as investing into the business of the company. Let me share how do I pick my stocks.
First I'll do a business analysis on the companies:
Company A sold 100 million units of product A at $1. Then the next year, company A sold 120 million units of product A at $1.20 (sold more products at higher price). Company B sold 100 million units of product B at $1. Then the next year, company B sold 120 million units of product B at $0.80 (sold more products at discounted price). Which is a better company?
Looking from a profitability perceptive, Company A is a better company. This is because despite rising the price of its goods, it is still able to sell more of its product, and resulted in expansion of its profit margin. This is a sign that the quality offers by the product is of superior quality, or this is a sign that the company possess certain competitive advantages.
As for company B, it tries to sell more of its products by lower down the price of its product (giving discount), thereby attracting more customers to buy its products. There is nothing fantastic about its business and management. Does this company sounds like some of the shopping malls in your neighborhood? Some shopping malls are only crowded with people when there is sales going on, when it has no sales, the shopping malls are so much quiet.
So what kind of business or industry will consumers willing to pay a higher price and possibly buying more at the same time?
1. Iron ore & copper suppliers (CVRD, Rio Tinto, BHP Billiton, Freeport Mcmoran, Southern Copper) Iron ore and copper supplies are mainly controlled by a few huge miner companies. So steel makers do not have much choice but end paying a higher price for the iron ore year after year.
2. Strong branding retailers (Apple) iPod from Apple costs $200 - $300 plus, somehow consumers are still willing to pay for this kind of price. Innovation is recession free, ever since Steve Jobs goes back to Apple, we have seen more and more innovative products coming out from Apple.
3. Oil rig contractors and oil services companies (Diamond Offshore, Transocean, Swiber Holdings, Schlumberger) As price of oil rises, demand for oil rigs increase as well. Oil rig contractors rise the rental of oil rigs to as high as USD600,000 a day now, and yet there are still demand for oil rigs.
4. Toll road companies (Anhui Expressway, listed in Hong Kong) If you need to drive from point A to point B, and the road that leads to point B is an expressway, you still have to go through this road even though price of toll fees increase.
5. Healthcare (United Healthcare) High price of healthcare services do not reduce the number of patients.
6. Niche industrial companies (Tai Sin, Armstrong Industrial, Yip's Chemical, Garmin Ltd and Google) Some industrial companies that have niche technology or competitive advantage enable them to command a higher premium for their goods and services.
After identifying the industry or companies that I'm interested in, then I'll do a financial analysis, reviewing their cashflows, debt level and valuation. I do not want to overpay a stock even though the company looks very solid.
If all looks ok, I'll invest some first, and buy more if fundamental continues to look strong.
Article Source: http://EzineArticles.com/?expert=Brendan_Lee
Wednesday, August 27, 2008
Stock Market Trading Strategy - RSI Relative Strength Index
By Chris F Jones
Learn to trade using the RSI (Relative Strength Index) and see your trading profits increase. The RSI is one of the most used indicators available to traders. This little indicator can be used in several ways, and we will take a look at a few of them today. So, if you're ready lets get started.
First off, I guess we should give a little background of this tool and credit to it's developer. The Relative Strength Index was first introduced by J. Welles Wilder in the June 1978 issue of Commodities Magazine (it's now called Futures Magazine), and then later, it was reintroduced in his book, New Concepts in Technical Trading. OK, I think that's enough on the history, I don't want to bore you. I just thought we should give credit where credit is due. Now, lets get on to good stuff, how can we make money using this handy little momentum indicator.
The index follows the momentum of price as an Oscillator that ranges between 0 and 100. The index does this comparing the magnitude of a stock's recent gains to the magnitude of its recent losses. Using this scale of 0 to 100, you can determine overbought and oversold levels. Readings above 70 are considered overbought and anything under 30 oversold. So how does this help me in trading? If the RSI rises above 30 it is considered bullish for the underlying stock. On the other hand, if the RSI falls below 70, it is a bearish signal. That means if the RSI has fallen below 30 (meaning it's oversold) and rises back above 30, it could mark a potential entry point. Just remember, this should be used to confirm some other buy signal. Don't use it as a lone buy signal.
Then, there is my favorite signal, "The RSI Divergence". There are two types, the bullish and the bearish. A bullish divergence occurs when price makes a lower low and the RSI indicator makes a higher low. A bearish divergence is just the opposite, price makes a higher high, but RSI makes a lower high. So what does all this mean? If you see a stock put in a lower low, but the RSI doesn't confirm it with a lower low of it's own, then get ready for this stock to reverse it's trend.
That's just two ways you can use this indicator. There are many more. Learn all you can, never stop educating yourself, and you will see your profits go through the roof. I hope this article is of help. Good Luck, and may all your trades be on the winning side.
Chris F Jones is owner of Stocks-n-Options.com. An educational site, where stock and options traders can learn to trade using technical analysis. Visit http://www.stocks-n-options.com for more information.
Article Source: http://EzineArticles.com/?expert=Chris_F_Jones
Learn to trade using the RSI (Relative Strength Index) and see your trading profits increase. The RSI is one of the most used indicators available to traders. This little indicator can be used in several ways, and we will take a look at a few of them today. So, if you're ready lets get started.
First off, I guess we should give a little background of this tool and credit to it's developer. The Relative Strength Index was first introduced by J. Welles Wilder in the June 1978 issue of Commodities Magazine (it's now called Futures Magazine), and then later, it was reintroduced in his book, New Concepts in Technical Trading. OK, I think that's enough on the history, I don't want to bore you. I just thought we should give credit where credit is due. Now, lets get on to good stuff, how can we make money using this handy little momentum indicator.
The index follows the momentum of price as an Oscillator that ranges between 0 and 100. The index does this comparing the magnitude of a stock's recent gains to the magnitude of its recent losses. Using this scale of 0 to 100, you can determine overbought and oversold levels. Readings above 70 are considered overbought and anything under 30 oversold. So how does this help me in trading? If the RSI rises above 30 it is considered bullish for the underlying stock. On the other hand, if the RSI falls below 70, it is a bearish signal. That means if the RSI has fallen below 30 (meaning it's oversold) and rises back above 30, it could mark a potential entry point. Just remember, this should be used to confirm some other buy signal. Don't use it as a lone buy signal.
Then, there is my favorite signal, "The RSI Divergence". There are two types, the bullish and the bearish. A bullish divergence occurs when price makes a lower low and the RSI indicator makes a higher low. A bearish divergence is just the opposite, price makes a higher high, but RSI makes a lower high. So what does all this mean? If you see a stock put in a lower low, but the RSI doesn't confirm it with a lower low of it's own, then get ready for this stock to reverse it's trend.
That's just two ways you can use this indicator. There are many more. Learn all you can, never stop educating yourself, and you will see your profits go through the roof. I hope this article is of help. Good Luck, and may all your trades be on the winning side.
Chris F Jones is owner of Stocks-n-Options.com. An educational site, where stock and options traders can learn to trade using technical analysis. Visit http://www.stocks-n-options.com for more information.
Article Source: http://EzineArticles.com/?expert=Chris_F_Jones
Tuesday, August 26, 2008
Using Volume For Stockmarket Trading
By George Polizogopoulos
Using the On-Balance Volume
On-balance volume was the most widely used stock market tool for several decades now. It is a technical analysis indicator that was designed and fully intended to connect the relationship of two important aspects of a stock market which are the price and its volume. This indicator is based primarily on a running cumulative total volume.
This indicator will treat the volume as a plus when it is an up day and a minus on a down day. This would simply means that an up day is where the closing of the present day is higher than the closing of the previous day. When this happens, the volume will be added. But when it happens that the previous day's closing is higher than the present day, then it will be considered a down day with the volume correspondingly subtracted from the cumulative total.
Actually, this technical analysis indicator is a tool to confirm price movement. The concept is based on the premise that volume will be higher on trading days where the price moves in a positive direction. And volume will accordingly diminish when prices moves negatively.
It is therefore logical that when prices are going up so will the OBV and when prices will make another upward run so does again will the OBV. But if OBV fails to pass its previous day high, then it would suggest a down day or a weak day.
Weighted Volume - A More Effective Indicator
A simple way of refining more the OBV indicator will be to take the weighted volume of the day's market transaction to have a more comprehensive grasp of the market. This procedure will be to compare the daily volume with the average recent volume.
With the use of a composite indicator you can then get the weighted volume index when you measure and input the actual price movement.
By using this approach, you can be assured of a more reliable way of gauging the market as this approach considers the volume and its relationship to comparative price direction. Another benefit that you can gain by using this method is that you can easily identify abnormality of price and volume movements.
Utilizing the Volume Spread Analysis
Volume Spread Analysis creates the opportunity for skilled and professional traders to be able to buy stocks wholesale while the market is moving up and then again to resale this huge wholesale stock that they bought piece by piece to individual and small time market traders.
This stock retailing by professional traders is done without affecting the movement in the stock prices since they have already figured out the price movements through their visual reading of the volume spread analysis.
In real terms, volume spread analysis is what most professional stock market trader's use in playing the market. The analysis is interplay of three important variables that they have to monitor to correctly determine the market. These variables are the amount of volume on a price bar, the rice spread of the bar and the closing day price range.
These variables are simply hard to detect and so traders with large holdings plays these variables through visual detections. If they play it right, these traders will be able to know where the money is going and they can then unload their holdings to these small market players while maintaining the positive price movement of the market.
The Best Volume Signal
Finally, if you happen to be a small time trader, you can try finding for the best volume signal in the market. Once you learned of a steady slide in the market, try to gauge the movement. Try to be patient and do not immediately pounce on some short backing but do time your move for that upward thrust that sometimes follows a heavy downward spiral. This upward burst is a counter trend but will give small traders good earnings on the side.
George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD's.
Article Source: http://EzineArticles.com/?expert=George_Polizogopoulos
Using the On-Balance Volume
On-balance volume was the most widely used stock market tool for several decades now. It is a technical analysis indicator that was designed and fully intended to connect the relationship of two important aspects of a stock market which are the price and its volume. This indicator is based primarily on a running cumulative total volume.
This indicator will treat the volume as a plus when it is an up day and a minus on a down day. This would simply means that an up day is where the closing of the present day is higher than the closing of the previous day. When this happens, the volume will be added. But when it happens that the previous day's closing is higher than the present day, then it will be considered a down day with the volume correspondingly subtracted from the cumulative total.
Actually, this technical analysis indicator is a tool to confirm price movement. The concept is based on the premise that volume will be higher on trading days where the price moves in a positive direction. And volume will accordingly diminish when prices moves negatively.
It is therefore logical that when prices are going up so will the OBV and when prices will make another upward run so does again will the OBV. But if OBV fails to pass its previous day high, then it would suggest a down day or a weak day.
Weighted Volume - A More Effective Indicator
A simple way of refining more the OBV indicator will be to take the weighted volume of the day's market transaction to have a more comprehensive grasp of the market. This procedure will be to compare the daily volume with the average recent volume.
With the use of a composite indicator you can then get the weighted volume index when you measure and input the actual price movement.
By using this approach, you can be assured of a more reliable way of gauging the market as this approach considers the volume and its relationship to comparative price direction. Another benefit that you can gain by using this method is that you can easily identify abnormality of price and volume movements.
Utilizing the Volume Spread Analysis
Volume Spread Analysis creates the opportunity for skilled and professional traders to be able to buy stocks wholesale while the market is moving up and then again to resale this huge wholesale stock that they bought piece by piece to individual and small time market traders.
This stock retailing by professional traders is done without affecting the movement in the stock prices since they have already figured out the price movements through their visual reading of the volume spread analysis.
In real terms, volume spread analysis is what most professional stock market trader's use in playing the market. The analysis is interplay of three important variables that they have to monitor to correctly determine the market. These variables are the amount of volume on a price bar, the rice spread of the bar and the closing day price range.
These variables are simply hard to detect and so traders with large holdings plays these variables through visual detections. If they play it right, these traders will be able to know where the money is going and they can then unload their holdings to these small market players while maintaining the positive price movement of the market.
The Best Volume Signal
Finally, if you happen to be a small time trader, you can try finding for the best volume signal in the market. Once you learned of a steady slide in the market, try to gauge the movement. Try to be patient and do not immediately pounce on some short backing but do time your move for that upward thrust that sometimes follows a heavy downward spiral. This upward burst is a counter trend but will give small traders good earnings on the side.
George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD's.
Article Source: http://EzineArticles.com/?expert=George_Polizogopoulos
Monday, August 25, 2008
7 Wise Stock Market Investing Rules
By Ian C Jackson
It would be foolhardy indeed to embark upon any exciting adventure without the proper equipment and tools of the trade. Stock market trading is exactly the same.
The reason why most tend to fail is because they are ill equipped or have simply ignored sound advice. Arm yourself with the correct equipment to do the job properly and you will be on the way to capture many a prosperous trading opportunity. Here are 7 recommendations you would be wise to follow:
1. As a good rule of thumb, never expose more than 5 percent of your trading budget to any one trade. This way, if one trade goes against you, your losses are kept in check and you can still trade on another day.
2. Unless you are a highly experienced trader, you would be most unwise not to use a Stop Loss. Simply, this is an insurance against potential large losses if you trade goes against you
3. Emotion. There are two emotions playing a hard game in the stock market, they are greed and fear. You need to harness and these two emotions within yourself. You may think this is not possible, but you can, and must, educate yourself.
4. Do not follow the crowd. I strongly advise that you do not trade on the recommendations or tips of other people, even if they are you best friends. By all means use advice or reports as research, but ultimately it should be your decision, based on you judgement.
5. Don't trade on borrowed money. Never open a trading account or trade using a loan or credit. The idea is to end up trading with the money of other people, in other words, from the profits you make from successful trades you make.
6. Plan your trade & stick to it. You will find a trading strategy with which you are happy. Honestly you will. I did, and so did every successful trader. Once you find it, study it and paper-trade it first, in other words, practice using a dummy account.
7. Ensure you educate yourself properly. The biggest reason for a trader losing in the stock market is because of lack of knowledge. They fail to educate themselves properly, hastily jumping in where sound knowledge fears to tread.
How would you like to discover more about the techniques successful traders use to make profitable trades?
Download them free here: Day Trading Course
Ian Jackson is an authority on Day Trading information, learning the hard way - and now he reveals how you can learn the business too, without all the growing pains.
Article Source: http://EzineArticles.com/?expert=Ian_C_Jackson
It would be foolhardy indeed to embark upon any exciting adventure without the proper equipment and tools of the trade. Stock market trading is exactly the same.
The reason why most tend to fail is because they are ill equipped or have simply ignored sound advice. Arm yourself with the correct equipment to do the job properly and you will be on the way to capture many a prosperous trading opportunity. Here are 7 recommendations you would be wise to follow:
1. As a good rule of thumb, never expose more than 5 percent of your trading budget to any one trade. This way, if one trade goes against you, your losses are kept in check and you can still trade on another day.
2. Unless you are a highly experienced trader, you would be most unwise not to use a Stop Loss. Simply, this is an insurance against potential large losses if you trade goes against you
3. Emotion. There are two emotions playing a hard game in the stock market, they are greed and fear. You need to harness and these two emotions within yourself. You may think this is not possible, but you can, and must, educate yourself.
4. Do not follow the crowd. I strongly advise that you do not trade on the recommendations or tips of other people, even if they are you best friends. By all means use advice or reports as research, but ultimately it should be your decision, based on you judgement.
5. Don't trade on borrowed money. Never open a trading account or trade using a loan or credit. The idea is to end up trading with the money of other people, in other words, from the profits you make from successful trades you make.
6. Plan your trade & stick to it. You will find a trading strategy with which you are happy. Honestly you will. I did, and so did every successful trader. Once you find it, study it and paper-trade it first, in other words, practice using a dummy account.
7. Ensure you educate yourself properly. The biggest reason for a trader losing in the stock market is because of lack of knowledge. They fail to educate themselves properly, hastily jumping in where sound knowledge fears to tread.
How would you like to discover more about the techniques successful traders use to make profitable trades?
Download them free here: Day Trading Course
Ian Jackson is an authority on Day Trading information, learning the hard way - and now he reveals how you can learn the business too, without all the growing pains.
Article Source: http://EzineArticles.com/?expert=Ian_C_Jackson
Friday, August 22, 2008
Gann Analysis For a Successful Trade
By George Polizogopoulos
One of the pioneers of technical analysis of the stock market was W.D. Gann. In 1908, he created his analysis known as the market time factor. To test his analysis, he opened one account and invested 300 dollars. After only 3 months, he was able to make 25,000 dollars in profit.
After his transactions were verified and the analysis that he used were uncovered, he became an instant celebrity in Wall Street. Soon he was making money with his technical analysis and he begun to attract many followers who became convinced that by using his market time factor analysis they can beat the market and make money out of it.
Actually, his market time factor analysis to predict price movements of stocks where based on three factors which are price, time and range. Added to these will be the premise that the markets are cyclical in nature and geometrical in design.
The Three Pronged Gann Analysis
Using these three factors, Gann was able to develop his system of stock price movement prediction through a three-pronged approach which is as follows;
Price Study - This approach would have to utilize support and resistance lines, and also pivot points and angles.
Time Study- Historically reoccurring dates are considered on these approach through natural and social inter relation.
Pattern Study -This kind of approach would focus on market swings and will utilize trend lines and also reversal patterns.
Constructing Gann Angles
When constructing a Gann Angles for your analysis, bear in mind that these forms of analysis in determining the price movements of stocks are not fixed but are empirical methods. The following will be the process:
1 - Always Determine the Time Units - An empirical process. The usual way to do this is by taking the stock's chart to heart through a furtive study and by carefully noting the distances by which price movements occur. Once you have determined the time unit then you can now proceed to put the angles to test for accuracy of results.
You can either use the intermediate term which is one to three months charts. Others may opt for the long term which is a multi-year charts or short term which is one to seven day charts. For best results, however, it is recommend that the intermediate term charts be used to produce the optimal amount of patterns.
2 - Next, Find the High or Low Where You Will Draw the Gann Lines - Another empirical process and the usual way to do it is to utilize other kinds of technical analysis like the Fibonacci levels or you can use the pivot points. You can also use price swings for this purpose.
3 - You Have Now to Know Which Pattern to Use - Your choice will simply be on the variations in the slope of the line with the numbers provided referring to the number of units that determines the variations of the slope lines.
4 - You Can Now Draw the Patterns - You have to take note of the directions. It can either be downward and to the right from an elevated point, or upward and to the right from a base or low point.
5 - Start your search for repeat past patters from the charts - You have to remember that this analysis for predicting price movements is based on the assumption that markets are cyclical.
Practice with Gann Angles towards a Successful Trade
When you use this system, you have to note that it needs time for you to perfect the approach. Results will depend depending on the skill of the person using this method. It is suggested that constant practice should be made until such time when you will be hitting a good average of success in predicting the price movements When you do actual trading, it is suggested that you combine this method with other technical indicators to increase your chances of success.
George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD's.
Article Source: http://EzineArticles.com/?expert=George_Polizogopoulos
One of the pioneers of technical analysis of the stock market was W.D. Gann. In 1908, he created his analysis known as the market time factor. To test his analysis, he opened one account and invested 300 dollars. After only 3 months, he was able to make 25,000 dollars in profit.
After his transactions were verified and the analysis that he used were uncovered, he became an instant celebrity in Wall Street. Soon he was making money with his technical analysis and he begun to attract many followers who became convinced that by using his market time factor analysis they can beat the market and make money out of it.
Actually, his market time factor analysis to predict price movements of stocks where based on three factors which are price, time and range. Added to these will be the premise that the markets are cyclical in nature and geometrical in design.
The Three Pronged Gann Analysis
Using these three factors, Gann was able to develop his system of stock price movement prediction through a three-pronged approach which is as follows;
Price Study - This approach would have to utilize support and resistance lines, and also pivot points and angles.
Time Study- Historically reoccurring dates are considered on these approach through natural and social inter relation.
Pattern Study -This kind of approach would focus on market swings and will utilize trend lines and also reversal patterns.
Constructing Gann Angles
When constructing a Gann Angles for your analysis, bear in mind that these forms of analysis in determining the price movements of stocks are not fixed but are empirical methods. The following will be the process:
1 - Always Determine the Time Units - An empirical process. The usual way to do this is by taking the stock's chart to heart through a furtive study and by carefully noting the distances by which price movements occur. Once you have determined the time unit then you can now proceed to put the angles to test for accuracy of results.
You can either use the intermediate term which is one to three months charts. Others may opt for the long term which is a multi-year charts or short term which is one to seven day charts. For best results, however, it is recommend that the intermediate term charts be used to produce the optimal amount of patterns.
2 - Next, Find the High or Low Where You Will Draw the Gann Lines - Another empirical process and the usual way to do it is to utilize other kinds of technical analysis like the Fibonacci levels or you can use the pivot points. You can also use price swings for this purpose.
3 - You Have Now to Know Which Pattern to Use - Your choice will simply be on the variations in the slope of the line with the numbers provided referring to the number of units that determines the variations of the slope lines.
4 - You Can Now Draw the Patterns - You have to take note of the directions. It can either be downward and to the right from an elevated point, or upward and to the right from a base or low point.
5 - Start your search for repeat past patters from the charts - You have to remember that this analysis for predicting price movements is based on the assumption that markets are cyclical.
Practice with Gann Angles towards a Successful Trade
When you use this system, you have to note that it needs time for you to perfect the approach. Results will depend depending on the skill of the person using this method. It is suggested that constant practice should be made until such time when you will be hitting a good average of success in predicting the price movements When you do actual trading, it is suggested that you combine this method with other technical indicators to increase your chances of success.
George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD's.
Article Source: http://EzineArticles.com/?expert=George_Polizogopoulos
Thursday, August 21, 2008
Trade Big
By George Polizogopoulos
Stock market traders are of two kinds; those who go for the small boards and those who trade big boards. What I mean for small boards are those listed stocks in mines and other natural resource exploration, while those in trade big boards are the industrial and commercial sectors. Natural resource explorations like mines, oil and gas are considered as small boards precisely because of the amount that they offer per share. Most mining and oil exploration shares are listed by cents. This precisely is the reason why they are called small boards' listings.
On the other hand those that are listed on the trade big boards are industrial and commercial shares whereby their cost per share can even go as high as 50 dollars per share or even higher. Industrial sector listings would include manufacturing concerns involve in food, shelter, clothing, transportation, electronics and computer and even heavy machinery productions. Commercial sector on the other hand would mean companies that are into trading like companies in the buy and sell and distribution of consumable and non-consumable items and service companies. Financial companies like banks and investment houses are also grouped in this category.
Most people believe that in buying stocks you have to give preference to stocks that are directly related to the production of food, shelter, education and other basic needs of today's consumers like electronic and communication products as well as transportation, medicine and transport. They would say that although most of these stocks are a bit pricey, you can depend on their ability to withstand volatility of the market because of the continuing need of the public for the goods that they produce. They would add that with these kinds of stocks you will not be subjected to the vagrancies of inflation as your shares would tend to go up with it. In short, they will advise you to trade big.
Indeed, if you are new to stock market trading, it would be advisable to go for dependable stocks. Do not bother with those mining shares that go for less than one cent per share. These stocks are attractive because you can have a bundle of shares for only 50 bucks. However, you have to be careful if you do decide to invest on mining shares. Your 50 dollars worth of shares can suddenly be worth 20 dollars if a sudden drop in gold, copper or mining will transpire. This is the nature of mining stocks. It is very volatile since gold as a mineral is affected in the pricing of currency such as the dollar. And a sudden drop in the price of gold will have repercussions to other minerals mined such as silver and copper. So, trade big to avoid these pitfalls.
Another tip that you have to keep in mind when you trade big is to be extra conscious with price fluctuation. When you happen to see a rapid upward movement of a particular stock, do not aspire to go with the sudden surge. There is a great possibility that the surge will suddenly cease and fall back lower that the previous level before its upward surge. Always try to open your ears and eyes to any breaking news that might have an impact on stocks and make your move if you sense something is on the offing. It is far better to be first in the bandwagon when it starts to move than to be the last when the bandwagon is already falling down headlong.
George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD's.
Article Source: http://EzineArticles.com/?expert=George_Polizogopoulos
Stock market traders are of two kinds; those who go for the small boards and those who trade big boards. What I mean for small boards are those listed stocks in mines and other natural resource exploration, while those in trade big boards are the industrial and commercial sectors. Natural resource explorations like mines, oil and gas are considered as small boards precisely because of the amount that they offer per share. Most mining and oil exploration shares are listed by cents. This precisely is the reason why they are called small boards' listings.
On the other hand those that are listed on the trade big boards are industrial and commercial shares whereby their cost per share can even go as high as 50 dollars per share or even higher. Industrial sector listings would include manufacturing concerns involve in food, shelter, clothing, transportation, electronics and computer and even heavy machinery productions. Commercial sector on the other hand would mean companies that are into trading like companies in the buy and sell and distribution of consumable and non-consumable items and service companies. Financial companies like banks and investment houses are also grouped in this category.
Most people believe that in buying stocks you have to give preference to stocks that are directly related to the production of food, shelter, education and other basic needs of today's consumers like electronic and communication products as well as transportation, medicine and transport. They would say that although most of these stocks are a bit pricey, you can depend on their ability to withstand volatility of the market because of the continuing need of the public for the goods that they produce. They would add that with these kinds of stocks you will not be subjected to the vagrancies of inflation as your shares would tend to go up with it. In short, they will advise you to trade big.
Indeed, if you are new to stock market trading, it would be advisable to go for dependable stocks. Do not bother with those mining shares that go for less than one cent per share. These stocks are attractive because you can have a bundle of shares for only 50 bucks. However, you have to be careful if you do decide to invest on mining shares. Your 50 dollars worth of shares can suddenly be worth 20 dollars if a sudden drop in gold, copper or mining will transpire. This is the nature of mining stocks. It is very volatile since gold as a mineral is affected in the pricing of currency such as the dollar. And a sudden drop in the price of gold will have repercussions to other minerals mined such as silver and copper. So, trade big to avoid these pitfalls.
Another tip that you have to keep in mind when you trade big is to be extra conscious with price fluctuation. When you happen to see a rapid upward movement of a particular stock, do not aspire to go with the sudden surge. There is a great possibility that the surge will suddenly cease and fall back lower that the previous level before its upward surge. Always try to open your ears and eyes to any breaking news that might have an impact on stocks and make your move if you sense something is on the offing. It is far better to be first in the bandwagon when it starts to move than to be the last when the bandwagon is already falling down headlong.
George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD's.
Article Source: http://EzineArticles.com/?expert=George_Polizogopoulos
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