Category Archives: trading

Option Trading: Be A Better Stock Trader

The stock market might look like a tricky place for novice traders. It is the kind of place that would need coming from the trader's part.Stock market trading is like a casino, where traders bet all their money to get more, though their chances of winning are quite unpredictable. There is no guarantee that you can win in stock market trading, but the odds can be turned towards your favor if you know how to play the games right.
Playing the stock market game is huge task for a new trader. The stakes involved are high as well as the risk. Unforeseen circumstances due to the instability of the market's movement can appear from time to time even without knowing movement of your stocks might move towards your favor so quickly but can also turn its back upon you in an instant.

However, the stakes in stock market ready is high that many people could not afford to pass up on it.A lot of people find the stock market as a promising place to accumulate and amass wealth in an easier of the people who have had success in stock market trading confessed that they utilize a certain strategy that helped them perform better in the game.Since, being involved in stock market trading might mean higher risks, a person must also possess the right strategy that can help him in being a better player in stock market trading.

One of the most widely used strategies in stock market trading is option trading or stock options trading. Option trading or stock options trading involves an agreement between a buyer and a seller that gives the buyer the right, but not as an obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price. Option trading or stock options trading is a lot better than holding a stock because it allows for more flexibility. With option trading a trader can choose to either be a call option or put option. Call options give the buyer the right to purchase the underlying asset while put options gives the buyer of the option the right to sell the underlying assets.

Playing your cards right in the stock market is a skill that can be learned through stock option education. A novice trader can effectively educate himself more about option trading or stock option trading through stock option education providers. Option trading or stock options trading in stock market is as risky as realized and is quite important for a new trader to learn about this in a comprehensive stock option education providers provide in depth discussion and expert advice which can help a trader understand option trading to a full extent. Stock option education provides the needed help in preparing a trader before going into the uncertain world of stock market trading by providing a better understanding of the downside and the risks involved with entering into trade options.Stock option education can effectively help a novice trader in dealing with option trading or stock option stock option education, a trader can effectively choose on which particular option trading can help him in stock option trading.A trader can also find the necessary help in stock option education in devising an effective options trading strategy that can help him in dealing with the harsh consequences of being involved in stock options trading.

An Insight into 50-Day Moving Average

When you deal with stock options trading you are required to know about strategies and technical indicators related to the trade. 50-day moving average is one of the technical indicators of the stock market, which you can use to analyze price trends and fluctuations in the economic market. More specifically, when you buy company's stock option, the average closing price of the underlying security over the last fifty days is termed as 50-day moving average. An Easy Calculation With a simple calculation you can get the 50-day moving average (MA) figure. Add up the closing prices starting from day 1 and continue it up to the 50th day; once you get the sum total, divide it by the number 50 to get the average result.

High & Low MA Reading Apparently it seems that a high 50-day MA forecasts an optimistic trend (suggesting a bullish market) and a low reading predicts a pessimistic trend (suggesting a bearish market). On the contrary, it is just the reverse. A high reading of fifty day moving average is a warning bell for you, because the market might take a downside turn. So, the conclusion is too much optimism on the part of traders and investors is not desirable. On the other hand low MA indicates just the reverse of high MA. In a scenario of high MA, the stock options market hardly seems to take in new buyers. Short-term Average & Long-term Average Moving averages are calculations that predict the trend and momentum in the market.

Both long-term and short-term averages can be used by you as essential indicators of the market. A short-term average usually spans a time of 15 days and a long-term average spans a longer duration like 50 days. When short-term MA crosses the figure of long-term MA, the market seems to experience an upward momentum. A downward momentum in the market takes place when short-term crosses below long-term average. You are likely to see a change in the market sooner with a shorter moving average. You can consider moving averages as determinants of a wise financial move ( you can judge right time to invest and assuage the profitable entry and exit point related to specific securities). You can take account of the overall health of the stock market, since 50-day MA is considered as the dividing line between a technically healthy stock and an unhealthy stock. Hence, you can use fifty day MA for technical analysis of the price movement of the market, reflecting the average value of price of a security over a set time frame.

Comparing Day Trading With Other Trading Timeframes

From March 10 to March 26 of 2009, the market indices showed a tremendous climb. The S&P 500 was up 22%. The DOW was up 21%. The NASDAQ was up 19%. The S&P/TSX was up 17%. As of the March 27 close, the indices have retreated, likely due to profit taking to lock in gains after the rise in the past couple of weeks. This may be a pause, or it could be the beginning of a trend reversal. We do not yet know.

I day traded 3 stocks on the TSX, employing long and short positions. I traded in 1000 shares of K (Kinross Gold) and TLM (Talisman Energy) and 500 shares of RIM (Research in Motion). The objective is to take price changes of $0.05 to $0.10 per position to yield $50 to $100 gains less $14 commission. My own rules are to take the gain if it is there. The shorter the time period, the better. Shortest duration was under a minute to buy, then sell a long position for an $86 net gain. Longest duration trade was held until the following trading day which is clearly not day trading! My rules are there for me to break and I ultimately have to account for my own actions and the resulting consequences. If I could hire a trader that follows rules without exception and whom I can trust to return gains of 15% per month, I would. Until then, I will have to do. Seriously, if I can only suppress my emotions and follow rules without exception, I would be far better off in trading performance.

From March 11 to March 26, I made 15% net gain in my margin account. For that same period, following candlestick technical analysis, StockTradersPlace showed a 22% gain in K, 13% gain in TLM and 17% gain in RIM. So, my day trading under-performed the short-term candlestick indicators as well as the indices.

I have stated this before and I say it again. If on March 11, I knew that the markets would go up by 20%, I would have entered into 1 trade on March 11 and sold out on March 26. Since we never know ahead of time how far a stock will climb and the precise timeframe, we resort to various trading techniques ? day trading, short-term trading, longer-term buy and hold, options trading, technical analysis, etc. In retrospect, I can say that I under-performed with my day trading. However, day trading is a safe way to avoid the volatile inter-day price movement of stocks which is what an active trader has been facing prior to the recent run-up. Even during this run-up, you can see that it wasn?t an up candle every day. There were dips that suggested a reversal at a few points along the way.

For me, I will continue to utilize day trading along with short-term inter-day trading as per candlestick indicated trends. I utilize whatever works, including equity options in the future if and when I figure out how to succeed with that.

Copyright ? Mar 2009

Bullet Advisory Indian Stocks- How To Trade Stock Future-18 Essential Things We Should Know Before Trading

Trading stock future is not as simple as trading a trading stock future we are not taking the delivery of the stock and playing on margin.Stock future position has to be settled in cash on or before the expiry of future settlement. Knowledge of the following 18 necessary things before trading stock future can be of tremendous help.

(1)Stock future has predefined minimum fixed lot size to trade.Stock future trade can give unlimited profit or loss.Profit or loss is directly proportionate to underline price of stock future.Profit or loss can be calculated by difference of price at which future bought or sold and the prevailing price of future*lot size of stock future.

(2)Trading stock future requires margin money to be paid as decided by the stock exchange depending on volatility and market wide position of the stock.Extra money should be held with us to pay as difference if the trade goes in wrong direction.

(3)Stock future can rise or fall to any level during a single trading session as there are no circuit filters imposed in the most of the stock should be able to pay the mark to mark difference given a notice.

(4)Stock exchange can put stock future of any stock under curb if member wide or market wide limit of the future exceeds certain predefined percentage is always better to check before future trading whether the stock future is under curb or not.Trading a stock which is under curb can invites penalty to be paid as decided by the stock exchange.

(5)Stop loss placed for stock future is valid for only a day in some stock have to place a new stop loss again on next is better to check whether stop loss kept is valid for a day or good till date in the exchange in which we are trading.

(6)It is always advisable to place stop loss with sufficient trigger price and sale price difference to have better chance of trade to be executed.Keeping low or no difference between the trigger price and the sale price can sometime become very harmful if trade is not executed and queued for sale.

(7)We should always keep in mind the future expiration date before and after a trade.

(8)We should always check whether the cash price of the stock is inclusive of any divided, right, bonus, spilt rights or not.

(9)It is better to check historical volatility of the stock and take the notice of any abnormal deviation .

(10)Monitoring the volume of the stock future is a very good abrupt rise in the volume should be spotted.

(11)Monitoring the open interest addition and subtraction of the stock future is essential.Unusually high addition or deletion of open interest should be traced immediately.

(12)It is good to check cost of carry of the stock future whether positive or negative with respect to spot stock price.

(13)Keeping the watch on unusual activity in options of the stock future we are trading can be very beneficial.

(14)We should take a note of current month stock future price and next month future price if it is in the premium or discount to current month?s future price.

(15)We should always try to co-relate change in open interest, cost of carry, volume, volatility to future stock price.

(16)We should watch the rollover near expiry if it is below or above the previous month in percentage term.

(17)We should take the help of technical charts before executing a trade. We should look for the chart patterns and break-outs.

(18) It is always advisable to consult a professional expert advisor if we want to trade the stock future.

By
Narendra Nainani , Renowned Technical Analyst of India having experience of 26 years provides Advisory services for Indian Stocks.Advice for NIFTY, SENSEX, Future and Options Option Put Option Recommendations, Derivative Strategies daily via SMS and yahoo messenger.

NRI Share Trading Account – Invest Wisely via the Stock Brokers of India

Investment in shares and stock is widely popular among the investors throughout the world. Only the investors know how much benefits they can get. For this shares and stock investments a paper work and specific preparation will be required to be familiar with the trading market. Not all investors will be experts and sure they will require a professional support who can direct them in a right way to the profit on these investments and who can handle the necessary paper works appropriately. If you are living in India then there is not so formalities exists but if you are an NRI, PIO or OCI then definitely you are in need of a professional support. For such reasons several experienced share broking companies available widely which can give you a better assistance.

Share trading is not an easiest task; it requires enough knowledge and understanding of the share market and its flexible trends. Being as the backbone for the both the native and NRI investors the share brokers avail an easy and simple business on the challenging trading market. The stock broker in India is responsible for handling all the works including applying the nri pan card for opening the nri online trading account and nri demat account etc. Once the trading account created their work started as guiding the investors throughout their trading activities including buying and selling of the shares and paper works etc. Hiring a knowledgeable stock broker can get you relieved from the all the worries of handling the detailed procedures involved in online share trading. He has the ability to take care of the process independently. They guide you to make the right investment that result in profit and can manage your money in the proper manner. He is well versed with the stock market volatile trends and his relevant knowledge of the field can help you have the best of the trading opportunities you come across. There are also restrictions exists for the stock brokers. The stock brokers should be certified as the member of the National Stock Exchange and also by the Bombay stock exchange. This makes them familiar with the fluctuations within the share market and they know the right time on investing on the types of stocks. If you have opened your nri demat account and nri share trading account with a right share broker then they can bring you huge benefits. In the past days the share trading is done by manual and paper works.

Because of the increased involvement in investing in the share market the manual trading improved to online share trading. There is no need for you to contact them in person. Simply you can contact them through their online sources and can get their guidance on investing. A stock broker can take care all of the trading account related activities including the nri demat account, nri pan card, pan card for nri or pan card for oci etc. The stock market is unpredictable one that contains increase and decrease in the price of the shares. If you are an NRI then the stock brokers in India will be the safest option for you. Be it online mutual fund investment or commercial trading in stocks, stock brokers can facilitate easy trade transaction with much comfort ability. They are the qualified professionals with huge knowledge and understanding of the challenging market trends and dynamics. If you would like to make the investment all by yourself then you will be required more time and energy to carry out the entire process without the help of the stock brokers.

Commodity Futures Trading – What Is Your Trading Edge?

Finding your very own unique commodity trading edge is a worthwhile goal. Without one you are lost in the masses, struggling to push your head above the sea of expenses. Trading edges do exist, though for short periods of time. Psychological edges are more permanent. You need many. Read on to find how to go about finding yours.

When talking about trading, I cringe when I hear the word, "system." It reeks of computer optimization - optimized mush, no flexibility. A better term is trading "method." A commodity trading method is something that is less rigid and has general rules that can be bent. We need to know when to bend the rules. This brings a method out of the mediocre class into one that has an edge - a human edge.

The best commodity futures and option traders in the world are usually discretionary types verses strict rule based optimization systems people. There are exceptions. To be a 100% intuitive, method trader is a tough row to hoe, agreed, but allows dynamic change to market conditions in a heartbeat.

So, where do we find our trading edge? Is it in the latest software, book, mentor, webinar, or maybe right here? It can be found everywhere, pieces here, pieces there, but mostly, the edge is within you. Sounds mystical, but it?s the truth. You have to spend the time to develop your OWN unique edge that the majority do not have. And yours will change over time.

For example, at one point back in the late 60?s and early 70?s, few commodity futures traders had use of computers. It was found that even a simple exponential moving average worked well for the smooth trending markets of the era. Moving average commodity traders did well since the markets were trending nicely. As more traders caught on, the successful trending systems began to get diced. You will notice that many of the new and emerging foreign markets start out with smooth trends until they mature and then start the chop cycle as change moves in. It?s all part of the never-ending evolutionary commodity trading game and marketplace.

There are some effective, but simple, long-term trending methods out there. Almost any method will work at one time or another. The broadest, loosest trading methods will last the longest, while the most optimized last the shortest time. The famous ?Turtles? used a break-out of the 40-day moving average for many years.

They added a filter called ?n.? Two losers in a row = -2n. Two winners = +2n.? A winner and loser = 0n. The more losing trades in a row, the more frustrated the masses and the more likely the next trade will be a winner. That is, if the break-out came three times in a row with a resulting false move and a stop out, (-3n) then the fourth signal will be more probable for success. Sometimes.

The commodity futures markets follow this general rule: They will bless some methods for a while, then turn in a heartbeat and take it all away. A good trader is always watching several methods at one time and will switch to the one currently a heartbeat!

Part Three of Three Parts - Next!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

Profitable Trading System

After you have found a profitable trading system that you already back-tested, how can you be sure that this system will produce the same gains in future?
Nobody can predict the future, your system can easily make losses in next years or can be no tradable.
There are some tests you must do before accepting a trading system, these tests swill show the robustness of your system and when passing these tests, it will be more likely to show gain in future.

Test 1 : Make sure that you put liquidity rule, that your entry and exit prices are realizable.

Test 2: Examine again your trading systems and your rules (This is very important).
I made dozen of trading systems that showed great results but after more examination, it showed that i cannot follow them in real life.
Check if there is one stock that made very big gain, the system will maybe become no profitable without this stock.

Test 3: Change twice or 3 times the date of begin for the simulation, if it still show good results then it has passed the test 3.

Test 4: Change values of some parameters or variables you have in your trading system rules, you must change one value and then back-test, change another and then back-test…
If the results are not affected very badly then it passed the test 4.

Test 5: Try to restrict the system from buying 20% or more of stocks you previously bought when doing the back-test. Then re-run the back-test. To pass this test, system must show pretty the same results as before.

Test 6: Equity chart must have a good look, check some statistic values like sharpe ratio, sortino ratio, standard deviation, maximum drawdown, average day for gains recovery…
It depends on the risk you are willing to take but choose only systems that have : higher sharpe ratio, higher sortino ratio, lower standard deviation, lower maximum drawdown…
Exclude systems that have very big max drawdown, standard deviation and average day for gains recovery.
The must important factor i think is average day for gains recovery.
Its the average number of day that you must wait until your equity value will goes back to the same level before the drawdown happen.
Big values will let you wait for long times before recovering gains and for sure many traders will abandon their trading system, and that's the worse thing that can happen to a trader because just after that, the system will show excellent results. (That's always happen)

Theses tests are very restrictive and you will reject maybe all your trading systems, but when trading you will put your money, real money, so i think you must be very selective to make all chance in your side.

earn your living DayTrading

So You'd Like To Daytrade(or Not)
How to (not) DayTrade
So you'd like to earn your living DayTrading?
You have all heard the stories of losing DayTraders running down the streets shooting people?

During the heady .com days prior to 2001, (when Bush became president,) there were stocks, 3 or 4 times a week that went up from 30 to 200% a day.
It was possible, if you knew what you were doing, to check before the market opened to see which stocks were running in real time and why.
And, if you then had a fast electronic brokerage system you could dive into the market, buy a bunch and sell them the same day.

About 1% of people doing this consistently made money.
I saw one private individual make a million in one day shorting Corel. And then there was somebody who lost a bunch hanging on too long to the WWWF IPO.
As a matter of fact the bottom line is that if you take inflation into account you'd have been better off putting your money in an old sock since 2001.
So what to do?

Give up on the Stock Market let alone give up on DayTrading?
Don't give up on the Stock Market, if you use the right system which is a simple set of formulas you can still make 30% or more on your money annually.
Using this simple system $11,000 left in the market for 17 years would be worth more than one million dollars today.

But it is not DayTrading and you still would need a strong stomach to sit out these 17 years, because some of those years would give you negative returns.
The bottom line is this; if you want to DayTrade there is only one way to do this today.
And that is with MINDBLOWING News.
MINDBLOWING News along the lines of:
XYZ corporation finds cure for cancer. ABC Inc invents Eternal Life Pill DreamCar Corp invents car that runs on water.
You get the idea.

And then I am going to use another qualifier:
You should get this news BEFORE most other people get it.
How to do this:
For about $10 a month you can get a subscription to real-time market news.
Get your Real Time Market News at about 6 AM Eastern Standard Time.
Say you find the real time news that a company has invented a car that runs on water.

Check the time the news was first released, making sure that news item was not available yesterday.
Buy the stock now with money that you can afford to burn ALWAYS USING A STOP LOSS.

Most electronic brokerage firms today allow you to buy stocks on NASDAQ only as early as 6 AM EST.
Sell the stock at 9.28 AM EST to all the traders that are waking up.
You could conceivably double your money.
So would you then trade again in this stock after the market opens officially?
No,I would not.

Too many mindgames will be played by market makers during the first day with the stock that produced the mindblowing news.
Remember the statement above:
"There have been very few days since 2001 that any stocks actually went up more than 30% in one day, the oomph has disappeared from both the Nasdaq and the Dow."

Never hold the mind blowing news stock overnight, because people in most cases will dump it on the second day.
One more tip:
Never buy IPO's on the first day.
The most touted IPO(meaning almost all large brokerage houses were praising this IPO to the sky) cost people the most in decreased value on the second day after the IPO came out.

Who were the winners? The brokerage houses.
So, if you have money to burn, have a cast iron stomach and want to watch market news from 6 AM to 9.28 AM EST, DayTrading may be for you.