If you need help in identifying when a stock has already break out of a trading range and is ready for a rally or move into uptrend, here is a simplified guide.
Call up the chart of the stock you are interested in, and perform the following steps:
1. Volume Analysis
When stocks fall in price, there should be an increase in volume to denote selling or distribution. There is normally a sudden spike in volume when the stock hits a near bottom or bottom. This volume spike shows that selling is exhausted, as the last remaining weak holders of the stock give up in despair as prices continue to drop and throw out their last remaining stocks, causing the volume spike.
Correspondingly, look for an increase in volume as the trend changes and there is an break out in price, when buyers come in to pick up the stock as they perceive the price has gone down low enough.
2. Pattern Analysis
Before a stock break out of a trading or consolidation range, there are tell tale signs and specific patterns that you can usually find. Among the bottoming patterns are candlestick patterns such as hammers, inverted hammers, piercing lines, rising stars, bullish engulfing patterns. Of notable interest is the inside day or included day pattern, which is commonly sighted before the outbreak. When there is an inside day, pay attention!
3. Trendlines
Trendlines is a simple way to identify outbreaks in trend. Connect the tops of previous high price ranges or the bottoms of previous low price ranges to form a trendline. A penetration upwards of the trendline will denote a outbreak to the upside and a outbreak to the downside denotes further correction.
4. Oscillators
Favorite oscillators to show overbought and oversold regions of a stock are the Stochastics and its close cousin, the Stoch-RSI. By themselves, they can lead to whipsaws as oscillators can be overbought or oversold for long periods. So oscillators like these should be used in conjunction with other indicators for synergistic interpretation. The out break into uptrends is denoted by the stochastics or the stoch-rsi moving upwards above the lower level which is normally fixed at 20% ( oversold level), and where 80% is the overbought region.
Trading outbreaks is a fine art, where some successful traders have been very successful in removing all emotion that prevent them from taking immediate action. Some of them have "perfected" their trading systems to recognise trends and patterns using just price bars and time- without any other technical indicators - so that they can trade their proven systems without being paralysed by too much analysis. To them, trading is both fun and profitable, as they have proven to outlast the many market crashes and have continued to increase their personal wealth by trading.
By: Peter Lim
Friday, March 23, 2007
Sunday, March 11, 2007
A Forex Primer Forex 101
The Forex or Foreign Exchange market is the largest, most fluid investment vehicle the world has ever known. Nearly two trillion dollars are exchanged each day across a vast network of computers found in central banks, investment banks, hedge funds, and brokerage firms around the world. This is the most fluid market in the world because it operates 24 hours per day Sunday through Friday afternoon when it shuts down completely.
Around clock trading means that you rarely have problems with gaps (difference between what commodity closes at and what it opens at the following day in stocks, the gap can sometimes be devastating), this never-ending array of profit-making opportunities can sometimes lead to over trading a very costly mistake because it often defies the logic of most Forex investment strategies and often leads to missed opportunities to maximize profit.
Traders in the
U.S. Dollar
Euro
Swiss Franc
Japanese Yen
Canada Dollar
British Pound
International corporations and nations must exchange currency to help finance payroll, secure resources, pay vendors, support infrastructure, etc. This constant exchange of money is done based on a rate that fluctuates due to a variety of factors, including:
Psychology fear, greed, and other emotions play a large role in the markets and can sway rates dramatically; however, human emotions have always influenced the markets making them predictable based upon enough data and proper analysis.
Current Events with a 24-hour news cycle, events from around the globe can quickly influence exchange rates and cause substantial price fluctuations. If investors allow fear (emotion) to affect their decision-making, then a sell-off panic can set in and artificially deflate exchange rates. However, the sell-off and panic may have been predicted if caused by historically relevant factors that triggered a similar trend in the past. Doing your homework is a good way to judge if current events are truly relevant to the true exchange rate before deciding to sell.
Government Reports Many analysts gauge the economy and the way exchange rates are trending by a number of reports released by the government on a periodic basis by a variety of agencies. GDP, the prime rate, unemployment figures, consumer confidence, and many other reports have been known to play temporary roles in the exchange rates between nations.
Many investors in Forex use margin to secure lots and you can typically secure 1-$100,000 lot for as little as $1,000. It is not very likely in this day and age of advanced technology and rapid connections for you to lose more than your investment the account will typically be shut down automatically when it becomes negative but be sure to check with your broker. Small fluctuations in the market can make a big difference for those that are highly leveraged so it is best to ask very carefully about the potential risks when thinking about this option.
While there is no central exchange for Forex traders to congregate, the market remains a great place to seek opportunity and profit. However, be sure to research any investment carefully especially for hidden costs. Brokers are not paid a traditional commission they are actually paid the difference between the bid and ask price on orders so make certain that all decisions are made only after careful research.
By: Kent Douglas -
Around clock trading means that you rarely have problems with gaps (difference between what commodity closes at and what it opens at the following day in stocks, the gap can sometimes be devastating), this never-ending array of profit-making opportunities can sometimes lead to over trading a very costly mistake because it often defies the logic of most Forex investment strategies and often leads to missed opportunities to maximize profit.
Traders in the
Forexoperate in units known as lots . A lot is the equivalent of $100,000 (unless you opt for the mini lot) and you are essentially trying to predict how the exchange rate between two currencies will fluctuate in the future. While there are literally dozens of potential pairs, the six main players in the Forex are:
U.S. Dollar
Euro
Swiss Franc
Japanese Yen
Canada Dollar
British Pound
International corporations and nations must exchange currency to help finance payroll, secure resources, pay vendors, support infrastructure, etc. This constant exchange of money is done based on a rate that fluctuates due to a variety of factors, including:
Psychology fear, greed, and other emotions play a large role in the markets and can sway rates dramatically; however, human emotions have always influenced the markets making them predictable based upon enough data and proper analysis.
Current Events with a 24-hour news cycle, events from around the globe can quickly influence exchange rates and cause substantial price fluctuations. If investors allow fear (emotion) to affect their decision-making, then a sell-off panic can set in and artificially deflate exchange rates. However, the sell-off and panic may have been predicted if caused by historically relevant factors that triggered a similar trend in the past. Doing your homework is a good way to judge if current events are truly relevant to the true exchange rate before deciding to sell.
Government Reports Many analysts gauge the economy and the way exchange rates are trending by a number of reports released by the government on a periodic basis by a variety of agencies. GDP, the prime rate, unemployment figures, consumer confidence, and many other reports have been known to play temporary roles in the exchange rates between nations.
Many investors in Forex use margin to secure lots and you can typically secure 1-$100,000 lot for as little as $1,000. It is not very likely in this day and age of advanced technology and rapid connections for you to lose more than your investment the account will typically be shut down automatically when it becomes negative but be sure to check with your broker. Small fluctuations in the market can make a big difference for those that are highly leveraged so it is best to ask very carefully about the potential risks when thinking about this option.
While there is no central exchange for Forex traders to congregate, the market remains a great place to seek opportunity and profit. However, be sure to research any investment carefully especially for hidden costs. Brokers are not paid a traditional commission they are actually paid the difference between the bid and ask price on orders so make certain that all decisions are made only after careful research.
By: Kent Douglas -
Wednesday, March 7, 2007
Different Types of Investments
Overall, there are several different kinds of investments. These include stocks, bonds, and cash. Sounds simple, right? Well, unfortunately, it gets very complicated from there. You see, each type of investment has numerous types of investments that fall under it.
There is quite a bit to learn about each different investment type. The stock market can be a big scary place for those who know little or nothing about investing. Fortunately, the amount of information that you need to learn has a direct relation to the type of investor that you are. There are also three types of investors: conservative, moderate, and aggressive. The different types of investments also cater to the two levels of risk tolerance: high risk and low risk.
Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are also low risk investments.
Moderate investors often invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risks. Moderate investors often also invest in real estate, providing that it is low risk real estate.
Aggressive investors commonly do most of their investing in the stock market, which is higher risk. The different types of stock can confuse first time investors. That confusion causes people to turn away from the stock market altogether, or to make unwise investments. If you are going to play the stock market, you must know what types of stock are available and what it all means!
Common stock is a term that you will hear quite often. Anyone can purchase common stock, regardless of age, income, age, or financial standing. Common stock is essentially part ownership in the business you are investing in. As the company grows and earns money, the value of your stock rises. On the other hand, if the company does poorly or goes bankrupt, the value of your stock falls. Common stock holders do not participate in the day to day operations of a business, but they do have the power to elect the board of directors.
Along with common stock, there are also different classes of stock. The different classes of stock in one company are often called Class A and Class B. The first class, class A, essentially gives the stock owner more votes per share of stock than the owners of class B stock. The ability to create different classes of stock in a corporation has existed since 1987. Many investors avoid stock that has more than one class, and stocks that have more than one class are not called common stock.
The most upscale type of stock is of course Preferred Stock. Preferred stock isn't exactly a stock. It is a mix of a stock and a bond. The owners of preferred stock can lay claim to the assets of the company in the case of bankruptcy, and preferred stock holders get the proceeds of the profits from a company before the common stock owners. If you think that you may prefer this preferred stock, be aware that the company typically has the right to buy the stock back from the stock owner and stop paying dividends.
Before you start investing, it is very important that you learn about the different types of investments, and what those investments can do for you. Understand the risks involved, and pay attention to past trends as well. History does indeed repeat itself, and investors know this first hand!
by Brian McGregor
There is quite a bit to learn about each different investment type. The stock market can be a big scary place for those who know little or nothing about investing. Fortunately, the amount of information that you need to learn has a direct relation to the type of investor that you are. There are also three types of investors: conservative, moderate, and aggressive. The different types of investments also cater to the two levels of risk tolerance: high risk and low risk.
Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are also low risk investments.
Moderate investors often invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risks. Moderate investors often also invest in real estate, providing that it is low risk real estate.
Aggressive investors commonly do most of their investing in the stock market, which is higher risk. The different types of stock can confuse first time investors. That confusion causes people to turn away from the stock market altogether, or to make unwise investments. If you are going to play the stock market, you must know what types of stock are available and what it all means!
Common stock is a term that you will hear quite often. Anyone can purchase common stock, regardless of age, income, age, or financial standing. Common stock is essentially part ownership in the business you are investing in. As the company grows and earns money, the value of your stock rises. On the other hand, if the company does poorly or goes bankrupt, the value of your stock falls. Common stock holders do not participate in the day to day operations of a business, but they do have the power to elect the board of directors.
Along with common stock, there are also different classes of stock. The different classes of stock in one company are often called Class A and Class B. The first class, class A, essentially gives the stock owner more votes per share of stock than the owners of class B stock. The ability to create different classes of stock in a corporation has existed since 1987. Many investors avoid stock that has more than one class, and stocks that have more than one class are not called common stock.
The most upscale type of stock is of course Preferred Stock. Preferred stock isn't exactly a stock. It is a mix of a stock and a bond. The owners of preferred stock can lay claim to the assets of the company in the case of bankruptcy, and preferred stock holders get the proceeds of the profits from a company before the common stock owners. If you think that you may prefer this preferred stock, be aware that the company typically has the right to buy the stock back from the stock owner and stop paying dividends.
Before you start investing, it is very important that you learn about the different types of investments, and what those investments can do for you. Understand the risks involved, and pay attention to past trends as well. History does indeed repeat itself, and investors know this first hand!
by Brian McGregor
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