Many people overlook the fact that they can use long term charts to help them produce long term gains in the stock market. This can be a valuable part of your portfolio.
Most traders look at a 1 year chart with 1 day candlesticks. They use this to help them determine the best spots to get in and out of a trade. Few will ever use longer term charts that span over years with a month or a week as a candlestick.
Even though these charts may lessen your chance of pulling out quick money there are some benefits to trading this way.
1. You are right more often. As opposed to a swing trader who may only be right 33% of the time trading on day to day charts a long term trader may be right the majority of the time by using a long term chart.
In fact any trading type will likely win more often and stay in trades longer by using a long term chart.
2. Because long term charts let you stay into the trade for months or years you will be able to get income from dividends. These dividends can be re-invested and help your portfolio grow faster.
3. There is no need to check these trades daily. Because you are using larger time periods for these trades you may only want to check these trades once a week, or once a month. This can cut down on your stress levels.
4. You can still leverage your money. Whereas short term traders may use options to get leverage if a stock is moving fast 1 way or the other a long term trader may use longer term options called leaps. These give you to benefits of options but with 1 or 2 years of time before they expire.
For more information on how to trade in the stock market visit http://www.stocks-simplified.com
Sunday, May 11, 2008
Thursday, May 8, 2008
Changing with a changing market
It is always a good idea to change your strategy based on what the market is doing. This is true no matter how much experience you have in the market.
Bob is the average trader that learned this lesson the hard way. He came into the market during one of the biggest bulls markets ever. He also decided to trade call options because of their huge growth possibilities. After a couple months of paper trading he perfected his system.
Bob now opened an account with $10,000 to trade this new system. Over the course of 2 years he turned this $10,000 into $90,000. Everything is going great, the money is rolling in every month and he feel like the world’s best trader.
Then the market crashes. When the market changes his bullish calls buying system no longer works. He was reluctant to change because his system that worked in the past has to work now. But because things are different now he fails to make money.
In fact after 1 year Bob has lost $70,000 trading. He is discouraged that his perfect system failed and pulls his money out thinking if he does he can at least say he came out ahead.
The mistake that Bob made was in thinking that because his system worked in a bulls market it would work in a bears market. It took him losing $70,000 of his previous profit to figure out that wasn’t so.
What he should have done was sit on the sidelines and paper trade when the markets changed. If his system still worked on paper maybe he could try betting some real money too. Because his system didn’t work he could have tried to develop a bearish system.
That is a common mistake all traders have. The market is always changing and you should be too. It is better to be a cautious trader then a trader who lost all their money.
For more information on how to make money in the stock market visit http://www.stocks-simplified.com
Bob is the average trader that learned this lesson the hard way. He came into the market during one of the biggest bulls markets ever. He also decided to trade call options because of their huge growth possibilities. After a couple months of paper trading he perfected his system.
Bob now opened an account with $10,000 to trade this new system. Over the course of 2 years he turned this $10,000 into $90,000. Everything is going great, the money is rolling in every month and he feel like the world’s best trader.
Then the market crashes. When the market changes his bullish calls buying system no longer works. He was reluctant to change because his system that worked in the past has to work now. But because things are different now he fails to make money.
In fact after 1 year Bob has lost $70,000 trading. He is discouraged that his perfect system failed and pulls his money out thinking if he does he can at least say he came out ahead.
The mistake that Bob made was in thinking that because his system worked in a bulls market it would work in a bears market. It took him losing $70,000 of his previous profit to figure out that wasn’t so.
What he should have done was sit on the sidelines and paper trade when the markets changed. If his system still worked on paper maybe he could try betting some real money too. Because his system didn’t work he could have tried to develop a bearish system.
That is a common mistake all traders have. The market is always changing and you should be too. It is better to be a cautious trader then a trader who lost all their money.
For more information on how to make money in the stock market visit http://www.stocks-simplified.com
Tuesday, May 6, 2008
Trading stocks for long term growth
When people think of long term they think of investing. Buying shares of companies that will one day be huge. They rarely ever think about trading. Even though trading can offer a better long term solution then investing in many cases.
Let me clarify what trading is. Unlike investing trading is attempting to time the market. Enter, make a profit or loss, and exit. It is really that simple. The idea is that with the right system you can still make a profit on average, month after month.
Many traders will only be in a trade to a few days, maybe a month. So, how can trading help you make long term profit? You have to reinvest your profits. Instead of spending the money you make if you reinvest your profits back into the stock market you can let your money grow at an exponential rate.
This method can be many times over greater than investing. That is because it deals with compound interest over short periods, not years. Let us compare the two.
You have $10,000 and want to let it grow for 10 years. You have two options. You can invest it or trade it.
If you invest it and pull out 20% a year, after 10 years you would have $61,917. You have made a good sum of money. Not enough to live off of, but a decent amount.
If you chose to trade it however and pulled out just 5% a month, after 10 years you would have $3,489,119. That could make you a millionaire many times over. This is all due to compound interest which is what trading is built off of.
For more information on trading the stock market visit http://www.stocks-simplified.com
Let me clarify what trading is. Unlike investing trading is attempting to time the market. Enter, make a profit or loss, and exit. It is really that simple. The idea is that with the right system you can still make a profit on average, month after month.
Many traders will only be in a trade to a few days, maybe a month. So, how can trading help you make long term profit? You have to reinvest your profits. Instead of spending the money you make if you reinvest your profits back into the stock market you can let your money grow at an exponential rate.
This method can be many times over greater than investing. That is because it deals with compound interest over short periods, not years. Let us compare the two.
You have $10,000 and want to let it grow for 10 years. You have two options. You can invest it or trade it.
If you invest it and pull out 20% a year, after 10 years you would have $61,917. You have made a good sum of money. Not enough to live off of, but a decent amount.
If you chose to trade it however and pulled out just 5% a month, after 10 years you would have $3,489,119. That could make you a millionaire many times over. This is all due to compound interest which is what trading is built off of.
For more information on trading the stock market visit http://www.stocks-simplified.com
Monday, May 5, 2008
What are trend continuation patterns?
What are trend continuation patterns? They are pattern that form in trending stocks. These patterns indicate that the trend will most likely go higher.
Not only do they indicate that a stock will head higher, but they will actually have a target at which stock should hit if it break out.
Alright now I know what you are thinking. These patterns that form in stocks, do they really work? Can it really be that easy? The answer is, yes. Trend continuations patterns are right the majority of the time.
I’m not saying that they will produce a profit all the time. But most of the time they will. There are 2 major reasons for that. One people are already buying stocks that are in an uptrend and selling stocks that are in a downtrend. Trend continuation patterns just tell you when to get into a trending stock.
The second reason for this is these patterns are already widely spread. If you see these patterns form chances are that hundreds of thousand, possibly millions of traders also see it. Most of these traders will probably buy or sell into it.
Now before you go out and buy into every one of these patterns that form you must remember it is important to keep your risk small. Some patterns may not succeed.
In fact you could lose money on a trade like this.
That is why you have to use not only targets, but also stop losses. These patterns will signal a buy when the stock breaks out of the formation. If they go back into the formation it signals that the trend will probably fail.
By setting a stop to get you out of a stock if it reenters the pattern you can greatly decrease your risk in the trade, while still keeping the potential to make a good profit.
For more information on what to look for with trend continuations visit http://www.stocks-simplified.com/chart_patterns.html
For more information on how to trade in the stock market visit http://www.stocks-simplified.com
Not only do they indicate that a stock will head higher, but they will actually have a target at which stock should hit if it break out.
Alright now I know what you are thinking. These patterns that form in stocks, do they really work? Can it really be that easy? The answer is, yes. Trend continuations patterns are right the majority of the time.
I’m not saying that they will produce a profit all the time. But most of the time they will. There are 2 major reasons for that. One people are already buying stocks that are in an uptrend and selling stocks that are in a downtrend. Trend continuation patterns just tell you when to get into a trending stock.
The second reason for this is these patterns are already widely spread. If you see these patterns form chances are that hundreds of thousand, possibly millions of traders also see it. Most of these traders will probably buy or sell into it.
Now before you go out and buy into every one of these patterns that form you must remember it is important to keep your risk small. Some patterns may not succeed.
In fact you could lose money on a trade like this.
That is why you have to use not only targets, but also stop losses. These patterns will signal a buy when the stock breaks out of the formation. If they go back into the formation it signals that the trend will probably fail.
By setting a stop to get you out of a stock if it reenters the pattern you can greatly decrease your risk in the trade, while still keeping the potential to make a good profit.
For more information on what to look for with trend continuations visit http://www.stocks-simplified.com/chart_patterns.html
For more information on how to trade in the stock market visit http://www.stocks-simplified.com
Sunday, May 4, 2008
Trend Reversal patterns
Trend reversal patterns can be very helpful when trading in the stock market. They can help you get into stocks near the bottom, or the top.
So, what is a trend reversal pattern? They are simply patterns that are seen time and time again at the end of a trend. There are a number of different ones, Double bottom, head and shoulders, ect. But they tell you the same thing.
Every reversal pattern is said to have a target for which to shoot for. Most of these patterns will hit their target most, but not all of the time. In fact there are three different thing that can happen when one of these patterns form.
The stock could actually be at a bottom. It could start heading up and make a nice uptrend. This is the one that most people want happen.
Another thing that can happen is the stock heads up once it breaks out. Then it goes and hits its target. Once it hits its target however the stock may actually crash. People see the stock as overvalued and a selloff occurs.
The third thing that can happen is the pattern can just fail. The stock doesn’t go up and actually breaks down lower.
All this uncertainty is why trend reversal trades need to cut their losses short and let their winners ride. For instance stock XYZ is trading at $59 and has broke out of resistance of a bottom pattern you may want to set a stop below resistance.
If the stock goes back below the resistance of $57 it probably means the stock will fall. However it has a target of $70. In this case it may be wise to put a stop at $56. That way if you lose you lose $3. If you win you win $11.
For more information on trend reversal patterns visit http://www.stocks-simplified.com/chart_patterns.html
For more information on trading the stock market visit http://www.stocks-simplified.com
So, what is a trend reversal pattern? They are simply patterns that are seen time and time again at the end of a trend. There are a number of different ones, Double bottom, head and shoulders, ect. But they tell you the same thing.
Every reversal pattern is said to have a target for which to shoot for. Most of these patterns will hit their target most, but not all of the time. In fact there are three different thing that can happen when one of these patterns form.
The stock could actually be at a bottom. It could start heading up and make a nice uptrend. This is the one that most people want happen.
Another thing that can happen is the stock heads up once it breaks out. Then it goes and hits its target. Once it hits its target however the stock may actually crash. People see the stock as overvalued and a selloff occurs.
The third thing that can happen is the pattern can just fail. The stock doesn’t go up and actually breaks down lower.
All this uncertainty is why trend reversal trades need to cut their losses short and let their winners ride. For instance stock XYZ is trading at $59 and has broke out of resistance of a bottom pattern you may want to set a stop below resistance.
If the stock goes back below the resistance of $57 it probably means the stock will fall. However it has a target of $70. In this case it may be wise to put a stop at $56. That way if you lose you lose $3. If you win you win $11.
For more information on trend reversal patterns visit http://www.stocks-simplified.com/chart_patterns.html
For more information on trading the stock market visit http://www.stocks-simplified.com
Saturday, May 3, 2008
Diagonal spread, long term growth plus monthly cash flow
A Diagonal spread is an excellent way to pull out monthly income from the stock market while also making long term profit. It is a more leveraged strategy then simple doing a covered call and produces greater income then Dividends.
A diagonal spread has to do with leaps. What are leaps? A leap, like an option, will give you the right to buy a given stock at a given price on or before a given date.
The only difference is that a leap will give you more time for a stock to make its move. In fact some leaps are two years away. This can give you leverage in the long term perspective.
Let us look at how you can use a Diagonal spread using a leap. Stock XYZ is trading at $50. We believe stock XYZ will be trading considerable higher in 1 year. So we buy the $45 Leap (call) 2 years out for $14. We also do not think the stock will go up to $60 this month so we sell the $60 call for $1. This brings us an instant $1 profit. If the stock stays below $60 you get to keep your $1 and your long term Leap.
Of course it the stock goes to $60 or higher you have to buy it and sell it at $60. Because you own the leap however you can buy it at $45 and sell it at $60 and make $15.
Well say you took the trade. Every month you sold a call option but never got called out. By the end of the year the stock is at $70 and your leap is worth $37. You also sold $9 in calls that year. In total you made a 228% return on your money.
Compare that with a 60% you would have made if you bought the stock. A diagonal spread can be a great way to make continuous monthly income and long term growth for your portfolio. Of course you still need to have rules in set for managing risk and finding good stocks. But mastering this technique can be quite profitable.
For more information on trading in the stock market visit http://www.stocks-simplified.com
A diagonal spread has to do with leaps. What are leaps? A leap, like an option, will give you the right to buy a given stock at a given price on or before a given date.
The only difference is that a leap will give you more time for a stock to make its move. In fact some leaps are two years away. This can give you leverage in the long term perspective.
Let us look at how you can use a Diagonal spread using a leap. Stock XYZ is trading at $50. We believe stock XYZ will be trading considerable higher in 1 year. So we buy the $45 Leap (call) 2 years out for $14. We also do not think the stock will go up to $60 this month so we sell the $60 call for $1. This brings us an instant $1 profit. If the stock stays below $60 you get to keep your $1 and your long term Leap.
Of course it the stock goes to $60 or higher you have to buy it and sell it at $60. Because you own the leap however you can buy it at $45 and sell it at $60 and make $15.
Well say you took the trade. Every month you sold a call option but never got called out. By the end of the year the stock is at $70 and your leap is worth $37. You also sold $9 in calls that year. In total you made a 228% return on your money.
Compare that with a 60% you would have made if you bought the stock. A diagonal spread can be a great way to make continuous monthly income and long term growth for your portfolio. Of course you still need to have rules in set for managing risk and finding good stocks. But mastering this technique can be quite profitable.
For more information on trading in the stock market visit http://www.stocks-simplified.com
Thursday, May 1, 2008
Stock Market Tips
Now a day’s everyone wants to make it big in the stock market. Trading can be a rewarding task when you get the hang of it. That is why I have put together this list of stock market tips.
1. Cut your losses short. It is very important to cut your losses short in the stock market. Capitol preservation is a very important key to remember. Think about it if you lost all your capitol when you were right you will not have any capitol to make money with when you are right.
2. Don’t trade against the industry group. It is said that 50% of what a stock does is based on its industry group. If the steel industry group is going up then stocks in that group are likely to go up to. There will be stocks in that group that go down, but it is best to stay away from these.
3. Develop your own system. This is perhaps the most important part of investing. You must develop your own system of strict rules that tell you when to buy and when to sell. These rules should be simple enough for you to be able to follow them effortlessly.
4. Don’t trade against the trend. Bottom fishing and top picking are the most dangerous ways to trade. The risk that you would face with picking tops and bottoms far outweigh the rewards. It is better to buy a stock that is heading up then to short it.
5. Keep your emotions in check. If you cannot control your emotions when trading you will lose money. Some traders get in and out of trades because they are scared, as opposed to when there system tells them too. This will only hurt them.
For more information on how to trade the stock market visit http://www.stocks-simplified.com
1. Cut your losses short. It is very important to cut your losses short in the stock market. Capitol preservation is a very important key to remember. Think about it if you lost all your capitol when you were right you will not have any capitol to make money with when you are right.
2. Don’t trade against the industry group. It is said that 50% of what a stock does is based on its industry group. If the steel industry group is going up then stocks in that group are likely to go up to. There will be stocks in that group that go down, but it is best to stay away from these.
3. Develop your own system. This is perhaps the most important part of investing. You must develop your own system of strict rules that tell you when to buy and when to sell. These rules should be simple enough for you to be able to follow them effortlessly.
4. Don’t trade against the trend. Bottom fishing and top picking are the most dangerous ways to trade. The risk that you would face with picking tops and bottoms far outweigh the rewards. It is better to buy a stock that is heading up then to short it.
5. Keep your emotions in check. If you cannot control your emotions when trading you will lose money. Some traders get in and out of trades because they are scared, as opposed to when there system tells them too. This will only hurt them.
For more information on how to trade the stock market visit http://www.stocks-simplified.com
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