Technical analysis is a non-traditional way of picking stocks to buy and sell. It is based off of human emotions and patterns in those emotions.
A technical trader realizes that stocks do not move up and down because a company is making or losing money. A stock goes up and down based off of supply and demand.
If there are more buyers than sellers a stock will normally go up until it reaches a point where sellers start to come in.
This can be flipped around. If a stock has more sellers than buyers it can push the stock down until the stock gets to a low enough point and buyers start to come back in.
Technical analysis tries to play off of this. They notice human emotions create patterns and trends that occur over and over again. So playing off of these trends and patterns rather than looking at a company’s financials can be a smart way to approach the market.
This simplified approach to the market disregards all fundamental factors such as dividends, cash flow statements, P/E rations, and so on.
There are a variety of instruments a technical trader can use to determine if a stock is a good buy or a good sell. Oscillators, chart patterns, stock trend, and candlestick patterns are all used to determine if a company makes a good trade or not.
So does it work? Technical analysis has proven to be a great way to approach the stock market. Combing Technical analysis with risk management may be the best way to approach the stock market for a short term trader.
Technical Analysis is built for short term trading. If you have a time frame longer than a couple months it may not be for you. Instead fundamental analysis can be used for longer term time frames.
For more information about technical analysis visit http://www.stocks-simplified.com/technical_analysis.html
For more information about Fundamental Analysis visit http://www.stocks-simplified.com/fundamental_analysis.html
Friday, January 2, 2009
Tuesday, December 30, 2008
Losing a trade or a row of trades is never fun. It can make you frustrated and unhappy. And who can blame you for feeling that way. A loss of capital can cripple your account making it harder to get to where you want to go.
That is definitely why you want to lose as little capital as possible when you are wrong. It is all about risk management.
But so many people forget that you trade more than just money when you trade. You are affected mentally every time you place a trade. Your confidence grows when you are on a winning streak. You feel like you can do no wrong.
However the flip side is also true. When you are on a losing streak you can feel terrible. You can feel like you never want to trade ever again. It can be hard.
The market come with surprises and can definitely get the better of you at times, no matter how good of a trader you are. They just can’t be controlled.
But even though we can’t control how the markets will move what we can control is how we react to them. If we have just been beat up we can choose to do one of two things. We can say we never should have traded in the first place and walk away or we can learn from our mistakes and use it to become a better trader.
Trading is a game that you are constantly learning how to improve on. I am confident that every year I become a better and better trader. When I make a mistake I quickly learn from it and apply what I have learned in my future trading.
If you want to be successful in trading you have to do the same. There is no way around it. Concentrating on learning from your mistakes and building your confidence are the two most important parts of mental trade management.
For more information about the stock market visit http://www.stocks-simplified.com
Tell us your trading goals at http://www.stocks-simplified.com/investing_goals.html
That is definitely why you want to lose as little capital as possible when you are wrong. It is all about risk management.
But so many people forget that you trade more than just money when you trade. You are affected mentally every time you place a trade. Your confidence grows when you are on a winning streak. You feel like you can do no wrong.
However the flip side is also true. When you are on a losing streak you can feel terrible. You can feel like you never want to trade ever again. It can be hard.
The market come with surprises and can definitely get the better of you at times, no matter how good of a trader you are. They just can’t be controlled.
But even though we can’t control how the markets will move what we can control is how we react to them. If we have just been beat up we can choose to do one of two things. We can say we never should have traded in the first place and walk away or we can learn from our mistakes and use it to become a better trader.
Trading is a game that you are constantly learning how to improve on. I am confident that every year I become a better and better trader. When I make a mistake I quickly learn from it and apply what I have learned in my future trading.
If you want to be successful in trading you have to do the same. There is no way around it. Concentrating on learning from your mistakes and building your confidence are the two most important parts of mental trade management.
For more information about the stock market visit http://www.stocks-simplified.com
Tell us your trading goals at http://www.stocks-simplified.com/investing_goals.html
Monday, December 29, 2008
Low volume stocks
Low volume stocks can make it much more difficult to trade profitable. For that reason it is better to stay out of these stocks regardless of how the set up looks.
Volume should be looked at every time you place a trade. What volume does is tell you exactly how much of a given stock was traded during the day. Every number counts as 2 trade’s one buy and one sell. So if volume is 10 million it means 10 million people sold and 10 million people bought that day.
It is very important to look at volume because if volume is too low it could pose problems if you plan to make money trading it.
The first problem low volume stocks give you involves getting in and out. If there are only 40,000 trades on a given day you might find it very hard to get in especially at a price that you want to.
The second problem is similar, if a stock turns against you it could be hard to get out. Falling price on a low volume stock could make a crowd of sellers with no buyers around. By the time you get out you could have a loss so far under your original stops that, you would be hurting.
The last way low volume stocks work against you is the mere fact that you can’t use the volume to help you. Normally you can use volume to help determine the strength of a price action. High volume on an up day means that the stock is likely to keep going up in the short term.
If volume is low to begin with however, it makes it harder to tell where high volume and low volume are. No one is trading the stock anyway.
So what is good volume? Every trader has a different opinion, but I believe you should be able to find a stock that is trading at least 1 million shares per day. That should allow you to move in and out pretty easily.
As your account gets bigger however you may want to move the bar up. Only trade stocks with more and more volume. Just remember to keep volume in mind the next time you make a stock trade.
For more information about trading volume visit http://www.stocks-simplified.com/volume.html
For more information about the stock market visit http://www.stocks-simplified.com
Volume should be looked at every time you place a trade. What volume does is tell you exactly how much of a given stock was traded during the day. Every number counts as 2 trade’s one buy and one sell. So if volume is 10 million it means 10 million people sold and 10 million people bought that day.
It is very important to look at volume because if volume is too low it could pose problems if you plan to make money trading it.
The first problem low volume stocks give you involves getting in and out. If there are only 40,000 trades on a given day you might find it very hard to get in especially at a price that you want to.
The second problem is similar, if a stock turns against you it could be hard to get out. Falling price on a low volume stock could make a crowd of sellers with no buyers around. By the time you get out you could have a loss so far under your original stops that, you would be hurting.
The last way low volume stocks work against you is the mere fact that you can’t use the volume to help you. Normally you can use volume to help determine the strength of a price action. High volume on an up day means that the stock is likely to keep going up in the short term.
If volume is low to begin with however, it makes it harder to tell where high volume and low volume are. No one is trading the stock anyway.
So what is good volume? Every trader has a different opinion, but I believe you should be able to find a stock that is trading at least 1 million shares per day. That should allow you to move in and out pretty easily.
As your account gets bigger however you may want to move the bar up. Only trade stocks with more and more volume. Just remember to keep volume in mind the next time you make a stock trade.
For more information about trading volume visit http://www.stocks-simplified.com/volume.html
For more information about the stock market visit http://www.stocks-simplified.com
Saturday, December 27, 2008
Stock Market Trading and Poker
I am a huge stock market geek and a huge poker geek as well. I remember seeing not too long ago a world poker series; they were interviewing a guy from the semi finals who said he was an option trader.
That made me think, trading which is one of my biggest hobbies is very similar to one of my other favorite hobbies poker. Now I know most people out there are not willing to believe that poker and trading are similar.
Most people associate poker with slot machines and gamblers, and the stock market with a way to invest your money and grow. The truth is people do make a living by both being poker players and by being stock market traders. Once more it takes the same qualities to be a good poker player as it does to be a good stock market trader.
In order to be a profitable poker player you must.
1. Have a strategy that wins in the long term
2. Manage your risk, don’t make stupid calls
3. Win big when you win, all in, raising
In order to be a profitable trader you must
1. Have a strategy that wins in the long term
2. Manage your risk
3. Win big when you win
I’m not saying that the stock market only works when you get lucky. But I am saying that the stock market is not something to be taken lightely. Most people believe they can just buy a stock today and sell it sometime later for a profit.
The stock market should be treated more as a poker game then a savings account, were you put it in and forget it. You cannot put all your money in one stock and hope for the best in the same way you would not go All in with a jack high and hope for the best. If you want to ultimately win you need a strategy that makes you money in the long run. A strategy thar lets you manage your risk and grow your winnings.
For more information about the stock market visit http://www.stocks-simplified.com
Tell us your stock market goals at http://www.stocks-simplified.com/investing_goals.html
That made me think, trading which is one of my biggest hobbies is very similar to one of my other favorite hobbies poker. Now I know most people out there are not willing to believe that poker and trading are similar.
Most people associate poker with slot machines and gamblers, and the stock market with a way to invest your money and grow. The truth is people do make a living by both being poker players and by being stock market traders. Once more it takes the same qualities to be a good poker player as it does to be a good stock market trader.
In order to be a profitable poker player you must.
1. Have a strategy that wins in the long term
2. Manage your risk, don’t make stupid calls
3. Win big when you win, all in, raising
In order to be a profitable trader you must
1. Have a strategy that wins in the long term
2. Manage your risk
3. Win big when you win
I’m not saying that the stock market only works when you get lucky. But I am saying that the stock market is not something to be taken lightely. Most people believe they can just buy a stock today and sell it sometime later for a profit.
The stock market should be treated more as a poker game then a savings account, were you put it in and forget it. You cannot put all your money in one stock and hope for the best in the same way you would not go All in with a jack high and hope for the best. If you want to ultimately win you need a strategy that makes you money in the long run. A strategy thar lets you manage your risk and grow your winnings.
For more information about the stock market visit http://www.stocks-simplified.com
Tell us your stock market goals at http://www.stocks-simplified.com/investing_goals.html
Tuesday, December 23, 2008
Weeding out Market Noise
If you pay attention to the stock market at all you will get bombarded with tons of useless facts about what is going on with the country, how the economy is improving/ getting worse, how inflation rates are changing, what the unemployment rate is.
It is difficult to find out which information is useful and which information is not useful. Easy, remember 90% of all information talked about in the stock market is completely useless, at least when it comes to making money. You cannot decide what to buy and what to sell based purely on inflation rates, or what the media says.
Your success as a trader will partly be decided by your ability of weeding out market noise. In fact ignoring all irrelevant facts about what is happening in the market will help you in the long run.
So what do you rely on? Simple your system, everyone who ever has, is, or will make consistent money in the stock market has done so by following their own system of trading or investing, that’s a fact.
It’s a shame that most traders will allow all of the market noise to get the best of them and break there rules. It happens to everyone who has just started trading, you will buy a stock because it looks like a good buy according to your rules, but then bad news comes out and you start thinking, “Oh no, that sounds really, really bad I better sell everything I own cause the markets going to crash”. Only to see your stock rally after you sell it. Following your rules would have helped you here.
There are 3 things you need to do in order to be successful in the market.
1. Develop your goal for the stock market. Investing without goals is like buying a lottery ticket, you don’t know what will happen but you hope everything will turn out for the best.
2. Develop a system and follow it, everyone who makes money in the market follows this step.
3. Weed out market noise, who cares what some random guy with a degree in economics on CNN says about the stock market. There is no college degree that will turn you into a stock market trader.
Follow these goals and you are on your way to making money in the markets.
I encourage you to share your stock market goals with the rest of us at http://www.stocks-simplified.com/investing_goals.html
For more information about the stock market visit http://www.stocks-simplified.com
It is difficult to find out which information is useful and which information is not useful. Easy, remember 90% of all information talked about in the stock market is completely useless, at least when it comes to making money. You cannot decide what to buy and what to sell based purely on inflation rates, or what the media says.
Your success as a trader will partly be decided by your ability of weeding out market noise. In fact ignoring all irrelevant facts about what is happening in the market will help you in the long run.
So what do you rely on? Simple your system, everyone who ever has, is, or will make consistent money in the stock market has done so by following their own system of trading or investing, that’s a fact.
It’s a shame that most traders will allow all of the market noise to get the best of them and break there rules. It happens to everyone who has just started trading, you will buy a stock because it looks like a good buy according to your rules, but then bad news comes out and you start thinking, “Oh no, that sounds really, really bad I better sell everything I own cause the markets going to crash”. Only to see your stock rally after you sell it. Following your rules would have helped you here.
There are 3 things you need to do in order to be successful in the market.
1. Develop your goal for the stock market. Investing without goals is like buying a lottery ticket, you don’t know what will happen but you hope everything will turn out for the best.
2. Develop a system and follow it, everyone who makes money in the market follows this step.
3. Weed out market noise, who cares what some random guy with a degree in economics on CNN says about the stock market. There is no college degree that will turn you into a stock market trader.
Follow these goals and you are on your way to making money in the markets.
I encourage you to share your stock market goals with the rest of us at http://www.stocks-simplified.com/investing_goals.html
For more information about the stock market visit http://www.stocks-simplified.com
Monday, December 22, 2008
Saving accounts vs. stock market
Most people decide that the stock market is just too risky for them to put their hard earned money into. I know many savers out there who would rather put their money into a savings account then into the markets.
This way they can go for the sure thing, the government insured return, but what are you actually getting when you invest your money into a savings account? Say your bank pays you 2% interest in your savings account, and you put $10,000 into it.
After 1 year you have $10,200 and it appears you have found a safe way to let your money grow. But hold on; let’s look at some facts first. Inflation normally hangs around the 3% range. This means that in order for you to have the same buying power as you did last year you need to have $10,300.
So even though you made $200 in paper money, you’re buying power actually decreased by $100. And if you factor taxes into that you will find that saving accounts are the only for sure way to lose buying power and get taxed on it at the same time. Losing around 1% in value per year isn’t exactly something you make up in the long run.
Now suppose you invest that money into the SPY which goes up 10% annually on average, you would have $11,000 after 1 year, on average and because you only need $10,300 to keep the same buying power not only is your paper money increasing but you’re buying power is too.
And suppose you educate yourself to make 20%, 30% or more off of your money annually, that would do so much more for your wealth then a savings account ever could. Also what is the limit on the return you can expect from the market? There isn’t one, your returns can be as large or as small as you can possible imagine and shoot for.
That isn’t to say the markets are without risk. You always have the chance of losing money in the markets. But if you manage your risk and let your winners ride it can be a great place to make money.
For more information about the stock market visit http://www.stocks-simplified.com
This way they can go for the sure thing, the government insured return, but what are you actually getting when you invest your money into a savings account? Say your bank pays you 2% interest in your savings account, and you put $10,000 into it.
After 1 year you have $10,200 and it appears you have found a safe way to let your money grow. But hold on; let’s look at some facts first. Inflation normally hangs around the 3% range. This means that in order for you to have the same buying power as you did last year you need to have $10,300.
So even though you made $200 in paper money, you’re buying power actually decreased by $100. And if you factor taxes into that you will find that saving accounts are the only for sure way to lose buying power and get taxed on it at the same time. Losing around 1% in value per year isn’t exactly something you make up in the long run.
Now suppose you invest that money into the SPY which goes up 10% annually on average, you would have $11,000 after 1 year, on average and because you only need $10,300 to keep the same buying power not only is your paper money increasing but you’re buying power is too.
And suppose you educate yourself to make 20%, 30% or more off of your money annually, that would do so much more for your wealth then a savings account ever could. Also what is the limit on the return you can expect from the market? There isn’t one, your returns can be as large or as small as you can possible imagine and shoot for.
That isn’t to say the markets are without risk. You always have the chance of losing money in the markets. But if you manage your risk and let your winners ride it can be a great place to make money.
For more information about the stock market visit http://www.stocks-simplified.com
Wednesday, December 17, 2008
Changing your trading rules
Changing your trading rules can be a good approach if your rules aren’t working. But if they are there is no need to change them just because you have a few bad trades.
You have been good, following your trading rules and having some success. But you start to notice some flaws in your approach. You will from time to time enter trades where you lose money and are forced to exit.
You also see other opportunities that you have missed because they did not give you an entry signal. This makes you upset. You now want to remake your rules one that would have allowed you to get into those opportunities. You also make new rules that will not allow you to get into the losing trades.
If this sounds like you, be careful. Every system has its share of winning trades and losing trades. You cannot just go dumping your rules and trying to create new rules every time you see a missed opportunity. This is especially true if you are having success following your current rules.
Remember your goal in trading is to win on average. You may lose a few small trades here and there but you should also be winning a few big trades here and there as well. If you are winning don’t try to change it.
I always hear people say I wish I would have bought Microsoft when it started. I would be a millionaire by now. My response to that is why would you have bought Microsoft then? Did it give off any buy or sell rules at that time? Or would you of simply put your life savings into a stock no one knew too much about and hope for the best.
Rather than looking at opportunities you have missed and saying I should have gotten into that, how about developing a system that works in the long run and following that system.
For more information about the stock market visit http://www.stocks-simplified.com
You have been good, following your trading rules and having some success. But you start to notice some flaws in your approach. You will from time to time enter trades where you lose money and are forced to exit.
You also see other opportunities that you have missed because they did not give you an entry signal. This makes you upset. You now want to remake your rules one that would have allowed you to get into those opportunities. You also make new rules that will not allow you to get into the losing trades.
If this sounds like you, be careful. Every system has its share of winning trades and losing trades. You cannot just go dumping your rules and trying to create new rules every time you see a missed opportunity. This is especially true if you are having success following your current rules.
Remember your goal in trading is to win on average. You may lose a few small trades here and there but you should also be winning a few big trades here and there as well. If you are winning don’t try to change it.
I always hear people say I wish I would have bought Microsoft when it started. I would be a millionaire by now. My response to that is why would you have bought Microsoft then? Did it give off any buy or sell rules at that time? Or would you of simply put your life savings into a stock no one knew too much about and hope for the best.
Rather than looking at opportunities you have missed and saying I should have gotten into that, how about developing a system that works in the long run and following that system.
For more information about the stock market visit http://www.stocks-simplified.com
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