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Monthly Archives: March 2010
Stock Swing Trading: What It Means
Stock swing trading is said to be similar to what is called fundamentalist trading. This is when companies are traded after being analyzed for things such as corporate events that involve reorganizations, stock splits or other events, but the position is held for longer than a day. Experts will tell you that this is a somewhat simplified explanation of what stock market swing trading is; further stating that the true definition lies somewhere in the middle of day trading and the more advanced trend trading.
But a trend trader usually examines the long term tendencies of the stock being considered and will occasionally hold onto the stock for weeks or even several months. People who focus on day trading stocks normally retain a stock for just two or three minutes or perhaps one or two hours, however it is never longer than a single day.
The investors who deal with stock swing trading will usually hang on to a stock for a certain period of time; usually a couple of days or perhaps a week or two. So it actually lies between the two extremes of the trend trader and the day trader. They normally trade stock on where it is in the intra-week or month swings between pessimism and optimism.
When experts are queried about the right way to swing trade stocks successfully, they claim that choosing the right stock is, needless to say, important to success. It’s acknowledged that the perfect stocks are those called large cap (companies which have capitalization value of more than $10 million) and they are the ones which are most actively traded on key stock exchanges. If there is a vigorous market, stocks will swing between low and high extremes which are loosely defined, and the swing trader then rides the swing in one direction for a couple of days and then quite possibly moves over to the other side when the stock changes its course.
You need to keep in mind that in either market extreme, bear or bull market, stock swing trading can be a little more difficult than in a market that lies somewhere between those two extreme markets. With those kinds of extremes, stocks that would normally be fairly active may not show that same up and down swing and movement that they might when the indexes have remained pretty stable and steady for a few weeks or a month. This means that the swing trader will probably have the best luck when the market has not really moved much; perhaps rising for awhile and then falling for awhile with the pattern repeating itself over and over for a period of time.
Swing trading stocks can be difficult but if you have the right teachers and instructions, you can profit from it. No one is promising you early retirement, but you might even be able to quit your day job and trade stocks professionally.
Short Interest Ratios And Short Selling Secret
Short selling is a way to make money when a security price starts falling. When you expect a stock to fall in price, you borrow it from your broker and sell it. After sometimes buy it back in order to return it to your broker. The difference between the selling price and the buying price in this case is your capital gain.
Now for short selling to work, the stock price should go down otherwize, you will make a hefty loss in case the stock price starts to go up. Since, you are trading with a borrowed stock, you have to return that stock to your broker. In case the stock price goes up, you will have to buy it back at a much higher price with a loss. Now, when you go short and the market suddenly turns against you in the sense that it goes in the wrong direction, you are in trouble. You want to buy back the stock but the price is continously going up. The harder it becomes to buy back the required number of shares, the more desperate you will become and the higher the prices can go before you are able to buy back the required number of shares and return them to your broker. So in a way, short selling is tricky and must only be practiced by the experienced traders.
Now, in other markets like the currencies, futures or the options market, you don’t have to borrow the security in order to go short. You can straight away go short by selling that security or currency in the market. Now, short selling in stocks is done by investors with the expectation of a making a capital gain when they expect that stock price to go down in the near future. Short selling is also done by the fund managers to hedge their stock portfolios.
In the case of stocks, you need to monitor the rate of short selling in order to gauge investor expectation as well as the future market direction. Now, NYSE and NASDAQ report the short interest in stocks listed with them. Now this data is released on monthly basis as the brokerage firms may need a while to report how many shares have been shorted and then report that data to the exchange.
Now this number is known as the Short Interest Ratio. Short Interest Ratio is a very important number for short sellers as it can give important clues about the investor expectation to the short sellers.
So what is the Short Interest Ratio? Short Interest Ratio is the number of shares of a particular stock that has been shorted in the market. Plus the average daily volume for that stock in the same month and also the number of days of trading at the average volume that it would require the market to cover the short positions in that stock. It also reports the percentage change in the short positions from the previous month.
An increase in the short interest ratio means that the investors are becoming nervous about the stock. Now, this number is not calculated frequently. What this means is that the trader cannot get a lot of information out of it. But still a high short interest ratio means that the stock prices will go high soon as the investors with short positions become desperate to buy it back. High Short Interest Ratios along with bullish indicators is an indication that prices are going to go up soon rather than down.
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Getting the Better of the Markets
Investments can be a problematic prospect, especially for the average investor whose only aim in to grow his or her nest egg. Indeed, in some regards these investors are the backbone of the industry. That being said, they can also be some of its most dramatic victims. One mismanaged trade can be the ruin of any fortune — and often is.
For this reason alone, many go-it-alone investors prefer to add a new dimension to their investment strategy: time. To the uninitiated, this means they prefer to trade in futures. This means investors can utilize traditional commodities or E-mini index funds to leverage the projected value of commodities at some point in the future — hence the name.
Given the fact that futures trading is not bound by the open and close of Wall Street, an investor can enjoy the privilege of round-the-clock trading via any global exchange. To be sure, the futures trader does not look to New York as much as he or she looks to the Second City, Chicago. The Chicago Mercantile Exchange is the mecca future traders turn to seek their fortunes.
Although futures allow for greater investment flexibility, it should be noted they require ready access to significant amounts of liquid capital. That is, they require access to cash — and lots of it. This is so because should your E-minis drop below the CME margin call, you will be required to ante-up, as it were. You can’t take your place at the roulette wheel unless you can afford to buy the placards, you see.
With a handful of E-minis, some commodities traders can reap a veritable financial whirlwind. What futures promise — and often deliver to the savvy strategist — is the potential for dramatic gains. Of course, this is subject to training and it would be in the best interests of the would-be futures traders to enroll in a futures trading course before embarking on too rigorous a trading regiment.
Heed the better part of your good sense and enroll in a reputable futures trading course prior to frittering away your hard-earned capital.
Stock Market Trading And Analysis for 09/11/2008
Another day of great reasons to subscribe to these videos! See for yourself how using the videos and the chatroom combine to give you excellent analysis in the current market uncertainty! This is an important video to watch! Thisvideo series is geared towards Investors, Swing Traders, and ultimately Day Traders who want to be armed with key observations for the upcoming major market move that will be happening shortly! Remember: You will consistently hear me reference previous videos during my nightly presentation. That’s because each new video builds upon the last as we demonstrate real world trading and investment analysis. Take the time to review all of our videos to expand your market awareness! You’re welcome to subscribe to our videos to keep up to date on the latest market analysis and techniques. Thousands of your fellow traders have done just that. If you want to be armed with the same education as them, subscribe. Don’t worry, we in no way shape or form, spam our subscribers. You become like family to us! Important disclaimer and reminder for all Traders and Investors! These videos are for educational purposes only. Equities, Futures, Options, and Currency Trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Absolutely do not trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell …