Category Archives: Stock Trading

Stock Trading

How To Make Gains In Virtual Stock Exchange

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Virtual stock exchange is a simulator game where you pretend to invest real money in shares. Mostly, you will be competing against other fantasy traders. In most sites you will be able to see your standings relative to the standings of other players. One of the best things about these games is also one of its worst things. If you win thousands of dollars you win nothing. Also, if you lose thousands of dollars you lose nothing.

Most techniques that are applied in stock market trading to gain profits are also applicable in paper trading. The essence of these games is to give you the trader some good trading experience before you can venture into the markets. You also get to learn tricks and tactics that can see you make some good profits in trading stocks.

Most sites usually give their players virtual seed money which they use to invest. The money could be predetermined or you could select your desired start up amount. Basically, most of the fantasy trading websites are usually easy to joint; you do not have to pay anything. You will however find a number of websites that allow their players to seed in real money maybe ten or twenty dollars. These sites offer payment if you make profits.

Basically, your portfolio rises depending on whether the stock you bought is doing well or not. You may opt to play against your friends or even join the public platform. Most of these sites usually portray the prices as they appear in the stock market . You do not have to log in to know how your stocks are doing. You can just watch the news and you will know whether you are making profit or lose.

Other paper markets use statistical analysis to determine the prices. These prices do not reflect what is happening in the real market though they may bare names of real companies and firms. In most instances, you will find that fantasy markets that do these also allow their traders to profit from their trades.

To make virtual profits in these websites, you must be able to analyze the markets and know when to enter or exit trades. Most of these sites offer analysis tool that you may use to determine the price movement. Of course you become good using any of these tools with time. These sites also offer their members the latest news updates to help them with fundamental analysis.

Fundamental analysis is a way of analyzing the market in regards to the daily happenings. For instance, if a company was to report that it is struggling with debt, then this will signal most traders that prices are about to fall. The right thing to do would be to exit the share in question. With time this kind of training prepares you a great deal for the markets.

It is important to understand that trading in shares carries a substantial amount of risk and is not advisable to all investors. You may receive all the training you can get in the virtual stock exchange but things are different when real money is involved. In most cases, you will find brokers advertising in the fantasy trading website. You can work with these brokers once you decide to join the real thing.

You can learn all about the techniques of online investing without risking any money. Check out the real time virtual stock exchange for more details.

Stock Trading

My Three Most Important Day Trading Rules

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One of the keys to being a successful day trader is to have a list of rules that you consistently follow. Unlike a regular job where you would have a boss looking over your shoulder, as a day trader you’ll be your own boss and thus be responsible for your own results. By writing down and following your day trading rules, you’ll create a system that reinforces your trading discipline and prevents you from making costly errors. In this article, I’m going to share my three most important day trading rules.

Rule #1: Manage Risk On Every Trade

This rule is really the foundation of my trading philosophy. It means that on every trade I make, my first consideration is not how much potential profit I could make, but how much money I could potentially lose. Too many traders focus too much on the potential profit and overlook the importance of risk management. Before I make any trade, I know what my downside is and the price at which I will exit the trade if it goes against me (my stop-loss). This ensures that no single losing trade will be catastrophic. As a trader, my goal is to hit consistent singles and doubles and not necessarily home runs.

Rule #2: Reduce Afternoon Trading

Another key to learning to be a consistently profitable day trader is to understand the significance of the time of day. With regards to trading opportunities, not all times are the same. Commonly, you can find a lot more volatility and volume in the stock market at the open and close of trading and a noticeable lull in trading activity during the middle of the day. Considering that day traders need volatility to make money and also need to overcome their transaction fees, trading in the middle of the day is normally a bad idea. To implement this rule, I keep my attention on the clock and significantly reduce my position sizes and risk in the middle of the day (commonly from 10:00 am -2:00 pm CST).

Rule #3: Review Every Trade I Make

I view every single trade I make as a learning experience, both to learn more about the tips and techniques I’m applying in addition to obtain information about the current market. One of several beauties of trading is that you get immediate feedback on all your actions. During this review procedure, I focus my attention not on the end result from the trade but on the decisions I made. Was my position sizing suitable? Should I have moved my stop-loss? Did I follow my risk management plan? Just like any experienced trader will tell you, there are lots of occasions where bad trades result in being profitable while outstanding trades don’t work out. To be able to improve as a trader, it’s important that you learn from each and every trade you place.

Conclusion

By simply following these particular day trading rules, I know that I can be consistently successful and create exceptional risk/reward trades. Even though risk management might sound like an fuzy concept, I implement it by being aware of my stop-loss well before placing any trade. I’m also aware of the most favorable times to trade and restrict my trading when situations aren’t perfect. Lastly, I gain knowledge from every trade I make by having a comprehensive review process. Take time to jot down your trading rules to give lucidity to your trading and be sure you remain self-disciplined.

For more tips on day trading, make sure to get your free Beginner’s Guide To Stock Trading to learn more about day trading guidelines from the best internet stock trading site.

Stock Trading

Benefits of Trailing Stops

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A trailing stop is simply a stop loss order that moves up as the stock moves up but doesn’t move down as the stock moves down. For instance a 10% trailing stop on a $100 stock would start off at $90 if the stock moves up to $110 the stop would also come up to $99. But if the stock fell at this point the stop would stay at the same level and get you out if it dropped to $99 or lower, thus limiting your losses while maximizing your gains.

Creating trailing stops has its many advantages.

1. Limits Loss

No matter how good of a trader you are you will eventually have losses. You will need a way to limit them so that they do not affect your overall return that much.

If you decided to place a 10% stop for instance you would be risking only 10% of the investment that you just made. If the stock suddenly pulled back 50% you would get out near the top and could wait for it to turn around before getting back in.

2. It Does Not Limit Gains

The second big advantage of trailing stops is that they do not limit your potential gain. If you decided to buy a stock and then place a 10% stop loss on it you would just be limiting your potential loss, not your potential gain. The stock could go up to infinity if it wants to and you would benefit from it, only once it pulls back 10% would your stop kick in.

3. The Emotions Are Taken Out of Trading

Everybody has emotions. But when you are dealing with money those emotions can affect you in a negative way as they make it harder to think clearly.

Creating your own game plan is important. But it is also important to stick to your plan and not change it every 5 minutes. That is why trailing stops are so powerful because you just set it up and never have to make another decision about the trade again.

A trailing stop will follow the stock up and exit as soon as it turns around. Really the only thing you need to do is to find a strong stock and set up the trailing stop on it.

This way you can have a computer follow your “game plan” because they will likely do it better then you.

To find more about the how to use trailing stops or to get other trading tips visit Shaun’s site which offers stock market tips. Check here for free reprint license: Benefits of Trailing Stops.

Stock Trading

A Couple Of The Interesting Facts About Covered Calls

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Selling covered calls implies a prediction or belief that a particular stock price will remain the same or increase within a finite period of time. The most common length being a 3 month option. Profiting from such a prediction is the motivation why the holder of a stock will consider writing or selling a covered call option. The same, but opposing viewpoint is held by the buyer of that same option.

In a nutshell, the express purpose of selling a call option, and or buying a put option, which is the other side of the trade, is to realize a benefit, or hedge against a loss. The different ways and means to achieve such a goal is made clear once a basic understanding of how and why options work.

Fearing a lack of supply or an unanticipated rise in the cost of a needed commodity was strong motivation for the consumer of a staple to enter into an agreement with a seller to hedge or prevent such an occurrence from causing a loss or financial hardship.

Conversely, the seller of the very same commodities hoped to ensure that the fruit of his labor retained it’s value long enough to sell off his harvest and thus avoid falling prices. This simple dynamic required a buyer and seller to agree upon a contract where each hoped his best interest’s would be well served.

The modern day options market provides the same essential function. There still exists the same dynamic between producers and consumers of commodities. The benefits enjoyed by the commodity producers and consumers lent itself well to serving the same function on behalf of stock and bond holders.

It is essential to understand that what the option sellers and buyer are betting on is the perceived change in value of a stock out into the future. More often than not the contract is never actually fulfilled, meaning that the buyer does not take possession of the stock. The buyer or seller may simply trade out of a contract. Many option contracts expire without being exercised. This produces a net gain for the seller, and a loss for the buyer.

The seller or writer of a covered call option is offering to sell an obligation. This is a commitment to sell at a certain price, a specific number of shares, up to a certain date into the future at which time it expires. This obligation is expressed in amounts of 100 shares, referred to as a contract. Ten contracts equal a thousand shares, and so on.

The buyer or holder of the option is securing a right, which enables him to purchase the shares of a company, at a agreed upon price, up to a certain date into the future. The seller of a covered call option seeks to realize an additional means to profit from a stock holding, in a way that does not rely upon dividends, earnings per share, or a rise in the stocks price.

The covered call premiums can also reduce the the cost of his initial purchase if he sells contracts that equal the number shares purchased. The results however, are dependent upon the value of the under-lying equity upon expiration. In essence, covered calls are the method employed by a seller to lower his actual cost per share, or to realize an additional means of profiting from a stock holding.

Learning the top option trading strategies will help you be a successful market trader. Covered calls make it possible to protect your investment.

Stock Trading

Some Less Common Ratios You San See When You Invest In Stocks

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One way of investing into the stock market is to find strong companies that are fundamentally sound and hold onto them for the long term. When you try this you notice that there are going to be ups and downs. The idea is to end up with an investment that will stand the test of time and grow bigger as time goes by.

What are some of the ratios you can look into? First we can look at some of the less common ones.

The solvency ratio equation is one such ratio. It can tell you how likely it is that the given company will be able to pay for its long term debts. The larger the number on this ratio the better off you are. If the company has a ratio that is under 20% it is suppose to be bad, above it is good.

Another ratio you can look into is the Gordon growth model. This tries to estimate how much the stock is worth based off its future dividends. The disadvantage of this strategy is that you don’t exactly know what the future dividends of the company are going to be so it takes some guesswork.

The levered free cash flow formula is a ratio that you can use in order to see how strong a company is. This tells you how much cash a company has after it has paid off all of its debts. The larger this number is the more cash the company has and it may even mean you get a bigger dividend.

Those are just some of the ratios which you can use. It is also a good idea to remember that these ratios are open to interpretation. Every industry is different so you have to use some common sense with it.

Stock trading can be very powerful, here are some stock tips to help you learn stock trading.