Category Archives: Stock Trading

Stock Trading

Five Tips to Choosing the Right Trading Charting Software

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An effective and well-tested trading system is perhaps your most important tool as a trader. It’s crucial to keep in mind though that even the most carefully plotted plan can still fail without supporting trading charting software.

It isn’t a secret though that lots of traders find it hard to make choices because there are too many. The problem becomes more complicated when you realize that all software makers say they’re the best. How can you pick from all these top products?

As you might have already guessed, your first point of assessment must be a product’s reputation in its niche or market. Determine what people are saying about it. The internet has made it very easy for anyone to post positive or negative feedback online so you’re bound to find a great deal of these on various sites including social sites.

Usually though, sterling reviews shouldn’t be the only basis for your choice. It’s always possible for any product owner to generate artificial positive feedback. Hence, you’d also have to look into other factors such as product longevity. Investment or stock charting software that’s been around for years says a lot about its performance. Common sense dictates that a product that has been able to stand the test of time is reliable simply because buyers or subscribers will not put up with an unreliable one for long.

Flexibility is also a hallmark of a good charting tool. For more experienced traders this means, having room to custom code their preferences beyond what a package provides as default options. Even if you’re just a beginner, you should steer clear of products that offer to do everything for you. Common sense should tell you that no auto tool can replace human judgment and capacity for analysis. Hence, you’re most likely headed into a bad situation if you leave everything in the hands of a tool.

Naturally though, it is vital that your tool be both flexible and automated. Although it’s ideal to call the shots, you’d also benefit from quick and instant results. For instance, you would want to be able to easily determine which stock options match certain predefined criteria. Excellent software with scanning abilities can allow that.

Another important trait to look for in a package is its ability to use different data plans. Some software makers offer cheap packages that quickly lure beginner traders. Later, they sell expensive partner data plans that are exclusive to their tool, thereby forcing traders to pay up. The best option is to buy a charting package and then use a separate data plan of your choice that you can use with it.

You can’t always make a decision even after careful and methodical research. If you find yourself in this situation, your next best option is to first list down the software options which you think are the absolute cream of the crop. Next, pick those that provide free trials. This way you can test tools at no cost.

There’s no beating trading when it comes to providing the opportunity for financial freedom. However, it’s equally likely to get you into a financial rut if you don’t have good tools so make sure you choose the best charting software.

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Stock Trading

How to Make the Most Out of Bollinger Bands?

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Below is a chart of Apple. The blue bands represent the standard Bollinger bands.

The chart displays a lot of useful information. It is evident from the chart above that the price follows the upper band at the end of May to the beginning of June and in July. In the above chart, you can also see lots of instances when the center line supports or resists the movement of price from one band to the other.

It is crystal clear that in the beginning of May and then in June, the stock overbought and the price went down on these instances.

Most of the programs utilized for charting with Bollinger bands use the settings as BB(20,2.0), meaning regular 20 bars with 2 standard deviation numbers. This is the typical view, this is how everyone uses this fantastic tool for trading. These methods are effective, but there are other more efficient techniques that you can use.

Start thinking differently from the common people and you will be able to get more advantage from the signs of this instrument. The next chart is based on BB(13, 2.0), meaning 13 bars are used rather than the 20.

You can get more details from this graph. The blues bars show the standard 20 bars and the bars are for the 13 bars. As you can tell that the price moves more closely to the upper red band at a number of places. On all the three uptrend, it appears to paint a far greater boundary.

Most importantly, in this graph you can also note that the lower band provided support in the middle of May and middle of June, which was not shown in the previous graph. The 13 bar input appears to improve the accuracy of the price motion shown by the graph.

You must be thinking now that this is not a surprise. If we keep on lessening the lines and take them to just one line, the it would just trace the price line precisely when taking a look at it retrospectively. But, if you wish to be one step ahead of the people with intraday trading then you should test out various time frames for the bands.

Here’s a graph with an 8 period Bollinger band added. Have a look at the graph and see what you can foretell about the trend and the support levels.

Most people trade Bollinger bands wrong, don’t be one of those individuals. If you understand how to use Bollinger band correctly, they can prove to be of great help. Using Bollinger bands indicator is a great way to find out which trades will be worthwhile for you.

Stock Trading

How to Trade Like a Pro

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If you could wave a magic wand, you’d probably want to turn yourself into a pro trader. Sadly, you can’t do magic and you’ll have to learn to succeed on the trading floor the hard way. The good news is that it isn’t impossible at all to excel in it. You just need to follow a few good tips.

The first thing you need to make sure you’ve settled is the market you want to trade in. There are many different options for you to consider. You might be most familiar with stock trading but you can also go for Forex, commodities and options among others. Stocks however are the easiest for beginners. If you’re just starting out, try stock trading first before you move on to more complicated investment types.

With a market to start trading in, you then need to set in place a reliable trading system. What many traders find is ideal is to create custom systems. You also have the option though to simply take an existing and well publicized system, make adjustments to it and use it as your own.

Having a system is only part of your preparation done. You also need to spend time testing it. This is the only way you can ensure your plan isn’t flawed. The best way to go about this is through back testing. In this process, you use your system with various historical data. If it comes out a winner, it’ll be safe for you to conclude that it’ll work well for you in actual trading.

The best trading system should be able to do wonders for you. Sometimes though, the flaw lies not in the system but in the person. You’d be sabotaging your own success if you don’t have the discipline to let your system run the show. You should adopt the type of trading psychology that doesn’t interfere with a solid system even if it occasionally makes you lose.

With a system in place and the right mindset to accompany it, one final tool you’ll need is a charting package. Choosing one isn’t as easy as it seems though. There are simply so many to pick from and if you don’t know which features you need, it’s easy to get lost in a sea of options. To make sure you get the best tool possible, go for one that offers a free trial period. This way you can test it at no cost.

Obviously, you also need to pick a reputable licensed broker. You can either go for a full service or a discount provider. Those that offer full service can give you trading advice and tips while discount providers are likely to just place trades for you. If you’re confident that your system is a well tested one, there might be no need for you to get the services of a full provider. Your system will be all you’ll need to pick the right trades.

It doesn’t take a genius to figure out that it’ll probably take years of hard work and effort to become a professional at trading. For beginners though, these tips and tools should be more than enough to get you started the right way.

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Stock Trading

How To Find Short Term Trades with Bollinger Bands

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What should we compare prices to when we wish to buy low and sell high? Bollinger bands presents tools that will help you answer that question with dependable statistical analysis–particularly if you use them in the right way. There is a quite unconventional but still profitable strategy of making use of Bollinger bands as buy signals. In this article, you will learn how you can use the outside of Bollinger bands to determine good purchasing opportunities.

Do you remember the fundamentals of Bollinger bands? The bands represent volatility measures that are located above and under a moving average. The standard deviation is used to calculate the volatility measures.. The Bollinger bands narrow as the volatility decreases and widen when the volatility soars. When the volatility rises or reduces, standard deviation changes with it. Owing to the dynamic nature of Bollinger bands, it is possible to use them on different securities with the default settings. In order to use the approach explained in this article, the default settings of Bollinger bands need to be changed.

Many charting packages can make the changes to Bollinger bands specified here, but if you don’t have one that can do so, or if you don’t know where to begin, try out freestockcharts.com. The charting examples discussed in this post use the very same website.

There are four steps that you have to do:

1. Use a moving average price for a proxy for the trend, back testing results reveal that a 44-period simple moving average works the best for this method. Having said that, it is not imperative to use a 44-period average, almost any moving average between 40-periods and 100-periods would be suitable here. You can get an idea of trading from the slope of this line, when it is sloping up, long and when it is sloping down, short.

2. As opposed to the default 20-day average for normal trading, you should utilize a 5-day average. It means that we will trade anywhere from one week to three months.

3. The default standard deviation is set to 2. You need to change it to 1.4, so that it covers 90% of normal prices in the past week. When making use of freestockcharts.com change the Bollinger band indicator that you have applied. You need to change two things; the standard period from 20 to 5 and the standard deviation from 2 to 1.4.

4. You should look for buy signals when the moving average is sloping upward while the price is under the Bollinger band.

Take a look at the following examples:

This example is of the chart Disney (DIS), which is shown from January to March. As you can see that there were ten days in January when the price dropped under the Bollinger bands.

When the price falls under the Bollinger band, it is an entry signal given that after this point the stock turns up and continues to rise. To duplicate these indicators, you can use any charting package, which will allow you to edit the Bollinger band indicator that you have applied. As said before, you can do this by using freestockcharts.com. You have to adjust two things; the default period from 20 to 5 and the standard deviation from 2 to 1.4.

It is clear from the chart above that whenever the price drops under the Bollinger band, it goes up in the next 5 trading days. Thus, you can easily identify and use this entry signal. Don’t forget, that the moving average line has to be sloping up in order for this entry signal to offer optimum usefulness.

On the chart, should you have purchased on anyone of those ten days where DIS drops below the lower Bollinger band, it wouldn’t have been difficult to have a profitable trade. As you can see that each trading signal had a minimum of one day in the next week when the price went up more than it decreased. Also, in the next two months Disney increased from the entry prices by approximately 12%.

Through testing it has also been shown that you can win this trade over 70% of the time if you do two things: allow a three to five percent stop loss setting and take profit every time the price rises more than two percent from the entry point. Furthermore, about 10 to 20 percent of the trades you come across will be occasions where you can let the trade run in your favor past the initial two percent target. Trading can be easy and profitable by making use of these signals from the Bollinger bands.

In the next example, we refer to the chart XHB (Homebuilders) for the months of February to May. As you can see that in the month of February, there are 9 entry signals; instances where the price falls under the Bollinger bands.

As you can see in this example, if you purchased this stock at one of the entry signals in February, XHB increased approximately 10% over the following month. In case you are working with this method, then it is extremely important to adhere to all the instructions to letter without overlooking any single detail. Notice in this example, around May 15 there is just this type of detail. The 44-period moving average had sloped downward.

If you stick to the rule in step number one then the possibility of entering into a trade after May 15 would be eliminated. This keeps you from losing money by stopping you from buying in a downward trend market. As soon as the moving average peaks and starts to turn over, exit your trades and do not get back into any, with this method, till the moving average line is again sloping up.

There are various ways to use Bollinger Bands. This approach works well if you want clear, easy to understand, entry signals. Again, you must ensure that you follow the four steps to the letter so that you don’t lose money. A 44-period simple moving average is ideally suited to be used in this technique. Nonetheless, any moving average between 40-periods and 100-period moving averages will work almost as well as a proxy for the trend. Even though this method for making use of Bollinger bands may be a bit uncommon, it helps you determine those prices that are, literally, outside the lines and good candidates for unusual profits.

A good way to make profitable trades is with the aid of Bollinger band trading. Regardless of whether you trade forex, stocks, or even options, if you know what the bands are saying then you can readily make lucrative trades. If you’re a trader then you should learn how to trade Bollinger bands.

Stock Trading

The Risks Of Penny Stock Investing For The Inexperienced

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The perks that can be had from purchasing dangerous penny stock investing is recognized to attract a ton of newbies. It is of the utmost significance that care is taken so that they do not fall foul of some underhanded methods by unscrupulous and dishonest traders. In this short write-up we are about to shed some light on how some unethical groups of capitalists have the ability to maneuver penny stock markets for their own economic gain.

Penny stock investing can be extremely satisfying and a lot of fun too, since a business that has such a reasonable stock value can experience dramatic modifications over a really short time period.

Unfortunately this makes it a target for capitalists who are willing to break the regulations. By buying up a huge amount of shares in a business then releasing incorrect details about that business in order to get the unwitting public to flood in and buy up much more, they can see significant boosts in their very own initial investments. Whilst the general public are left with a container filled with shares that are worth far less than what they paid, the fraudsters will have already dumped theirs at the higher price and run for it.

This is known as Pump and Dump and is simplified by the reality that penny stocks are not as suitably regulated by the authorities meaning some of this dishonest behavior can slip by undetected.

This is simply one of numerous underhanded methods that wrongful investors can swoop in and make a ton of cash off of the general public and leave them scraping their heads about where their cash went. It functions as a crucial lesson for anybody aiming to enter penny stocks. Anybody reasoning about spending their difficult earned money in such a risky scheme ought to make themselves cognizant of frauds like this so that they do not come down with similar fraudulences.

There are a lot safer ways to make a living and if you are generally risk averse then you might wish to check it out at some alternatives to penny stocks. We have actually listed a number of links below to help you broaden your horizons and actually offer you something to think about when it comes to alternative job paths

This author has more than seven years responding to queries like “what are penny stocks?” You can read more on the subject at awesome-penny-stocks.net.