Tag Archives: money

Stock Trading

Determining Where To Invest

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There are quite a few different types of investment vehicles on the market, and there are several factors, which you should use to determine where you should invest your funds.

Of course, determining where you will invest starts with researching the different kinds of investment available, determining your risk aversion, and determining your investment style and your financial aims.

If you wanted to purchase a new car, for instance, you would do a fair bit of research before taking a final decision and a making a purchase. You would never think about purchasing a car that you had not fully investigated and taken for a test drive. Investing your money works in very much the same manner.

You would, of course, learn as much about the investment as possible, and you would want to see how past investors had fared as well. It’s just common sense!

Does learning about the stock market and investments take lots of time? Yes, but it is definitely time well spent. There are numerous books and websites on the topic, and you can even take college level courses on the subject, which is what stock brokers do. With access to the Internet, you can actually play the stock market with fake money in order to get a feel for how it works.

You can make pretend investments in a pretend portfolio often called a ‘Wish List’ and see how they fare. Do a search with any search engine for ‘Stock Market Games’ or ‘Stock Market Simulations’, although almost every online stock broker provides these services. It really is a great way to commence learning about investing on the stock market.

Other types of investments outside of the stock market do not always have simulators, so you will have to learn about those types of investments the hard way – by reading.

As a potential investor, you should read every you can possibly get your paws on about investing, but make sure you start at the lowest level of investment books and websites, or, you will soon find that you are are hopelessly confused.

Finally, speak with a financial adviser. Tell her your aims and ask them for their suggestions. This is what they do for a living! A good financial adviser can easily help you determine where to put your money, and help you determine a plan to achieve all your financial aims. Many planners will even show you about investing along the way, so make sure to pay very close attention to what they are telling you!

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Forex Trading

Basic Understanding Of Charting Techniques Used In Technical Indicators

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Despite the fact that there are normally several chart types, the mostly used are line chart, the bar chart and the highly popular chart which is the candlestick chart. Charts and chart reading and understanding are essential for implementing and applying technical indicators.

A line chart is rarely put into use regularly a lot of now days. It was initially the essential chart used prior to the arrival of the personal pc. At that time, stock price information was documented by hand, considering that solely final prices had been recorded. The line chart was created joining the final prices.

With regard to a bar chart, the highest in addition to the very least prices within a prescribed span of time (minutes, hours, days, weeks, or months) can be linked with a vertical bar. The initial price might be displayed by way of a tick mark at the left side; the fnal price is represented simply by the tick mark at the right side. The bottom and the top of the vertical bar symbolize the cheapest in addition to highest prices involving the span, respectively. The bar chart is utilized mostly in Western technical analysis.

The beginnings of candlestick charts was in Japan several hundred years ago. It was not until 1990 that the world knew about it when it was introduced in his book Candlestick Charting Techniques (Nison, 1991).

Candlesticks basically outline price variations that occur during a specific time.the candlestick body display the price change that occurred between the market open and close during the given time span. The candle is shown white if the closing price is higher than the opening price, but shown dark when the closing price is lower than the opening price. Candlestick can be shown in a body or a body with short and long wicks. When it comes to Candlestick charts, the subject is huge and needs a separate study.

Looking at price movements of 100% and more it may be a good idea to make use of a logarithmic scaling on the vertical price axis of the chart. If you are employing a scale of five points on a linear scale, a price change from $15 to $30 comprises three divisions, whereas a price variation from $30 to $60 consists of six divisions. This means that the distance on the vertical axis from $30 to $60 is twice as large as the one from $15 to $30. On the other side, a price move from $15 to $30 or from $30 to $60 equates to the same 100% price increase. A price moving from $15 to $30 or from $100 to $115 is the same comparable on a linear scale. Evidently, this really does not allow for a good graphic understanding associated with exactly what the price change definitely offers.

When stock price moves from $15 to $30 , this price movement is measured as 100% price move but when the price moves from $100 to $115 , only 15%. In order to have the same distance on the vertical axis display the same percent increase in the price, you will need to employ the logarithmic scale. So when using the logarithmic scale, you can a price increase of 100% when the price move from $30 to $60 similar to a price increase from $15 to $30. So looking at the chart will give more meaningful visual representation.

The moment there are sizable price movements, using a linear scale will constitute a disadvantage. It is basically not possible to sketch a linear scale underneath a upside trend or possibly a downside-moving trend. However, the majority of people use the linear which is acceptable provided that the move is within a very small price range. Logarithmic scale is more important when it comes to long-term time ranges such as weekly and monthly charts, mainly because the price changes are more noticeable. The best solution to this situation is to apply logarithmic scales of price movement always.

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Forex Trading

Back Testing Your Trading System-Know These Shocking Limitations

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A trading system might consist of a few indicators and a number of rules that tell when to enter the trade and when to exit the trade. Trading system is considered to be proven and tested if there is some date that supports its performance under live market trading conditions. However, it might not be possible to test a trading system quickly under live trading conditions. To overcome such problems, backtesting has been developed. Backtesting is done with the use of a software.

For this you can do back testing. Back testing is a method that uses historical data to test how well your indicators work in a particular market. You can use back testing software that enables you to look at the past market data and test how well the indicators and your trading system have worked in the past market.

There are many problems with historical data. There is no slippage in backtesting. Slippage is one of the most important problem that a trader faces while trading live. The other problem that the backtest ignores is the widening of spreads under volatile market conditions. So backtesting results are no guarantee that the trading system will perform well under live market conditions. Things that worked in the past might not work now. Similarly something that didn’t work in the past, may work now! You never know!

What we can say is that no two trades are exactly alike. So when you look at back testing results, you should look at them with scepticism. But it doesn’t mean that backtesting is entirely useless!

Some markets are highly seasonal. For example, if you are a commodity trader and tend to trade agricultural commodities like the grain, seed or the livestock, these have a fixed planting and harvesting cycles.

For example, some markets especially the commodities market is highly seasonal and cyclical in nature. Now in other markets, you might not find any seasonal trends. For example, there is very little seasonality in curreny market or the bond market. In case of the stock market, there is much talk of the January Effect. Well, it is there no doubt about it. Some years, it is highly pronounced and others it is not that pronounced. Similarly stock prices tend to rise at the end of each month and the first few days of the new months. The reason for this is that many institutional investors tend to put the new funds to work at the end of the month and the beginning of the new month!

US Dollar Index trendlines might last for months to years. In other markets too backtesting can help you figure out important trends that lasts for last times. Backtesting can help you figure out how long a trend might last in a particular market.

But to tell you the truth, backtesting can only give you a rough guess about the performance of the trading system under live trading conditions. There is no substitute for live trading results!

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