Moving averages are represented by a wave-like line that moves up and down as price in the underlying stock, index, or commodity rises and falls. This data can be constructed using short term or longer term time frames. A shorter term average will more closely mimic the price activity in a chart, a longer term average will more significantly lag price activity.

Moving averages are not magical numbers. They simply help investors and traders gauge the relative strength or weakness of what they are following. This is an attempt to follow a trend and allow price data to help provide perspective. Many individual and institutional traders work with them to identify areas of support or resistance in price on a chart.

Investors/traders are always attempting to create an edge, they are always looking for something to boost their advantage. Many traders both individual and institutional have come to rely on moving averages in an attempt to see more clearly, that which is obvious, that which is coming into view, and that which whose subtle movements suggest direction and influence not yet defined enough to act upon.

Moving averages of differing lengths can help us to identify more certainly the primary and secondary trends acting within a market. An average of 20 will behave differently than a 50 day while a 200 day will of course behave differently than either a 20 or 50. Synthesizing these data patterns into a trading plan is the challenge. The fact we can use this data to assess patterns and trends creates opportunity for us to profit.

You can apply moving averages to any time frame chart your software can create. They can be applied to 5, 10, 30, and 60 minute charts as easily as they can be applied to a daily, weekly, or monthly chart. Any price activity within the time frame being expressed can used to construct this data series. Your trading horizon, short term or longer term, should dictate which time frame to use for your trading activity.

Daily, weekly and monthly charts give you the ability to see trends that are developing and those that are in place. With moving averages you can quantify the evolution of price activity over time to help you devise strategies particular to your trading style.

For more information on how to trade the market and tools we use please visit: http://www.trendlinebreakoutstocks.com

Article Source: http://EzineArticles.com/?expert=Ray_Winder

Wikipedia’s definition of day trading is “The buying and selling of securities on the same day, often online, on the basis of small, short-term price fluctuations.” About.com’s day trading definition is a little bit different but carries the same tone, “Day trading (and trading in general) is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed.”

When buying and selling stocks, a day trader will generally select a style that is suited to that particular investor. For example, some may only hold shares or stocks a matter of seconds or minutes. This type of trading style is known as short-term trading. If the investor holds shares throughout the business day then this style is known as swing or position trading. Some day traders will even combine the investing styles but most will generally pick a certain style and stick to it.

There are different kinds of trades as well, such as counter-trend, ranging, and trend trades. Counter-trend trades go against the current stock price movement as in selling when the price is going up. Trend trades is trading in the opposite direction or trading in the direction of the price movement such as buying when the stock price is going up. Then there is ranging trades which are trades that move back and forth between two prices, generally used when market movement is going sideways.

Some investors will make several stock moves per day while other may only make one single trade in a given day. At the end of the day, it doesn’t matter how many day trades you have made but how much money you have made. This is truly what is important in the world of day trading online.

Larry Haywood is a publisher covering structured settlements and annuity payments.

Article Source: http://EzineArticles.com/?expert=Larry_Haywood

Two weeks ago it was negative surprises from the important housing industry, signifying it has not reached a bottom yet after all, and that the Chicago Fed National Activity Index, designed to gauge economic activity nationally, fell back into negative territory for the first time in four months.

Last week it was the shock of the dismal employment report for March, indicating the previous several months of jobs improvement were temporary.

This week it was the surprising jump of 20,000 new weekly unemployment claims, indicating the jobs reversal in March is continuing in April. There was also the first decline in the NFIB Small Business Optimism Index in five months. And the University of Michigan Consumer Confidence Index declined in April versus the consensus forecast of economists for further improvement in April.

The reports of recent weeks have cooled off global hopes that the U.S. economic recovery would continue to strengthen and provide support for faltering global economies, rather than have the faltering global economies drag the U.S. down with them.

The U.S. economic recovery also stumbled in each of the last two summers, but that was not the only catalyst for the U.S. stock market corrections in those two years. The euro-zone debt crisis was as big a concern.

Unfortunately, the euro-zone debt crisis, which seemed to have been resolved a few months ago by the bailout of Greece and massive infusions of extra liquidity into eurozone financial systems, has returned. And this time the focus is on Spain, a much larger and more difficult economy to bail out than Greece should it come to that. It was reported Friday that Spain’s banks had to borrow $416.7 billion from the ECB liquidity fund in March compared to $223.8 billion in February. Borrowing by all banks in the 17-nation euro-zone in March totaled $1.48 trillion, and Spain accounted for 28% of it.

European stock markets have been responding to the new debt crisis concerns (as well as their slowing economies) since early March, with markets in Germany, France and the United Kingdom already down an average of 8% since the end of February.

Meanwhile, concerns that China’s economy, the 2nd largest in the world, might be slowing to a hard landing were heightened by Friday’s report that China’s economy grew by 8.1% in the 1st quarter, down from 8.9% in the 4th quarter of last year, and below the forecasts of 8.3%.

Chinese Premier Wen Jiabao had projected China’s growth will slow to 7.5% this year, but a growing number of analysts believe it will overshoot on the downside into a hard landing, a concern enhanced by Friday’s report.

Meanwhile, Brazil’s government projects its growth rate, running at 7.5% in 2010, will be cut in half to just 3.8% this year.

So, it was another week of disappointing reports from all directions.

My Seasonal Timing Strategy remains in its favorable season and 100%, for the moment anyway. And my non-seasonal Market-Timing Strategy has come off its October buy signal, but only to neutral, not yet on a sell signal.

However, I suspect the next opportunities for profits may well come from the downside, in short sales and positions in inverse ETF’s designed to move up when markets move down.

On any sell signal, some of my favorites from the last two summer corrections will likely be my favorites again. They include the ProShares Short S&P 500, symbol SH, the ProShares Short Russell 2000, symbol RWM, and ProShares Short QQQQ (the Nasdaq 100), symbol PSQ.

I suggest, in preparation for the possibility of a correction, that investors familiarize themselves with the various methods of positioning for profits from the downside. The market usually goes down much faster than it goes up, making it more difficult for those who are not prepared. The market again demonstrated its tendency to go down faster than it goes up by recently losing more than two months of gains in just five days in response to unexpected negative economic reports.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

Learning to properly analyze trading volume is crucial if you want to make a lot of money in the markets. The skill of recognizing whether the bulls or bears are in control of a particular market, is almost like having a key to a treasure chest of virtually unlimited money.

The definition of trading volume

It is the number of shares or contracts traded in an individual security, or an entire market during a specific period of time. Basically, it is the amount of shares that trade hands from sellers to buyers as a measure of market activity. As an example, if a buyer of a stock purchases 200 shares, that would cause the volume for that period to increase by 200 shares based on that transaction.

The basics

If you get a big price gain in heavy trading volume, this tells you big players such as mutual funds and hedge funds most likely are buying. On the other hand, if you get a big price drop in heavy volume, it is pretty clear the big players are selling. A big price gain in light volume gives you an indication there is a lack of conviction in the move. Big players simply are not behind the move, and the stock will have a hard time holding onto its gains.

Supply and demand

Price-action is obviously important, but trading volume, the supply and demand, will best tell you what is actually going on with a stock, or the market as a whole. Our objective is to determine the balance of the supply and the demand. When the demand is greater than the supply, the price will rise, and vice versa. Remember, it is the action of the volume that tells us of the supply and demand. The price only gives us the value of the volume.

3 important types of trading volume activity

The first type is increasing volume during a price advance, with pauses or set-backs occurring on light volume. This type of action is indicative of demand being greater than supply. This is the type of price and volume action that favors a resumption of the advance. You will make excellent money if your stock is showing this kind of price and volume action.

The second type is when you get increased volume at the top of a price advance, and it lasts for a while with no meaningful gain of prices, that is called churning. Many times churning is indicative of a turning-point. Big players are getting rid of their shares right before the general market starts a correction, or even possibly a bear market. This type of action usually fools the general public.

The third type of trading volume has to do with a price advance that is struggling or acting very tired. This is the case when you see a stock, or the market in general, creep upward on light volume, and simply dies at the top. Basically, this indicates a lack of demand. There are few buying orders or selling orders. This action many times is telling us a reversal could soon be in the cards, especially if followed by increased volume on the down side. Heavy volume at the end of a move generally means a turning-point. Recognizing reversals or turning-points can make you a fortune.

Gary E Kerkow, founder of Tradingmarkets4u, is a stock and commodities market expert. He is a highly successful trader and instructor, with over 20 years experience.

Become a winner by following world-class trading recommendations.

Discover secrets of the world’s best traders and investors.

Learn how to receive a “free special report” on my “Stock Of The Decade”.

Visit my website at http://www.tradingmarkets4u.com

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Breakout trading is used by traders and investors to take a position within the early stages of a trend. This strategy usually can get you in near the starting point of a major price move. The key to making big money is getting aboard the right side of a major price movement. Then, as the market goes your way, you can strategically add to your position. It is wise to always practice sound money management. This can be achieved by implementing stops.

Definition of a breakout

Breakout trading involves a stock or futures price that moves outside a defined support or resistance level with increased or heavy volume. After the breakout, you would enter into a long position if the price breaks above resistance. You would enter into a short position if the price breaks below support. Many times you will see an increase in volatility, with prices usually moving in the breakout’s direction.

The best traders and investors use this strategy

Richard Dennis of the famous Turtle Traders used breakout trading to make hundreds of millions of dollars. This is after starting with only a few hundred dollars. Dennis completely understood that all trading is based on probabilities. He knew if you traded a stock or future at the proper breakout point, the odds were in your favor every time.

William J. O’Neil, founder of Investors Business Daily, and the winning system called CAN SLIM, is also a breakout trader. O’Neil looks for fundamentally and technically sound stocks that are market leaders. He will only buy a stock when it breaks through a key resistance area with heavy volume. O’Neil is considered by many to be the greatest stock market operator ever.

The flat base is a lucrative chart pattern

One of the best chart patterns for breakout trading is the flat base price structure. It moves pretty much straight sideways, in a somewhat tight price range. During much of the pattern, the volume tends to be lower than normal. Many times, the longer a stock remains in a flat base, the greater the price appreciation when the stock breaks out.

For a stock, the formation should be at least 5 weeks long, and should not correct more than 10 to 15% inside the pattern. You can draw a trend line across the top of this formation. The stock is bought as it breaks the trend line, and volume increases. The more volume on the breakout, the better. After the breakout, you can place a stop under the old resistance level, which now becomes a support area.

Here is a great example of breakout trading. A stock trades in a price range of 25 to 28 dollars per share for about 3 months. During the 3 months of this trading range, volume was usually lower than normal. The stock breaks out to $28.25 per share. The volume on this breakout is triple the normal daily average. This is your buying signal. It is wise to make sure your stock candidates are sound technically, and fundamentally. This will increase your odds for success.

Gary E Kerkow, founder of Tradingmarkets4u, is a stock and commodities market expert. He is a highly successful trader and instructor, with over 20 years experience.

Become a winner by following world-class trading recommendations.

Discover secrets of the world’s best traders and investors.

Learn how to receive a “free special report” on my “Stock Of The Decade”.

Visit my website at http://www.tradingmarkets4u.com

Article Source: http://EzineArticles.com/?expert=Gary_E_Kerkow

Big banks and financial institutions have the capital and agility to persuade large and medium cap stocks to move in a preferred direction. It may sound like they have the upper hand, but individual traders can join them in a move and profit from the ride.

Finding where the smart money is can be similar to a shell game, so how can you find where the smart money is going to strike next? The answer is simple: You find the top trending stocks! Strong trending stocks have major volume, a clear direction, and lots of liquidity – A.K.A where the smart money is. Wouldn’t it be nice to find a list of current strong trending stocks?

Now you can…for FREE! Simply click here.

MarketClub.com has been in the business of trend following for decades, and they are happy to announce that you can take a look at Today’s Top 50 Trending Stocks now…for free! This dynamic report will compile a daily list of market movers that can make a difference in your portfolio for 2012.

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In the Four-Year Presidential Cycle the market has a strong tendency to be positive in the last two years of each Presidential term. Within each year it tends to make most of its gains in its annual favorable season between October and May. Shorter term, it tends to be positive in the few days surrounding the end of each month.

Not as many are aware of the tendency for the market to run into trouble, even within its favorable annual season, when February rolls around.

Februaries have been particularly troublesome since 1999. It has been a down month in 8 of those 13 years, with an average decline of 4.3% in the down years.

But even that doesn’t tell the whole story. Obviously, a decline doesn’t start on the first day of February and end on the last day of the month each year. So even in years when February was an up-month it was still often involved in a period of market trouble.

For example, February was a positive month in each of the last two years, with the S&P 500 up 3.1% for February in 2010, and up 3.4% in 2011.

However, in 2010 the weakness came early, a 3-week market correction of 7.9% beginning January 19 and ending February 8. Last year the weakness arrived late, with a four-week 6.2% correction beginning February 18 and ending March 16.

So far this year there has certainly been no trouble. In fact, it’s been unusually smooth sailing, with none of the frequent, heart-stopping 200 to 400 point moves by the Dow in both directions that were experienced in the summer and fall. As of the close on Thursday the Dow has had only two days of triple-digit moves this year, and both were to the upside, a gain of 170 points on the first trading day of January, and a gain of 156 points on the 2nd trading day of February.

But there are now yellow flags waving, indicating the need to be alert.

They include that the extra exuberance of the best January in 15 years has the market quite overbought technically above key moving averages.

Then there is the high level of optimism and bullishness among investors. It’s no secret that investor sentiment tends to be very bearish at market lows and then gradually improve until it reaches extreme bullishness by the time rallies have been underway for some time, have made new highs, and may be ready to top out.

We can see that condition in several methods of measuring sentiment. This week’s poll of its members by the American Association of Individual Investors showed another jump, to 51.6% bullish and only 20.2% bearish. Historically, the AAII poll is considered to be in its warning area when bullishness reaches above 50% and bearishness drops below 20%.

The VIX Index, also known as the Fear Index, measures the sentiment of options players, and is another consistent method of measuring investor sentiment. It showed a very high level of fear or bearishness during the summer correction and at the October low. But as the rally off that low has progressed fear has disappeared, now measured at only 19 on the VIX Index, in the zone of low fear (high bullishness) usually seen near rally tops.

We also have to consider the high level of selling by corporate insiders. Corporate insiders, blessed with more information about the prospects for their companies and those of competitors than any outsider could possibly obtain, have a history of successfully buying near market lows and selling near market tops.

In the month of November as the market plunged in its first sell-off in the rally, insiders began buying heavily, at a ratio of 100 shares bought for every 80 sold according to Argus Research. But now insiders are selling at a heavy pace, a ratio of almost 600 shares sold for every 100 bought.

None of these conditions, an overbought market technically, a high level of bullish investor sentiment, a high level of insider selling, can trigger a sell signal. They can only warn a top could potentially be near. The market can always become more overbought, sentiment can always become more bullish, and insiders can continue selling.

But the combination of those conditions and the arrival of February should be enough to have investors alert, and at least cautious about wading further into the market for the time being.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

Step 1: Options Education

Options are extremely complex derivative trading instruments and trading options isn’t as simple as buying low and selling high. In fact, there isn’t just one kind of option and there isn’t just one option for each stock! There can be as many as hundreds of options available for trading on a single stock and all of them behaves differently and at a different rate in response to changes in the price of the underlying stock. All of these characteristics make learning about what options are the first steps in trading options. A lot of beginners make the mistake of starting their options education by randomly buying a few options to see how they behave. That usually leads to more questions about why those options behave the way they do and the inevitable loss also affects trading confidence right from the start. Inevitably, beginners starting out this way would have to come back to the education part. There are a lot of websites that give good in-depth explanation on how options work for free.

Education for options trading must also include a comprehensive education in technical analysis as the full benefits of options trading can only be obtained from accurate trend analysis and market timing.

Step 2: Paper Trading

After you have obtained a comprehensive understanding of how options work it is now time to put your knowledge to the test. No, this is not when you should simply fund an options account and start trading with real money. Most reputable online options accounts offer a function known as “virtual trading”. This is a function which allows you to practice options trading using real prices with identical trading interface but using fake money rather than real ones. Virtual trading, or paper trading, is the most important step in verifying your options trading knowledge before you do it for real. Very often, beginners will find the confidence they build up in the education phase fizzle out really quickly in virtual trading as they see the fallacies of their methods and perhaps even find holes in their options knowledge which requires more education to patch up. Those options beginners who went ahead with real trading following their theoretical options education usually end up losing all their money and quitting options trading altogether. This is why paper trading is such an important step in the overall options learning process. In fact, it is recommended that the virtual trading phase be at least 6 months to ensure you are not missing anything. It is like practicing in the baby pool after learning the swimming strokes on land.

Step 3: Single Contract Real Trading

After you have mustered enough confidence through an extended options virtual trading practice, it is time to take your knowledge and experience into the real money options trading world. However, it is not yet time for you to start trading your entire savings or retirement account full force. This is time for you to practice using real money trading only one contract at a time. Single contract real options trading training allows you to experience the real emotional stress of trading real money and also allows you to get familiarized with using real money interface while risking only a small, limited amount of money. Such single contract real options trading practice is critical due to the fact that most beginners make their first losses through execution mistakes such as clicking on a wrong link, using a wrong order or placing an advanced order wrongly. Such unnecessary losses can be significant if a lot of money is committed right from the start and its impact on trading confidence cannot be undermined. Trading only single options contracts may be inefficient in terms of commissions for some options brokers but it allows such mistakes to be made with relatively low level of pain on your capital. As such, it is recommended for a beginner options trader at this stage to keep trading only single contract until no more executional mistakes are made moving on to the next step.

Step 4: All Out Options Trading

All out trading is when you are truly ready to make options trading a true source of additional income or income replacement. This is when you will commit significant amounts of money in order to produce a meaningful profit trading options. However, coming out of single contract real trading, one should not immediately commit all the money one can muster all at once. Emotional stress increases as capital involved increases. Indeed, an options trader who can handle trading thousands of dollars may not have the emotional strength to handle trading hundreds of thousands and such a surge in emotional stress usually lead to dire consequences. It is again just like learning to swim; you don’t jump straight into the deepest end by rather move deeper gradually as your confidence and competence increases. As such, one should trade options with more and more money only as one’s trading confidence and competence increases.

Indeed, learning to trade options effectively without damaging one’s trading confidence along the way is the only way to ensure long term success in options trading. This is why adhering to the steps in learning to trade options are so important.

Jason Ng is the Founder and Chief Option Strategist of Masters ‘O’ Equity Asset Management (MastersoEquity.com) and author of an Options Trading education site, Optiontradingpedia.com. He is a fund manager specializing in options trading and his revolutionary Star Trading System has helped thousands.

Article Source: http://EzineArticles.com/?expert=Jason_Ng

Most stock market investors can enjoy the best of both investment approaches, by allocating a portion of their investment capital for day trades, and the balance of it for long term investments. Because day trading can be more volatile, and can result in huge profits or disastrous losses, most investors are recommended to put only as much of our cash as we can reasonably afford to lose, into this kind of trading strategy. Before you invest you should make sure to only invest what you can afford to lose that way, even if you encounter a worse case scenario, it will not significantly impact your financial situation.

There are pros and cons to both approaches. Investors who do day trades enjoy the idea that they can get in and out of the stock market quickly, and make money without waiting for the results. It does not matter what type of investment strategy you take it still requires you to do some analysis on the back end. Long term stock investors figure that if you are trading, buying and selling stocks at a fast pace, then you do not have any time to do research on a stock.

Investing in corporations that present you with slow but consistent gains is a time-tested approach to investing . In fact, historical data proves that if you buy and hold good stocks, over a long period of time, then chances are that your investment will do well. So it may be a good thing for a younger person to invest in some quality stock investments right now.

With most stock investments, it is usually best to diversify to reduce your risk and increase your potential returns. An approach that you could utilize to diversify is to use a portion of your investment cash for short-term and long-term stock investments. If one set of investments does not do well, the other probably will. If both strategies are successful, then all the best.

Learn more about stock market investing basics at
http://www.howtobeastockmarketplayer.com

Article Source: http://EzineArticles.com/?expert=Omar_Best

So the divergences this year have been rather odd.

The U.S. economy stumbled in the first half of the year, resulting in the U.S. stock market tumbling into a quite serious correction in the summer months, with the S&P 500 down 20% at one point. But the economy began recovering in the fall, and the U.S. stock market has been in an impressive rally since its early October low, the Dow gaining 15% from that low, and closing up approximately 6% for the year.

In the process it has broken out above its important long-term 200-day moving average again, its bull market that began in early 2009 still intact. And it enters the new year near a new rally high, and with economic reports increasingly positive.

But far from moving in tandem, numerous markets outside of the U.S. have been quite ugly in 2011.
For instance, China, the world’s 2nd largest economy, sees its stock market in a quite serious bear market, down 30% over the last 13 months, and entering the new year still in a negative downtrend.

And that’s in spite of China’s economic strength still being at a level that’s the envy of the rest of the world. China’s economy has grown at an average annual rate of 10% for more than 30 years (which is how it has become the world’s 2nd largest economy).

Economists estimate that China’s growth slowed to 9% this year, and will slow further to 8.5% next year. But that compares to Goldman Sach’s estimates that U.S economic growth, which has been recovering from the first half slowdown, will still only reach 3% next year.

The stock markets of other large Asian countries like India, Hong Kong, and Japan have not experienced the resilience seen in the U.S. market either. They are in bear markets, down 26%, 26%, and 22% respectively as they enter the new year.

It’s not much different in Europe where the stock markets in Germany and France, the eurozone’s two largest economies, enter the new year also in bear markets, down 22% and 24% respectively, although higher than at their October lows.

Can the U.S. market continue to outperform the rest of the world next year?

The U.S. economy continues to recover from the severe recession of 2008. The employment picture, although still dismal, is improving, with the unemployment rate down to 8.6% in November, its lowest level in three years, and the four-week average of new weekly unemployment claims at their lowest level since June, 2008. Consumer confidence is at its highest level since last April, factory output is rising, and even the housing industry is finally showing signs of recovering.

The biggest threat is that the debt crisis in Europe might finally implode and push Europe into an economic recession that would spread around the world to include the U.S. The markets in Europe and Asia seem to have factored that possibility into stock prices with their bear markets of 2011.

However, encouraging assessments regarding the eurozone debt crisis have begun creeping out from under the year’s overwhelmingly negative headlines, with some economists now predicting the crisis will be contained by recent measures undertaken by the EU and ECB, and will be more permanently resolved by mid-2012.

If markets in Asia and Europe begin to factor in a positive outcome, or even just that the crisis will be kicked down the road again, their bear markets would likely end and be replaced with new bull markets. That would free the U.S. market from the drag they have had on it, and the U.S. market rally could indeed have further to run, with global markets moving in tandem again giving it a further push.

Is it too much to hope for? Maybe not.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

Successful stock market trading is based on several key factors. All trading is based on probabilities. You want to put the odds in your favor as much as possible, before taking a position in the market. This is achieved by implementing a successful trading plan. A plan should encompass strategies, methods, techniques, and principles. A great example of a successful method is the one used William J. O’Neil. He is the founder of Investors Business Daily, and one of the most successful stock market operators of all-time.

A major key to successful stock market trading is money management. You simply must cut your losses short. A good policy is to always sell a stock if it drops 10% below the purchase price. If you buy a stock at $30.00 per share, and it drops to $27.00, you sell it no matter what. This will keep you from taking a huge loss, which will hurt not only your stock market account, but your psychological ability to trade properly.

Analysis makes a big difference

Proper analysis is critical in several different time-frames. This includes the general market direction on the daily chart. Is it currently in an up-trend, down-trend, or basically moving sideways? Proper price and volume analysis will give you the answer. You do not want to be buying stocks during a stock market correction. This is because about 75% of all stocks follow the general market. It does not make sense to fight the trend. That is like trying to swim against the current of a river.

Take a logical and more professional approach to trading

The approach you take to stock market trading can make a big impact on your overall results. Analyze stocks closely. Look for trends, and get out of a position when the trend seems to be stopping. Do not wait around and hesitate when the market starts to go against you. Holding on to a loser is one of the biggest mistakes a trader can make. An even bigger mistake is adding to a losing position. This is a recipe for disaster. You should only add to a stock or futures position after the market has gone in your favor, and you are up money on the position.

Volume is a major clue

Volume should be a major consideration in your stock market trading process. You want to make sure a stock has enough following for a significant price advancement. A great test is the market itself. If volume rises substantially, then big players such as mutual funds or hedge funds know something, and are getting involved. If the price rises at the same time, this is a buy signal. If the price falls, you have a sell signal.

Your stock market trading results can be amazing. Implement a logical, analytical approach, along with cutting your losses short, and letting your profits run. This is a recipe for success. Always keep learning, and you might make a fortune trading the various markets.

Did you know that over 90% of traders in the stock market, and commodities market lose? Become a winner, and learn the secrets of the world’s best traders and investors by clicking here:

http://www.tradingmarkets4u.com

Gary E Kerkow, founder of Tradingmarkets4u, is a stock market, and commodities market expert. Kerkow is a highly successful trader, and top trading instructor. Learn the successful methods he implements by clicking here:

http://www.tradingmarkets4u.com/About_Gary_E_Kerkow.html

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With the current volatility it is almost impossible for the small investor or the amateur to “time” the market. Even in the best of times with a relatively stable market is difficult making a profit trying to out guess the market and in these times it is a fool’s folly. Traditional investing theory postulates; if you’re investing for the long-term, maintain a consistent investment strategy by continuing to put small amounts of money into the stock market as often as possible, on a regular basis, ignore CNBC, and remain oblivious to short-term stock market gyrations. The premise being that the stock market, at some point in the future, will be lower than it is now; conversely at some other point in the future it will be higher than it is now. While history has shown this to be still an immutable fact, even in this volatile market; there are still other ways to make a substantial profit in today’s market.

Thousands of small investors are now looking online for investing guidance and opportunities. There is a new kind of social awareness group that specializes in finding undervalued stocks which the general trading community has over looked. These stocks have to meet several criteria, some of which include:
1) A manageable share structure on the verge of being maxed out
2) A current filing status with reasonable transparency
3) Very few, if any, convertible notes
4) No history of abusive dilution or reverse splits
5) A responsible management team who has experience in running companies and will respond to shareholder inquiries with frequent, valid, business updates
6) And most important the company has to have an undervalued share price with which to give every member a solid return on their investment.

Following the types of tenants above allow members to benefit greatly alongside the company as they are able to attract more business and financing without the need for the typical cycle of dilution. We also strongly believe in accumulating and trading exclusively at the offer, or Asking Price. Penny stocks are illiquid, plain and simple. There are NO market makers here to make a market, hence the need to always use limit orders instead of market orders. By buying exclusively at the asking price liquidity is maintained and a stocks’ price is allowed to appreciate in a healthy manner.

This is just one type of online investing resource. Whether it is a nationally advertised and recognized online resources or that “one of a kind” online investment resource that you just discovered, due diligence is required before any money is to be risked. It is important that the resource that you chose utilize fits your needs and accommodates your risk tolerance when adopting their suggested market strategy.

AskBlasters.com. A leading investment company.

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Article Source: http://EzineArticles.com/?expert=Lee_Estrada

With the right statistics (and widely accepted assumptions) this was a simple suit of imperial clothing to weave. And with a ready audience on both Wall Street and Main Street (don’t you just hate that expression), this conclusion laid the framework for the passive investment mentality that has overrun the markets.

Armed with some pretty impressive theory, the economists “poipetrated” the very first occupation of Wall Street!

We now have more derivative betting mechanisms masquerading as common stocks than we have common stocks themselves — ’nuff said on volatility. So long as derivative chips are in play, it (high volatility) will run the casino.

Clearly, the MPT creators were once Mutual Fund investors, looking for something better after years of disappointing investment returns. True, mutual fund managers rarely beat the markets — but why? And also true, private, individual, portfolio managers rarely fail to beat the market averages over significant time periods.

Mutual Fund managers were destined to failure on the day that the first “self-directed” retirement/savings plan was created. This transfer of management responsibility to inexperienced “main streeters” spelled disaster from the get-go.

At about the same time, market cycle analytics (Peak-to-Peak, Peak-to-Trough, etc) were scrapped in favor of a competitive, calendar year, racetrack scenario.

When the going gets tough, professional Mutual Fund managers become sell-order-takers. When bubbles develop, they are “prospectusly” required to join the lemmings in their race up to and over the cliff. Open-end Mutual Funds are managed by the mob, quite literally.

Independent managers (particularly MCIM practitioners and CEF portfolio managers) have no push-pull relationship with the mob. Management rules are applied to economic realities; probabilities being left to statistical Monday morning QBs. Real managers call the shots, taking our profits before the mob panics and selecting bargains while the cyclical rout is in progress.

The Probability Of Winning The Bet On Probabilities

MPT (Modern, lazy if you will, Portfolio Theory) has other erroneous ideologies and assumptions in its DNA. It wants investors to believe that short term growth in portfolio market value is the be all and end all of investing activity, and that the proper alignment of any number of speculations is an acceptable investment strategy.

The creation, development, and growth of a portfolio’s income component is systemically ignored and left to chance in the MPT portfolio design process, while an all consuming battle is waged against the simple fact of a rather simple to deal with reality called the market cycle.

Economists are just naturally averse to admitting that they can neither predict, nor control, nor cope with market, interest rate, and economic cycles as well as a seasoned professional investor just has to. They observe and study the past — managers, and actual investors, operate in the present, and deal with an unknowable future using rules and disciplines — not probabilities.

But MPT promoters, university funded economists, and Wall Street have deeper pockets than small and independent investment professionals. The ability to create all manner of securities (and theories) from thin air is clearly more profitable and less risky (from a law suit perspective) than dealing with the intricacies of individual stocks and bonds.

There is no real question about the prospects for market volatility — it is here to stay. The real question is how to deal with it profitably. The most obvious solution is rapid trading for fun and profit, a conclusion that most readers of this article will nod their heads to.

But long term, portfolio development-wise, looking to a more secure retirement or other objective, there is a non-MPT, non short-term-trading solution — one that embraces both the extremes of volatility and the repetitive (if not predictable) nature of the market cycle.

Market Cycle Investment Management, with its core equity trading discipline, and mandated “base income” growth mechanisms, is a proven common sense methodology that no self respecting economist will ever appreciate.

The K.I.S.S. principle is just not as sexy as standard deviations, correlation coefficients, alphas, and betas. But basic investment principles, applied with professional decision-making and risk minimization skills, have fared far-better without MPT mumbo-jumbo than they ever will with it.

And, for the record, market volatility is nothing to be afraid of, really — just bring it on!

Steve Selengut
http://www.marketcycleinvestmentmanagement.com
Author of “The Brainwashing of the American Investor: The Book That Wall Street Does Not Want YOU to Read”

Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day’s gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.

The only question I continue to have about all this comical hubbub is why don’t y’all just relax and enjoy it. Jon Methuen nailed it in his August 15, 2011 parody of the financial world’s ridiculous obsession with “volatility”. “A Reasonable Guide To Stock Market Volatility” is a must view — but only for mature adults with a semi-sick sense of humor.

Decades ago, a nameless college Statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. “In the real world”, he said, “there are liars, damn liars, and any member of the groups just mentioned”. An economist or a politician, armed with a battery of statistics, is an ominous force indeed.

Well, now all the economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.

But the volatility (and the uncertainty it either causes or results from, depending upon the expert you listen to) persists.

Modern computers are so powerful, in fact, that economists and statisticians can now calculate the investment prospects of just about anything. So rich in statistics are these masters of probabilities, alphas, betas, correlation coefficients, and standard deviations that the financial world itself has become, mundane, boring, and easy to deal with. Right?

Since they can predict the future with such a high degree of probability, and hedge against any uncertainty with yet another high degree of probability, why then is the financial world in such a chronic state of upheaval? And why-o-why does the volatility, and the uncertainty, remain?

Why the Volatility and Uncertainty Remain

I expect that you are expecting an opinion — yet another opinion — on why the volatility is as pronounced as it seems to be compared with years past. I’ll do that next. But, first a sentence or two on “uncertainty” — the playing field of the NFL (National Financial League). An uncertain environment is the only “for real” certainty you will ever experience in investing. Every investment has some form of risk and uncertainty.

Volatility, on the other hand is simply a force of nature — one that you need to embrace and deal with constructively if you are to succeed as an investor.

But this new force of nature, this extreme volatility that we have been experiencing recently, has been magnified by the darkest forces of the Dismal Science and the changes that it has encouraged in the way financial professionals view the makeup of the modern investment portfolio.

On the bright side, enhanced market volatility enhances the power of the equity and income security trading disciplines and strategies within the Market Cycle Investment Management (MCIM) methodology — an approach to market reality that embraces market turbulence, and harnesses market volatility for results that leave most professionals either speechless or in denial.

But, with no statistical data necessary (or available) to support the following opinion, consider this simplistic rationale for the hyper-volatility of today’s stock market.

Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations to finance their growth and development.

“Tax collecting” raise an eyebrow? Look at a rental car statement or your next hotel bill. Those greedy corporations collect more money for state and local governments than the income tax collectors — but that is a whole ‘nother issue.

Those of us who trade common stocks in general, IGVSI stocks in particular, owe a debt of gratitude to the real volatility creators — the hundreds of thousands of derivative products that bring an entirely speculative kind of indirect supply and demand to the securities markets.

Generally speaking, the fundamental, emotional, political, economic, global, environmental, and psychological forces that impact stock market prices have not changed significantly.

Short term market movements are just as non-predictable as they have ever been — they continue to cause the uncertainty you need to deal with using proven risk minimization techniques like asset allocation diversification and trading.

The key change, the new kid on the block, is the impact of derivative betting mechanisms on the finite number of shares available for trading. Every day on the New York Stock Exchange, thousands of stocks are traded, a billion shares change hands. The average share is “held” for mere minutes.

On top of derivative trading in real things such as sectors, countries, companies, commodities, and industries, we have a myriad of index betting devices, short-long parlor games, option strategies, etc. What’s a simple common share of Exxon to do?

Market volatility is here to stay — at least until multi-level and multi-directional derivatives are relocated to the Las Vegas markets where they belong.

Steve Selengut
http://www.marketcycleinvestmentmanagement.com
Author of “The Brainwashing of the American Investor: The Book That Wall Street Does Not Want YOU to Read”

Basics of ETF investing

Both individuals and institutions can get involved in ETFs. This can be done in basically the same way stock investing is carried out. With an online broker or offline broker, ETFs can be bought and sold like any stock. The amount of research and control required depends on the personal preferences of the investor, and the type of broker chosen.

An ETF is a basket of stocks designed to track an index or market. There are ETFs that track everything from the S&P 500 to commodities. Their prices will basically mirror the price of the market they are based on, although they may trail or exceed it at times. Designed only to follow, they require relatively little active human management, and therefore have much lower administration fees than most mutual funds.

Those who invest in ETFs are not trying to beat the market. They are only trying to capture the average returns that the markets have historically offered over time. Since many stock market investors and mutual funds usually do not beat the market anyway, they can be a smart choice.

Benefits of ETF investing

There are several benefits that you can get should get involved in ETF investing. These include:

Diversity: As mentioned earlier, ETF investing offers diversity to investors. A typical ETF is essentially a combination of stocks in different companies. To make the most out of an investment, it is possible to use ETFs to shadow various financial instruments such as bonds or commodities.

Minimal costs: ETF investing has lower costs compared to mutual funds, particularly when ETFs are purchased less frequently but in larger amounts. Furthermore, ETFs also offer more control over taxes when compared to mutual funds, since the latter is subject to higher turnover internally. Generally, ETFs do not generate significant capital gains until they are sold by the investor.

No investment minimums: Not only do ETFs have minimal costs, they also don’t require investment minimums, and you can even be purchased in one-share increments. This isn’t the case with mutual funds, which generally require a minimum of $1,000 or more for the initial investment.

Ease in transaction: Investors are limited to selling or purchasing mutual funds at the closing price every day. This isn’t the case with ETFs, since you can trade these whenever you wish to, similar to how stocks work. There are even day traders and short-term traders who use ETFs in their portfolios.

Transparency: Those who are involved in ETF investing know exactly where their funds and assets invested in ETFs are going. This isn’t the case with mutual funds, which are a lot more opaque that most people think.

While ETFs have a lot of advantages, they are not for everyone. Those who want their investments more actively managed for them will want to go with mutual funds. In addition, those who would like to beat the markets certainly need another investment. However, for everyone else, they are an option that should be considered.

Great advice on saving and investing at Money Saving Tips. Topics include credit cards, insurance and various forms of investing such as investing tax free.

Article Source: http://EzineArticles.com/?expert=Tom_A_Smith

Up until recent times you could stay out of serious trouble by simply allocating about half of your investment assets to stocks and the other half to bonds. That’s the traditional investment strategy often recommended for average investors, and most people deal with it by putting their money in stock funds and bond funds. Stock funds are the growth half of the equation and the risky part of the strategy. Bond funds are considered the relatively safe investment designed to pay higher interest income. Over the years losses in one fund type were usually offset by good returns in the other.

Welcome to the year 2012, where bonds and bond funds will likely not be such a safe investment. Stock funds are never safe and 2012 will be no exception to the rule. Asset allocation will be only half of the story going forward. Selecting the right funds within each category will be the other key to success. Let’s look at your best investment strategy in both fund categories, and the reason why certain funds will be your best choices.

Two things stand out about the so-called recovery the USA has supposedly experienced over the past few years. First, the economy did not recover as it has in the past after a recession – 9% of the working force is out of work. This makes for a weak economy and puts pressure on the stock market and stock funds. That’s why you’ll need to be careful about which stock funds you include in your investment portfolio.

Second, interest rates have been driven down to historically low levels to stimulate the economy in general and the pathetic housing market. Even with a 4% mortgage rate average folks can not qualify for a mortgage or afford to buy a house. Today’s ridiculously low interest rates mean savers can not earn a respectable interest income in truly safe investments. It also means that bond funds could be a trap in 2012 for people who don’t really understand bonds and bond funds. Let’s look at the best bond fund strategy first.

Even the best bond funds of the past few years could be big losers in 2012… if they hold long term bonds in their investment portfolios. When interest rates turn around and go back up the bonds they hold will lose significant value because new bonds will become available that pay more attractive (higher) interest income. Your best investment strategy for bond funds is to own funds that hold corporate bonds that mature in about 5 years to 7 years. CORPORATE BOND FUNDS pay more interest income than similar funds that invest primarily in government bonds. Funds that hold bonds maturing in 5 to 7 years (intermediate term bond funds) will be much less affected by rising interest rates than long term funds holding bonds that mature in 20 years or more. That’s a fact, and that’s how bonds work.

Your best investment strategy for stock funds will be to go with GROWTH AND INCOME funds that invest in high quality companies with a history of paying 2% or more per year in dividend income. If the stock market gets truly ugly in 2012 and beyond these funds will be your best bet to sidestep huge losses. In a bad stock market funds that pay little or nothing in dividends are usually the big losers.

Sometimes it pays to be aggressive and take on more risk. The year 2012 looks like a time to get more conservative and live to be a risk taker another day. Most investors need to hold stock funds and bond funds as well as truly safe investments like bank CDs. Your best investment strategy for 2012: allocate your investment assets with 40% going to INTERMEDIATE TERM CORPORATE BOND FUNDS and the same going to high quality GROWTH AND INCOME STOCK FUNDS paying 2% or more in dividend income. The other 20% of your investment portfolio goes to safe investments like bank CDs.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

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Of course, there has never been a shortage of scandals that have bedeviled Wall Street, and investors have generally ended up on the short end of the deal. Whether it was the recent financial meltdown that was a direct result of improper mortgage risk assessment by Wall Street bankers whose primary goal was to repackage the mortgages and sell them at a profit, as the recent credit evolved, or the never ending push to bring new, innovative, and profitable investments to the investing public, regardless of the welfare of the public. You must understand that Wall Street is dedicated to making money for its shareholders, and is definitely not worthy of investors blind trust.

Against that backdrop, we must attempt to answer the question posed in the title of this article. What is the best investment strategy for every individual has to be considered on a case-by-case base. As a general rule of thumb, traditional thinking dictates that the farther you, as an investor, are from the time you will require the use of the money, the longer your investment horizon should range.

But recent years have brought some change to that mode of thinking.

Let me first issue a disclaimer, of sorts: I have been a long time institutional investor for most of my professional career. I was a swing trader in those days, and my trades ranged from one trading session to several weeks. In the last eight years I have narrowed the scope of my investing to primarily intraday trading, using scalping methodology. My average investment horizon is now about 15 minutes. Wow! That is a real change in investment thinking; but I am in all cash every night and I sleep like a baby.

Where it 20 years ago, I would strongly recommend that younger investors take a long term approach to their investment strategy. I don’t feel that way anymore, for several reasons:

• The ultra-fast dissemination of news through social media and traditional media has literally brought the world into our living rooms. By the same token, the markets receive data and react to that data nearly instantaneously. There can be no doubt that the rapid transmission of information across the globe has added a volatility component into the market that did not exist in prior decades.

• Computer based trading programs, also called black box trading, and has had a profound effect on the price action of all highly liquid investments. High Frequency Trading (HFT) operators claim that, under current technology, they can execute 3,000 trades per minute. Further, the NYSE currently estimates that in the area of 50% of all trading fall under the category of HFT. This change of trend in trading has definitely affected the personality and performance of investment practices of the last 6-8 years.

• Mutual funds, which are strictly longer term investment vehicles (excluding the ETF variety of mutual fund); have consistently underperformed their corresponding index returns with unprecedented uniformity. Last year, nearly 85% of all open end mutual funds failed to match their index benchmarks.

Is long term investing dead?

No, not necessarily. But the days of buying the current hot stock and then forgetting about it are long gone. Price volatility has driven the market to lavish highs and unprecedented lows, which has caused long term investing to be viewed as a far less attractive investment choice than in prior times.

That is also my viewpoint.

I manage my portfolio with a 2-year investment horizon. Given the current state of affairs in the world (two wars, the housing crisis, Japans nuclear issues, the euro crisis, the US economy), I am confident looking ahead only a couple of years, and the once vaunted USA economy cannot be counted on, at the present time, to churn out double digit returns. I feel this approach is well considered and realistic, given the current geo-political problems we are currently experiencing.

So I have discouraged longer term investing, suggesting smaller investors concentrate on the intermediate term. I have taken the time to mention that I am interested in intraday (or, day trading) and most of my current investment (or trading) income comes from intraday trading. I prefer short term trading and about half of my portfolio in straight stock investing. I have outlined the reasons for this above. While short term investing takes a bit more time and effort than intermediate or long term investing, the rewards may be well worth the effort.

In summary, we have taken some time to look at the pros and cons of long-term investing, intermediate investing, and short term investing. I have stated that in my current economic outlook, I am shunning long term investing in favor of investing with a shorter-term outlook.

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During the tech boom of 2000, people got very excited when they saw on their charts a huge run up of their shares. When the market started to turn down, they didn’t know what to do because they didn’t have any pre defined exit points. Consequently they often held on too long and lost nearly all or all of their money.

I like to let my profits run, so I don’t like to have profit target. I like to get out once the share has retraced off its high. I can’t do that if I have set a predefined share price at which I’m going to exit. I know I’m not going to be able to pick the top, but I like to hold on to my winning trades.

You need to have a mechanical way in which you process your exits. Having the exits as mechanical as possible is one of the keys to making sure you’re going to stick with your exits, and not be swayed by your emotions.

To be profitable stocks traders we need to act counter intuitively. When trades are going wrong, it is instinctive to hang on. We must act counter intuitively and cut our losses short. On the other hand, when trades are going our way, our instinctive reaction is to want to exit in order to capitalize on the trade. This again needs to be resisted if we are to let our profits run.

In order to exit from a profitable trade, we set a trailing stop, based on percentages or indicators. Your initial stop, the stop you use to exit a non profitable trade, is calculated on your entry price. Your trailing stop, used to exit a profitable trade, is calculated from the highest price since entry. In this way, the stop ‘trails’ price, rising as the price rises. A trailing stop allows you to ride the trend for longer. It is important to find the balance between giving your trade enough room to move while also having the stop tight enough not to force you to give back too much profit.

I personally like to use what I call the LL stop. This looks for the lowest low (LL) in the past x number of periods, where x is set based on the style of the system I’m trading. For example, my initial stop may be set to be the lowest low (in price) over the past 28 days. As the trade progresses, my trailing stop kicks in and I look for the lowest low in the past 28 days as calculated from the current price.

A trade exit can be seen as an emergency chute when things go wrong and as a seat belt when things are going right. The exits should be mechanized and as far removed from human intervention and emotion as possible. Put your self in the top 1% of traders by writing down your exits and then using them with every trade you enter.

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Article Source: http://EzineArticles.com/?expert=Reece_Matthews

There is a lot of demand for less regulation, but that can be a two-edged sword: and was, in the case of mortgages. Regulations were repealed, allowing the financial institutions to do what they couldn’t do before. So, what happened? – just the greatest total threat to financial collapse on a worldwide basis that we have ever seen! If extraordinary steps had not been taken, I think it was obvious that the whole financial system would have collapsed. However, the treatment hasn’t come up with a cure yet. The world is still struggling to find answers and at present we are just keeping things afloat.

Where does manipulation come in now that we know the problem? Manipulation is being carried on, in my opinion, because the stock markets are being traded in a range that is not explainable. Lately we have seen lots of violent market action due to the financial situations in Europe. Here’s where the manipulation comes in. One day the market sees a big rise and the explanation is that the European situation is not as bad as was thought. Why? A vague answer comes. The markets go to the upper end of the range and then suddenly there is a steep drop. The reason given for the steep drop is that the European situation is not as good as they thought it was. In reality, nothing in the European situation has changed at all. There is a real mess over there, but you can’t say one day that Greece isn’t very important and then the next day say that Greece influences major financial institutions around the world and the risk of a domino affect to Portugal, Italy, Ireland, Spain, etc. is possible.

One of the key problems is that the financial institutions will not release what their real position is. The same thing is true of situations here in the US. Banks are allowed to carry items on their balance sheets that do NOT have to have the true value posted. To get a much truer position, you would have to have what they call “mark to market”, meaning that they would have to post the current value of the assets that they are carrying on their books. Think of it this way – You want a loan, so you go to the bank and they want to know the value of your assets, in order to determine your financial situation at the time you want the loan. Try telling them that you paid $400,000 for your house that is now worth $250,000, but you say you should be allowed to state that the house is still worth $400,000 because that is what you paid for it, and someday real estate values will rise again as they always have. If the bank only just laughs in your face instead of kicking you out the door, consider yourself lucky. But for them, our leaders have found it in their best interests to allow the financial institutions to do just that – not report the current value of their assets. That is manipulation in my book.

There are many other examples of how small groups manipulate markets so that the vast majority do not get a fair shake. Here in California the consumers were manipulated in the electricity rate business. Again, regulations were changed, so that rates were not regulated any more. So what happened? The few that bid on rates sold to each other and each sale resulted in a rise in our rates. Then the rates were sold by the 2nd party back to the first and rates went up again. I don’t know how many times this happened, but it was all proven to be true. Then what happened? Did they unravel this and make the greedy people pay for their crime by getting settlements that could be passed back to the consumer? No way – it never happened. The vast majority paid for it in all ways. So much for doing away with regulations that really protect. Granted, there are regulations that stall and even prevent needed projects. But, my thought is that the lobbyists get around that point eventually by seeing to it that the people in control are taken care of first, in the form of campaign contributions.

So much for manipulation! We the people get manipulated time and time again, with the small controlling group profiting by their actions.

Hey, we haven’t forgotten about something being rotten in Denmark – oops, no, not Denmark, but right here in the US – again. The scandal that appears to be on the verge of being exposed is gathering steam, and we will continue to follow it and have more to say about it shortly – I’m talking about Solar-Gate!

In the meantime, stay tuned, for you know by now, for sure, that… these are interesting times. (We pay through the nose, but we do get interesting times.)

Today’s Thought

We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution, but to overthrow the men and women who pervert the constitution. – Abraham Lincoln

If you enjoyed this economic commentary, Mike Celeste has a lot more where that came from. Check out his site at SplitMaster.com and his newly published ebook, Never Let Wall Street Steal Your Money Again! The book is packed full of investment information and how to stop being manipulated in today’s market. Get a comprehensive Free Preview of Never Let Wall Street Steal! Also, send us your questions and comments to contact@splitMaster.com.

Article Source: http://EzineArticles.com/?expert=Michael_Celeste

Yet a number of people associated with financial markets will not be interested in short-term trading. It does not suit their temperament or life style. There are a number of tools associated with these market timing studies that can be invaluable for investors too. Therefore, let’s refine this article into three categories of market participants, according to the strategies involving different cycles and different time frames for chart analysis. The reason for making this distinction is because investors and traders will use different technical studies and chart patterns to determine a favorable point to enter and exit into a position.

Long-Term Investor

From a cycles’ perspective, a long-term investor is one who will create an investment strategy with the four-year cycle as the central focus. That means the 4-year cycle will be used in tandem with a longer-term cycle, such as an 18-year cycle, a cycle that is “above” (longer than) the time frame of the 4-year. Additionally the investor will use the subcycles or phases that unfold within the 4-year cycle, as the next cycle of a lower degree. That will involve the two- or three-phase classical breakdown of the 4-year cycle, which may include two 23-month cycles (with a usual range of 19-27 months), and/or three 15.33-month cycles, with a range that varies according to whether it is the first, second, or third phase. As outlined in Volume 1, the mean average of a 46-month cycle would be 15.33 months. But historical studies show that the first phase has a mean cycle length of 16.5 months with a normal range of 13-20 months. The last phase, however, is shorter, with a mean cycle length of only 14.3 months, with a very wide range of 8-23 months. Because it is the last phase of a longer-term cycle, it is not surprising that 54% of the historical cases of this third phase occurred outside the “normal” range of 13-20 months that were observed in the first phase.

In my own practice, I use the 18-year cycle as the “greater cycle” containing four or five 4-year cycle phases. In other words, historically there are usually 4 or 5 four-year cycles within the greater 18-year cycle. There has been at least one instance of 6 four-cycle phases within an 18-year cycle (see Table 1). The “lesser degree” cycles I use in tandem with the 4-year cycle are the 2- and 3-phase subcycles within the 4-year cycle. These are the 23-month and 15.33-month subcycles discussed previously. I will also use the 50-week cycle to help time a long-term entry or exit point. As demonstrated in Volume 1 of the “Stock Market Timing” series, there may be anywhere from three to five 50-week cycle phases within a 4-year cycle. Half of the time (50%) the 4-year cycle will contain four 50-week cycles. The other 50% of the time it will likely contain three or five 50-week cycle phases. Thus one starts with the idea that a 4-year cycle will contain four 50-week cycles, but at the same time be aware that it might contract to include only three, or expand to include as many as five 50-week cycles. The point to understand here is that a long-term investor who is applying these methods to enhance investment performance, will use a 4-year cycle, and tie it in with at least one longer-term cycle and one shorter-term cycle.

The long-term investor will also examine charts of at least three different time frames. The primary time frame to be used for analysis might be the monthly chart. Above that, perhaps he may tie it in with the yearly or quarterly charts. Below that, he may tie in the monthly studies with the weekly and maybe also the daily charts. The point is that he wants to invest in the direction of what his monthly charts are telling him. But he wants to make sure this conforms to the trend direction suggested by the yearly or quarterly charts and their technical studies. He then wants to make sure that the weekly chart is at a point of reversal, and ready to move into the direction of both the monthly and longer-term charts.

Intermediate-Term Investor

In actual practice, quarterly and yearly charts are not that practical for investment purposes. An investor can do just fine by concentrating on the weekly and monthly charts, and then maybe using the daily chart to fine tune entry and exit points. A distinction may be made between a “long-term investor” and “intermediate-term investor.” An intermediate-term investor, in this case, may use the monthly, weekly, and daily charts for applying technical studies in the pursuit of optimal investment entry and exit points. At the same time, he may use the 50-week cycle as his primary frame of reference, and tie it in with the 4-year cycle and its phases (a level above the 50-week cycle), and the primary cycle (one level below the 50-week cycle). This type of investor may be most comfortable holding a position for several months, and maybe even 1-3 years.

Position Trader, or “Trader”

The term “position trader” will refer to one who intends to be in a position less than one year but usually at least two weeks. This trader will primarily be focused upon the daily chart. But in assessing an entry or exit point, he will tie this in with the weekly chart (one time frame above), and quite possibly an intraday chart (one time frame below the daily chart), such as a 60- or 30-minute type. In reality, it seems that most position traders are not concerned about intraday charts. They use mostly daily and weekly charts, and perhaps some will use monthly charts, just as investors will.

In terms of cycles, this type of market participant would be advised to use the primary cycle as the central point of analysis, and combine it with both the 50-week longer-term cycle (one level above the primary), and the major and/or half-primary cycle phases within the primary cycle (one level below the primary). If entering the first primary cycle within the greater 50-week cycle, the trader may elect to hold onto this position for several months. If entering the final primary cycle phase of the greater 50-week cycle, he may elect to hold onto the position for only 2-8 weeks.

Short-Term Trader

Most professional traders are short-term or even aggressive traders. Their basic goal is to enter a trade that – according to their studies – has maximum profit potential with minimal market exposure. Their average duration in a trade may range from one day to three weeks, sometimes more.

The short-term trader will use the same time frame charts as the position trader. But he will tie in different multiple cycles in choosing his entry and exit points. That is, the daily chart will likely be the primary chart for reference. Against that chart, he will integrate studies from the weekly chart (one level above) and perhaps a 30- or 60-minute chart (one level below the daily). He wants to trade in the direction of the trend indicated on the weekly chart. If the weekly chart studies suggest rising prices, then he wants to enter the market when the daily chart signals are bottoming and exhibiting signals that it is ready to turn up. He will then use the 60- or 30-minute charts to fine tune his entry point.

In terms of cycle studies, the short-term trader may use the 6-week major cycle as the central point of focus. The level above the major cycle to use in this endeavor would be the 18-week primary cycle, and the cycle to use on the next lower level would be the 2-4 week trading cycle, or even the 4-9 day alpha-beta cycles. If the primary cycle is in its early stages, the short-term trader will look to buy on any corrective decline to a major or trading cycle trough. He may use the alpha and beta cycles to help him make this decision.

Aggressive Short-Term Traders

In my daily and weekly market reports, parameters are provided for both “position traders” and “short-term aggressive traders.” These suggestions for aggressive traders are for those willing to go against the trend of the primary cycle. Or, in some cases, it will refer to those who wish to be in a trade for perhaps only 1-4 days on average.

An aggressive short-term trader is going to use a host of intraday charts to find the right technical set up for entry and exit. He may be most focused upon a 30- or 60-minute bar chart. The next level up to tie his analysis in with may be the daily chart. He should always try to trade in the direction of the daily chart, except when he believes the daily chart is about to reverse. Because he is willing to “bottom pick” or “pick the top” of a move before the reversal is confirmed, he is an aggressive short-term trader. He is picking the top or bottom of a move before it has actually reversed. He understands that the sharpest price moves in the shortest amount of time occur when the market reverses its trend and starts a counter-trend move. This is especially true in bull markets when prices are making a crest. The decline is usually sharp and vicious at the end of the rally to the cycle’s crest. However, the decline is also brief in comparison to how long it took to reach the crest. That is why the most successful traders are willing to sell short at certain points in a bull market. Investors would never think of such an unconventional and risky approach. But aggressive short-term (and professional) traders know that the greater the risk, the greater the profit potential as well.

Below the 30- or 60-minute chart, this aggressive trader may use a 5- or even 1-minute chart to fine tune entry-exit points, and maybe even a “tick chart,” which records each and every trade as it is being made. This trader studies the technical signals of these very short-term charts, and waits until they are also ready to turn against the trend of the daily chart, as well as the 30- and/or 60-minute charts.

There are no three cycles to tie in with one another for this type of aggressive speculator, unless one uses intraday cycles, like 50-minute, or 3-hour cycles, which are not within the scope of this book. However, an aggressive short-term trader may use the fast-moving solar-lunar phases, within the field of geocosmic studies, to help determine days when 4% or greater reversals, lasting 1-4 days, are most likely. The Sun-Moon combination changes every 2-3 days, and many of these combinations have very high historical correlations to 4% or greater price reversals in various stock indices. These studies were reported in Volume 4 of this Stock Market Timing series, titled: “Solar-Lunar Correlations to Short-Term Reversals.” For the aggressive short-term trader, the studies in this book are invaluable for knowing when to enter and exit a 1-4 day trade that has a higher than normal probability of success, assuming the very short-term technical studies are set up properly. Once again, the primary purpose of this book is to know how to identify such a compatible technical set up.

Summary

The importance of using multiple time frames and multiple cycles to establish a successful trading plan cannot be underestimated. It is the most important factor in determining the trend. It is only through an understanding of where the market is in terms of its trend that one can consistently realize profitable trades or investments. But trend means different things to different people. It means different things to a cycles’ analyst too. The trend to a short-term trader may be completely opposite the trend to a long-term investor. The key to understanding trend is to focus on a particular time frame or cycle, and to tie it into a time frame or cycle that is “above” that level, and also one that is “below” that level.

The idea is to first of all determine when the “up one level” chart or cycle is in a clearly defined trend. Then patiently wait for the next lower time frame or cycle to finish a contra trend move (i.e. retracement) and indicate it is ready to begin a thrust in the direction of the “up one level” chart or cycle. When it appears the lesser cycle is ready to move in the direction of the greater cycle trend, then time the entry (or exit) to coincide with the “below one level” chart entering an oversold (if buying) or overbought (if selling) technical pattern. The central and “below one level” time frames or cycles should also be in a time band when a cyclical trough (if buying) or crest (if selling) is due. It should also be in a time band when appropriate geocosmic signatures correlating with a reversal are present. This concept will be repeated over and over again, for these are the steps within the methodology of this series that make the market timing studies work. These are the steps that provide the structure in which market timing can be a very valuable tool to the success of any investor or trader, regardless of one’s market temperament. But as with all successful endeavors in life, it requires work. It requires planning and proper analysis, and the correct implementation of these rules, plus perhaps a few of the reader’s own. But the rewards are worth it, and it is an exciting process.

The following list represents suggested time frames and cycles to use in this endeavor for each type of market participant. The first time frame or cycle listed in each group represents the next “higher level” type to use. The middle time frame given will be highlighted in bold. It represents the suggested primary time frame to use for trading or investing. The last time frame given represents the suggested “lower level” type to use to fine tune one’s optimal entry and exit point for maximum profit potential.

Buy and Hold Long-Term Investor (6+ years)

Cycle:72- or 90-year, 18-year, 4-year
Charts:Yearly, monthly, weekly – concerned with percentages.

Long Term Investor (2+ years buy and hold):

Cycle:18-year, 4-year, 50-week
Charts:Yearly, monthly, weekly

Investor (1-3 year position):

Cycle:4-year,50-week, primary
Charts:Monthly, weekly, daily

Position Trader (2 weeks – less than one year)

Cycle:50-week, primary, half-primary or major
Charts:Weekly, Daily, 30- or 60-minute

Short-Term Trader (3 days – 3 weeks, sometimes as long as 6 weeks)

Cycle:Primary, major, trading
Charts:Daily, 30- or 60-minutes, 5- or 15 minutes

Aggressive Short-Term Trader (1-4 days, sometimes longer, sometimes shorter)

Cycle: None. This speculator looks for contra-trend moves based on technical set ups, but may use Sun-Moon studies as a leading indicator.
Charts: Daily and perhaps 60-minutes, 30-minutes, 5-minute or 1-minute, and even tick charts.

Determine which of these best fits your own psychological temperament and life style. It is possible to utilize more than one of these types. It is possible to utilize all of these types for various purposes and at various times. I do. But make the effort to define which approach you are taking with each investment, with each trade. Once that is determined, apply the suggested time frames to that type of investment or trade for the best and most consistent results.

Article Source: http://EzineArticles.com/?expert=Raymond_Merriman

Central banks around the world seem to be doing so, making little effort to prevent it this time around, resigned to letting the business cycle play out.

Stock markets around the world also seem to be doing so. In anticipation of economic slowdowns that won’t slide all the way into recessions, stock markets normally decline only into corrections (declines of less than 20%). But they plunge into bear markets when recessions loom.

And global stock markets outside of the U.S. are already in full-fledged bear markets. That includes 10 of the world’s 12 largest economies, the exceptions being only the U.S. and Canada.

In order of the size of their economies, at the recent August lows the stock market in China, the world’s second largest economy, was down 23% from its November peak, Japan down 21%, Germany down 30%, France down 29%, the United Kingdom down 21%, Brazil down 33%, Italy down 39%, India down 25%, Russia down 28%, and Spain down 29%. The exceptions were the U.S. and Canada, which at their August lows were down only 16% (the Dow) and 18% respectively.

But the recession and bear market are coming to the U.S. too, and may have already arrived.
You can be sure of that because it’s been one world economically for years, and historically global economies and stock markets tended to always move in and out of recessions and bear markets together even before their dependence on each other became so pronounced.

You can be sure of it because central banks seem willing to let it play out this time as in days of old, without intervention.

In the financial crisis of 2007-2008, it took a massive coordinated effort by global central banks to pull the world back from the brink of what would have been a total global financial collapse.

But when their economies began to slow again in 2010, without the world being on the brink of financial Armageddon, major nations outside of the U.S. were content to let the business cycle play out normally, arguing against the U.S. Fed’s decision to jump in with its QE2 stimulus efforts.

Indeed, while the Fed was making that massive monetary easing effort, central banks in Asia, Europe, and South America were tightening monetary policies and raising interest rates to ward off rising inflation, and to tackle the government debt crises created by their 2008-2009 bailout efforts.

The Fed’s QE2 effort pushed a flood of additional dollars into the global financial system, spiking the prices of commodities and paper assets like stocks, but had no lasting effect on even the U.S. economy.

This year, as global economies again slow significantly, central banks outside of the U.S. again seem content, or at least resigned, to letting the business and economic cycle play out, even though it likely means a global recession.

They refrain from saying anything too negative that might make matters worse, but for instance, this week the central bank of Brazil, which actually has one of the world’s strongest and fastest growing economies (but highest rate of inflation), warned that this downturn in global economies will not be as severe as in 2008-2009, but will be more prolonged.

The Financial Times reported Friday that “As the Organization for Economic Cooperation and Development’s forecasts showed on Thursday, the near-term economic outlook for the Group of Seven is dire, yet the mood is one of resignation…. Finance ministers across the G7 are searching for ways to explain their lack of likely coordinated action.”

And even in the U.S., the Federal Reserve has been clearly transparent about its reluctance to intervene this time.

With the economy far weaker than it was when the Fed intervened with QE2 last year, Fed Chairman Bernanke continues to say the Fed has some tools it can use if necessary, but will wait and see. In his most recent speeches he cautioned that the Fed is limited in what it can do anyway, and called for Congress to step up to the plate.

Thursday evening, President Obama did call for Congress to step up to the plate and pass his $450 billion jobs bill.

But even if the proposal should get through the political grinder of the grid-locked Congress, it would be too little too late by the time it could be implemented.

So prepare for a recession and bear market.

Hopefully investors learned from the 2000-2002 and 2007-2009 bear markets that Wall Street’s advice to diversify into ‘defensive’ stocks won’t do it. As I’ve shown you in previous columns, so-called defensive stocks, defensive because they pay high dividends or have been around a long time, are dragged down just as far as any in a bear market.

Back in ‘the old days’ the call of successful investors in times like this was that “cash is king”. Even receiving little to no interest income on cash was better than experiencing a 30 to 40% loss.

These days investors are better served. The availability of ‘inverse’ mutual funds and ‘inverse’ exchanged-traded funds, designed to move up when markets move down, make them the new king in bear markets. Cash may be better than losses, but the opportunities for 30% profits while others are experiencing 30% losses are even better.

In the interest of full disclosure, I and my subscribers have already taken double-digit profits from positions in the ProShares Short S&P 500 etf, symbol SH, and ProShares Short Russell 2000 etf, symbol RWM, and we’re looking at others.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way. Sy Harding is editor of http://www.StreetSmartReport.com, and the free market blog, http://www.streetsmartpost.com.

Article Source: http://EzineArticles.com/?expert=Sy_Harding

From the standpoint of methodology, trend following is the easiest way to trade. A trader can create a simple algorithm, plug it into a computerized trading platform, and have the trading signals completely automated. The trader can sit back and tend to other business and not have to worry about how the markets are acting on any given day.

At the same time, the markets do not always move in major trends. For a significant period of time, they can trade in narrow trading ranges. For commodity trading advisors who manage money in these markets, this usually results in negative returns.

This is the main reason why most small investors who attempt to trade commodities fail. They are unaware of the difficulties in following a trading system or trading strategy that looks good on paper.

One popular trading system known as the Turtle Trading System for trading commodities has been marketed as a methodology that will make the investor 100% annual returns for years on end. What the marketer has done is simply add up the profits and losses from each market traded in a basket of markets at year end, and imply that the system would make 100% returns. Unfortunately, this is not the real world of trading.

In the real world of trading a trend following system like this in a basket of commodity markets there are typically significant drawdowns that occur every year. For instance, if you start out with a portfolio of $100,000, at some point, you can expect your equity to drop by 30% or more. If this occurs right out of the gate, you are down to $70,000. Most people find this psychologically difficult to deal with, and give up. Also, when your account equity drops, smart risk management rules will require smaller position sizing in each market. As a result, it will take a while to climb back to the breakeven point. In fact, if initial equity drops by 30%, it will now take a nearly 50% return on current equity to get back to breakeven. This is why most emphasis on trading systems designed for trading commodities is on risk management, rather than the signals for entering and exiting positions.

In the stock market, some traders have experienced significant returns by employing a trend following strategy. William J. O’Neil, the founder of Investor’s Business Daily, is one of these traders. However, his methodology also incorporated some fundamental analysis of a company as well.

Trend following in the stock market tends to be more difficult because the universe of stocks to choose from is so large, and unfortunately, most stocks do not trade in trends that are very persistent.

With all this in mind, however, it would seem that applying a long term trend following system during bull market cycles is a viable way to earn above average returns for the small investor. While the universe of stocks is so large, many of today’s trading platforms and software programs allow the investor to screen stocks very quickly and easily. The investor can then focus on only those stocks that show the characteristics they are looking for in a potential trade. A smart investor can then employ the best risk management techniques utilized by commodity traders to enhance their trading performance.

In conclusion it is clear that trend following has its merits and drawbacks as a viable trading methodology. However, most of the world’s best performing traders and investors do utilize one form or another of this methodology in the trading. While Warren Buffett has often waited for stocks to become cheap, he is the ultimate trend follower in that the overall market itself has stayed within an uptrend for decades, even with the significant bear markets of the last ten years. Buffett has capitalized on this fact because he rarely sells out of a position. With that in mind, small and large investors alike should do significant research into the potential of trend following as a core trading strategy for their portfolio.

Scott Cole is a former execution trader for a hedge fund and commodity trading advisor (CTA). He has specialized in developing trend following trading systems for stocks and commodities. Visit http://www.besttipsfortrading.com/ for great insight on trading stocks, commodities and forex markets.

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In other words you should consider a stop loss strategy to improve overall stock portfolio performance adjusted for your own risk tolerance and investment objectives.

What is a “stop loss” order? Simply it means a trade order placed with a broker to sell a stock when it reaches a certain price level. Placing the stop loss order with a broker might not be the best solution, instead consider tracking the price movement yourself with a software program that will update portfolio prices and allow you to create price alert reports.

The reason you may prefer to track prices yourself is in case there is panic selling and you need to consider each stock based on its own merits. On days where there is extreme market volatility and wide swings in price movement your specific position might trigger a stop loss order with your broker only to rebound later the same day.

Your price alerts should first be set based on your basis in the security setting a sell alert at a predetermine percentage below what you paid for the stock. That percentage should be based on your risk tolerance, strength of the company, amount of dividends if any and your overall objectives.

Another technique is to also consider a “trailing stop loss” a strategy where you set a sell order based on a price as either a spread in points or a percentage of current stock’s value. As the price moves upward the trailing stop loss follows the market to higher levels thereby increasing your gains.

For example:

You purchase a stock for $20.00 and place a stop loss at 20 % of your cost basis meaning you would sell the stock if it falls to $16.00 or below. The security is currently trading at $30.00 and you wish to lock in your gains. Set your trailing price alert at 20 % of the current price and if the stock continues to climb you adjust the trailing alert higher increasing you gains with each upward movement in price of the stock.

In the case of mutual funds, stop loss strategy is a bit different for several reasons. Mutual funds are priced only once a day after each day’s market close and risk is generally less depending on the fund and how diversified it is. Brokerage firms will not place a stop loss for mutual funds so you will need to track price movements yourself.

For many investors selling stock can be an emotional decision based on many factors and often they will assume if they take a wait and hold strategy the stock or stocks will rebound thereby ignoring the stop loss strategy all together.

Even if a stock does rebound it might takes months if not years, if you execute a stop loss order you have the opportunity to reinvest the proceeds into a better and more profitable security.

Daniel Iuculano a Certified Financial Planner specializing in financial planning which includes portfolio management and other financial planning topics.

For further information visit:
http://www.dfi-wealth-mgmt.com
http://www.dfi-wealth-mgmt.com/Wealth_Management.html

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