Year: 2018

  • Are we witnesses of the historical period on the stock market?

    Are we witnesses of the historical period on the stock market?

    1 min read

    What are basic types of Forex trading? 1

    Is this really the historical period on the stock market?

    Longest Bull Market in History? 

    Media reports that the US stock market broke the record for longevity on August 22, 2018. And some portals were ecstatic with this information and published articles about this ”historical record”.

    This would be quite a success if it is true. But, many experts claim it is not.

    The true fact is that the longest run belongs to the 12 1/2-year periods running from October 1987 through March 2000. The present bull market started in 2009, will need to wait till 2021 to beat that record.

    According to some media and experts, bull markets are rallies that go beyond 20 percent and are never interrupted by a 20 percent fall. By the rules of Wall Street, that means the S&P 500 rally that began in March 2009 will surpass all that went before it on Wednesday.

    Historical period on the stock market?

    ”It may be peaking”, said Jim Paulsen, chief investment strategist at Leuthold Group.

    Here’s the problem: the rules aren’t made from stone. They’re not laws and even they are, people make them. So, that means the rules are not perfect and they are changeable. The 20 percent threshold people understand as arbitrary, false, an creation, fake. Experts disagree on everything and that’s good.

    “If you round the data, you’re going to get a certain number of bull markets. If you don’t round, you’re going to get a different number,” Justin Walters, co-founder of Bespoke Investment Group LLC, said by phone. “If you want to do that, that’s fine, but it’s not using the standard 20 percent definition.”

    If you want to start a fight on Wall Street just ask how old the current bull market will be on Wednesday.

    “Hold the champagne! This is not the longest bull market on record or since WWII as the current buzz on the Street would have you believe,” wrote Jeff Hirsch, editor of the Stock Trader’s Almanac, in his blog post.
    As Hirsch’s post shows, that calculation doesn’t sit well with some analysts, though not always for the same cause.

    For instance, Sam Stovall, chief investment strategist at CFRA, noted objections that argue the current bull would have to run until April 3, 2021, to claim the crown. In this case, the rub doesn’t have to do with dating the start of the bull market back to March 2009. Instead, it hinges on the contention that the 1990s bull market actually ran longer than it is widely credited.

    What is historical here?

    ”Using Ned Davis rules the longest bull began on October 11, 1990, and ran for 2836 calendar days until July 17, 1998. The current bull that began on February 11, 2016, would have to run until November 17, 2023, to beat it.” wrote Hirsch.

    So what conclusion we can have if this bull may be younger than we think?

    What we should focus on is performance. If we take this is indeed the longest bull market in history, let’s focus on returns. Through that point of view, the current bull market has returned just over 320 percent, while the bull market of the 1990s gained nearly 420 percent. To break that record would really be an achievement worth celebrating.

    It is impossible to prevent anyone from celebrating or drink champagne, but do it when you have the real reason based on irrefutable facts.

    Till then: Markets go up, markets go down.

    Risk Disclosure (read carefully!)

  • How to research and choose stock?

    How to research and choose stock?

    How to research and choose stock?
    Here you’ll find a full explanation on how to research stock.

    By Guy Avtalyon

    This is the main question: how to research stock? Investors have a name for all types of research, one of them is fundamental analysis. Fundamental analysis involves looking at numbers and other measures in a company’s financials as well as assessing the less tangible aspects of a business.

    This approach can help you decide whether a stock deserves a spot in your portfolio. Pick a company you’re interested in. Read current and past annual reports and letters to shareholders. Collect the numbers and financial ratios and compare the company’s performance history to the industry and its rivals. Then work through the list of qualitative questions.

    How to perform a technical analysis

    Technical analysis is a way to understand market psychology or what are investors’ feelings about a company, which are manifested in the stock prices. Also, technical analysts are mostly short-term holders, concerned about the timing of their buys and sells. If you can identify a pattern, you could have a chance to predict when stock prices will fall and drop.

    This is useful in how to research stock because it can inform you about when to buy or sell certain stocks.

    The technical analysis makes use of moving averages to track security prices. Moving averages measure the average price of the security over a given period of time. This helps traders to easily identify trends

    Use patterns as a tool on how to research stock:

    Patterns include known price boundaries in the market price of a stock. The high boundary is known as the “resistance.”

    The low boundary is called “support.”

    Recognizing these levels provide a trader to know when to buy (at resistance) and when to sell (at support). And there are some specific patterns that are also noticeable in stock charts.

    The most usual is  “head and shoulders.”

    This shows a top price then drops, followed by a higher peak then drops. And eventually follows a peak alike in height to the first. This pattern indicates that an upward price trend will end.

    There are also inverse head and shoulders patterns, which mark the end to a downward price trend.

    What is the difference between a trader and an investor?

    An investor search for a company with a competitive advantage in the marketplace that will provide sales and earnings growth over a long period. A trader tries to find companies with a price trend that can be utilized in the short-term.

    Traders typically use technical analysis to identify price trends. Investors typically use fundamental analysis, because they are focused on the long term. The decision, will you be a trader or investor, will determine you how to research stock.

    What orders do traders use?

    Orders are what traders use to describe the trades that they want their brokers to make for them. There are a lot of different types of orders.The simplest type of order is a market order, which buys or sells a set number of shares of a security at the prevalent market price. A limit order buys or sells a security when its price reaches a decision point. For instance, placing a buy limit order on security will order the broker to only purchase the security if the price fell to a some defined level.

    This allows a trader to specify the maximum amount willing to pay, a limit order guarantees the price the trader will pay or be paid, but not that the trade will happen.

    Stop order tell the broker to buy or sell a security if the price rises above or falls below a certain point. But, the price that the stop order will be filled at is not guaranteed because it is the current market price.

    What is short selling?

    Short selling is when a trader sells shares of a security that they do not yet own or have borrowed.

    It is typically done with the hope that the market price of the security will fall. As a result, the trader can buy the shares at a lower price than sold them for in the short sale. Short selling is useful to exit a trade in profit or to hedge against risk. But it is very risky.

    This should only be done by experienced traders who understand the market thoroughly.

    What matters is developing greater self-confidence and knowing the limitations of what you can really learn and find out.

    Also, there is a combination of stop and limit orders called a stop-limit order. When the price of the security passes a certain level, this order specifies that the order becomes a limit order rather than a market order as it does in a regular stop order.

     

  • Trade in Indian stock market and win in the markets

    Trade in Indian stock market and win in the markets

    How to trade in Indian stock market and win in the markets?
    To trade in India, you must have an exit strategy. And hesitancy isn’t helpful.

    By Guy Avtalyon

    To start trade in Indian stock market, you’ll need :

    1. trading account
    2. demat account
    3. savings account

    Trading and demat accounts are combinedly created which are then linked to your savings account.

    A trading account is used to buy or sell the shares while a demat account is used to store the shares.

    A great help when creating these accounts may come from the broker for a minimum charge. We would suggest you find a flat broker as the brokerage is less.

    In India, the broker must be SEBI certified.

    The markets are a mind game and to win this game, you will need a good plan and education.

    You have to think before you do anything. It is necessary to measure every move because it will have an influence on your next moves. You must have a strategy in mind to modify in case things do n’t correspond with your plan. 

    The most important thing will be to follow the plan consistently. Actually, there is no sure-shot formula for success in the stock market.  Just like any other skills, a new investor can learn stock with trial and error coupled with patience, discipline, research, and a sound understanding of the market.

    What should your plan have?

    How to trade in the Indian stock market?

    You have to define a logical expectation of return from your capital. How much capital to be put? There are some examples.

    Rs 25000/- is just a suggestive minimum, but depending on your strategy you have to find what is convenient capital requirement build on your style of investing or trading. To win this game, you have to decide the right mix of players which means, you have to work out a list of stocks, indices, options, that work for you in order to score your return objectives.

    So, the most important is to design a strategy to pick stocks/contracts to trade/invest in. You have to define a clear risk management strategy. If some stock is having a bad day on the market, you have to formulate a strategy, how much diversified the portfolio should be in order to cut losers and hold on to winners. This means a clear well-defined risk management strategy.

    You have to have well-defined rules when entering the basic factors. For example, results, sales growth, or technical factors like breakout along with a clear exit strategy. This means you have to have some entry and exit strategy.

    HOW TO MAKE YOUR RISK MANAGEMENT

    Risk Rules: The first step is to define how much to risk or how much to lose on one single trade.

    Just on the available trading or investing capital, you should decide reasonable limits you are comfortable losing. This is important because if you know the loss taking capacity, then trades will be done without fear of losing.  And when fear is not disturbing, you can make a decision without any emotions in your mind.  Fear of loss is the biggest barrier in trading and investing and the only way to overcome is pre-defining the risk rules in the form of loss-limits.

    Size of the trade: Don’t bet everything on one trade and go broke. Or bet too little and disable full profits to stay in the business.

    Both of these will drive you off the markets. In the first case, there is too many emotions or greed. When the trade goes against, it will be hard to press the exit button and you go broke because the position was large. The right side of the trade is such that which limits the losses to 1% or max 2% of the trading capital.

    Why trade in the Indian stock market

    There are some examples, for the people in India especially. On a trading capital e.g. Rs 2 lac, you can afford to lose max Rs 4000. Therefore actually trading is at 3000. And stop-loss is put in 2800, hence maximum loss per share would be 200.

    But 4000 is the maximum loss defined, as per strategy, therefore 4000/200 = 20 share can be bought at 3000 entailing a total investment of Rs. 60,000 (3000*20). With max risk at Rs. 4000 on this trade. Similarly, for investments, you should not invest more than 10% of the capital in any single stock. For the capital of Rs.2 lac, max Rs. 20,000 can be invested in a single stock, thereby creating a portfolio of 20 stocks.

    These rules are not mathematical rules of exactness, they are suggestive and followed hence as best practices.

    Exit strategy: In trading, you must have an exit strategy. It is important to know when to get out and mark profits or losses.

    What can help you to trade in the Indian market?

    Hesitance isn’t helpful when trade in the Indian stock market.

    Some traders in India have a pre-defined profit target of three times risk. If risk per trade is estimated at Rs. 4000 then the profit will be registered when Rs.12000 profits are achieved.

    The other exit strategy is when prices fall 10% from the top value. In that case and only then, the trader will square a long position. There are different ways of exiting the trade, it is crucial to have the exit strategy in place before entering the combat zone called the stock market.

    Stop-loss strategy: No matter what strategy you adopt, 90% of trades is how to control the losses. Portfolio returns often look bad because of a few trades went wrong where the exit stop loss wasn’t defined or activate.

    Because leverage is used this is more important in trading.

    You generally keep a stop exit when price adversely moves beyond, say 2 times average true range (ATR) or crosses key support or resistance field.

    Some prefer to keep the stop at 8% of the purchase price when we are speaking about investing. Whatever your strategies are, it is a must to exit a losing trade.

    Trading vs Investing

    Both require a different set of skills, mental attitudes, and different rules.

    The important decision-making points wherein strategy differs are Stop Loss or Hold On, long term or short term, analyzing price or analyzing the value, to follow the market or to predict are some of the contrasting and opposite action points which need to be applied to either investing or trading to the exclusion of each other. Doesn’t matter whether you are a trader or investor.

    Markets swing both ways, the bear market is going to follow the bull market.

    That means you should not have a prejudice towards long trades, selling short should also be done with the same comfort.

    By refusing to sell short you forgo huge opportunity to make money when the markets are in bear zone.
    Keep in mind, money can be made in 2 ways when trading:

    1. Buying Low and Selling High!
    2. Selling High and Buying Low!

    The hardest thing in the financial markets is the ability to consistently execute the plan with strong discipline.

    This rarely happens and that is why the results are so poor. The majority of the traders do not make money, because they lack discipline. To control over self all the time is really hard, but stay disciplined all the time is the most important ingredient for success.

    Whoever does it has wealth.

    Trading and Investing are essentially connected with human emotions.

    Basically, the human being makes the decision but the emotions act as barriers that impede good decisions. Sometimes the biggest battle is inside your own mind. To be a successful trader or investor you need to understand your own temperament. Whether you are patient or impatient, fearful, or fearless. A slow decision-maker or fast decision-maker, emotional or unemotional.

    Identify your psychological outlook and select the style which suits you the best, and you can have sustained success in trading and investing. Any money-making skills have to be self-acquired. You can’t postpone efforts to self-learn the art of making money through hard work and education. There is nothing that can substitute self-acquired knowledge and experience. You will have to write your own test in the markets.
    No copying or cheating will help you to pass the test! So, don’t listen to too many forecasters or advisers!

    What is the math of profit

    It is very easy when trade in the Indian stock market.

    Reduce costs, profits will automatically increase.

    Businesses are becoming digital driving down their cost of operations dramatically.
    Every trader and investor must act in order to reduce costs and increase profits dramatically.

    And you have to go with the trend.

    Once the phase of the market is identified as a bull or bear, then one should trade or invest in that direction.

    Also, it is not necessary to trade obsessively. Unfortunately, more tradings don’t mean more returns. Contrary, as investors’ motion increases, return decreases. Sometimes if there is no clear trend in the markets, it might be better to be an observer than be a compulsory participant. Both, in life simple things are more effective and in trading or investing. The strategy should be simple and easily understood too.

    The key to success is to stick to your rules of entry/exit points, to have solid risk management, self-control to stick to the plan. Also, the ability to control your emotions is the key to success. There is no other mystery to success in the markets.

    And read about the best Indian investors.

  • Market Dictionary And Jargon In Trading Options

    Market Dictionary And Jargon In Trading Options

    Market Dictionary And Jargon In Trading Options
    All the phrases that you’ll meet in the stock, Forex, and currency markets are explained. Especially for the options trading.

    By Guy Avtalyon

    Market dictionary and jargon can be confusing for people that just enter any market. Here you’ll find the meaning of most used terms. Each area has its own specific vocabulary and jargon.

    If you want to participate in the stock market, you should also know some basic terms and jargon.  In front of you is the short market dictionary and jargon. 

    Of course, in order to understand better what they are talking about. So, here you can find a Market dictionary with basic terms

    LONG – meaning in the market dictionary

    Describes a position (in stock and/or options) in which you have purchased and own that security in your brokerage account. Let me explain, if you have to buy the right to buy 100 shares of a stock, and are holding that right in your account, you are long a call contract.

    If you have to buy the right to sell 100 shares of a stock and are holding that right in your account, you are long a put contract. Say, you have purchased 1,000 shares of stock and are holding that stock in your brokerage account, or elsewhere, you are long 1,000 shares of stock.

    When you are long an option contract: you have the right to exercise that option at any time prior to its expiration and your potential loss is limited to the amount you paid for the options contract.

    SHORT   

    Describes a position in options in which you have written a contract (sold one that you did not own). In return, you now have the obligations in terms of that option contract.  If the owner exercises the option, you have an obligation to meet. And you have sold the right to buy 100 shares of stock to someone else, you are short a call contract.

    But, if you have sold the right to sell 100 shares of stock to someone else, you are short a put contract.

    What else our Market dictionary can say about this? When you write an option contract you are creating it. The writer collects and keeps the premium received from its initial sale.

    If you are short you are the writer of an option contract and you can be assigned an exercise notice at any time during the life of the option contract.  All option writers should be informed that assignment prior to expiration is a distinct possibility and your potential loss on a short call is theoretically unlimited.

    This means the risk of loss is limited by the fact that the stock cannot fall below zero in price. Although technically limited, this potential loss could still be very large if the underlying stock declines in price.

    OPEN –  meaning in the Market dictionary 

    The opening transaction is what adds to, or creates a new trading position. It can be a purchase or a sale.

    Opening purchase – a transaction in which the purchaser’s intention is to create or increase a long position in a given series of options.

    Opening sale – a transaction in which the seller’s intention is to create or increase a short position in a given series of options

    CLOSE 

    A closing transaction is reducing or eliminating an existing position by an offsetting purchase or sale. The closing purchase is a transaction in which the purchaser’s intention is to reduce or eliminate a short position in the series of options.

    This transaction is known as “covering” a short position. The Closing sale is a transaction in which the seller’s intention is to lessen or eliminate a long position in the series of options.

    What are LEVERAGE AND RISK in the Market dictionary

    Options can provide leverage. That means an option buyer can pay a small premium for market exposure in relation to the contract value (usually 100 shares of the underlying stock).

    The investor may have a large percentage of gains from comparatively small, favorable percentage moves in the underlying equity. Leverage also has downside consequences.

    If the underlying stock price does not rise or fall as anticipated, leverage can increase the investment’s percentage loss.

    Options offer their owners a predetermined, set risk.

    But, if the owner’s options expire with no value, this loss can be the entire amount of the premium paid for the option. An uncovered option writer may have unlimited risk.

    What is the strike price

    In trading, options determine whether that contract is in-the-money, at-the-money, or out-of-the-money.

    Say the strike price of a call option is less than the current market price of the underlying security.

    Then say, the call means to be in-the-money. Because the holder of this call has the right to buy the stock at a price which is less than the price he would have to pay to buy the stock in the stock market.

    If the strike price equals the current market price, the option is said to be at-the-money.

    What is Intrinsic value 

    It is the amount by which an option, call or put, is in-the-money at any given moment.
    By definition, an at-the-money or out-of-the-money option has no intrinsic value; the time value is the total option premium.
    This does not mean that you can get these options at no cost.

    The amount by which an option’s total premium exceeds intrinsic value is called the time value portion of the premium. It is the time value portion of an option’s premium that is affected by fluctuations in volatility, dividend amounts, interest rates, the motions in time.

    There are various factors that give options value and affecting the premium at which they are traded. Altogether, these factors determine time value. 

    These are certainly not the only so-called professional terms on the stock market. This Trading dictionary is just a collection of basic terms. Very soon you will have the opportunity to read the Great Trading

    Dictionary, that Traders Paradise is preparing for our readers. But they are some of the most common ones you will meet when you step into this world.

  • How To Learn About Trading and Master it?

    How To Learn About Trading and Master it?

    1 min read

    How To Learn About Trading?

    How to learn about trading or investing? First of all, don’t worry, you are not alone.

    I’ll start by telling you, there are a lot of people who are trying to make money online. You can find a very good way to make money online and for free.

    To be honest, I am not a fan of pay-to-be-rich-quick scams online. In other words, I think trading or investing is permanent learning. And life goal is to be successful in this field for a long time. 

    For new investors wanting to take their first steps, I offer great answers to the simple question.

    “How do I get started? How can I learn about trading?”

    The first step on how to learn about trading 

    Your first step should have multiple sources of a good education. Trying and errors combined with the ability to continue will finally lead to success.

    Read books, read articles, find a mentor or advisor, study the greats. Also, read and follow the market, consider paid subscriptions and be careful. 

    For some starting level investor, the stock market can be a lot difficult to understand. Without a good knowledge, no one is capable to dive into it.

    There are two main schools of thought regarding how to choose stocks.

    The first called fundamental analysis and second called technical analysis.

    How To Learn About Trading? 1

    The first refers to the use of a company’s financial reports and public statements to analyze the strength of the business. Balance sheets, income statements, yearly and quarterly earnings, and news releases are all important tools for fundamental analysis. You can find those reports online, as are tutorials on how to read them.

    The second refers that swings in stock prices follow sample that traders can learn to detect and profit from.

    Technical analysis

    Technical analysis is not as widely accepted or practiced as fundamental analysis.  Therefore many traders use a combination of the two techniques to choose stocks.

    Choosing a company with healthy fundamentals and then from time to time trading on a technical indicator is a safer strategy than relying only on technical indicators.

    How To Learn About Trading? 2

    Before you decide to buy or sell any stock, you should completely research the company, its leadership, and its competition. There are various sites which offer excellent compilations of news stories, financial statements, and stock price charts. Stock sites also show professional analysts’ ratings of a given stock, which indicates whether that analyst advises a trader to buy, hold or sell a stock. 

    Before you enter the trade

    Before you begin buying and selling stocks, you have to decide which online trading service you want to use, firstly. 

    Choosing your brokerage partner carefully can directly affect your bottom line.

    The best advice I got as an online trader is to choose my brokerage partner with open eyes.

    What you have to do, how to learn about trading:

    Practice with an online stock simulator: Using these allows you to practice your skills with zero risks. Many come with tutorials and forums to discuss investing strategies.

    However, keep in mind that simulators don’t reflect the real emotions of trading and consequently are best used to test theoretical trading systems.

    Trade penny stocks: You can find companies offer stocks that are traded for a very low cost. This wonderful opportunity to practice leveraging the market without a lot of risks.

    Trading penny stocks mean trading outside the major stock exchanges. You can trade them on the over-the-counter-bulletin-board (OTCBB) or through daily publications called pink sheets.

    The bottom line

    In conclusion, educate yourself about financial performance indicators.

    Read the news and financial websites. Listen to podcasts or watch online investment courses.

    Join a local investment club to learn from more experienced investors.

    Books provide a wealth of information and are inexpensive compared to the costs of classes, seminars, and educational DVDs sold across the web.

    Risk Disclosure (read carefully!)



  • What are the basic types of Forex trading?

    What are the basic types of Forex trading?


    Whatever measure, guide, or indicator you are looking for, whatever the time frame, there are 3 basic types of trades.

    Guy Avtalyon

    In this post, I’ll explain the basic types of Forex trading. What caused this subject?
    Regardless of personal experience in trading, conversations, and exchange of views with other traders are valuable. In one of such conversations, the topic was the types of tradings. After many hours and a lot of coffee, we had one conclusion: There are 3 types of trading.

    I need your attention for a minute. Let me explain this.

    True is, whatever measure, guide, or indicator you are looking for, whatever the time frame, there are only 3 types of trades.

    I meet a lot of people thinking they’ve mastered trading. The problem is they didn’t understand the differences between the trades they took.

    Sure thing is, it will be easier for you if you know the ultimate goal and what can you expect from the trade you took. And it is possible if you know the type of trade you just implemented. This is very important because your knowledge is what determines where to place your stop loss and your take profit.

    When a professional trader enters a trade, he knows exactly what he’s trading.

    And my trading friends and me, we can recognize 3 types of trading.

    Reversal trade
    Breakout trade
    Pullback trade

    Each of those trades has some special characteristics. I’ll tell you more about each of them. Depending on the market you’re trading, the success of each type of trades may be different.

    What are the basic types of Forex trading?

    Some traders are attracted to trade all of those types for a limited number of currency pairs.  But others are specialized in only one of those trades.

    When a professional trader enters some trade, he must know what he is trading.

    What is REVERSAL TRADE?

    A lot of traders think that implementing Reversal trades is composed of “calling a top” or “calling a bottom”.
    However, this isn’t quite true.  Actually, the entry price of a reversal trade is often in a previous zone of support or resistance.

    Reversal trades are among the most popular basic types of Forex trading because of their ability to be easily spotted. They take place in a ranging market.
    What are basic types of Forex trading? 2

    As you can see the buyers were very aggressive on the chart above because they pushed the price up all the way to point 1 from an original support zone. But, once the price hit a resistance zone (marked as 1), buyers started to take profit. And several traders began to short the currency pair and got more aggressive.

    They took control of the market. This had for the result to create a strong rapid decrease in price.

    At point 2, the same result came, which was a good opportunity to enter a Reversal trade. The sellers placed their orders at that level and the buyers began to take profit because they knew the price had reversed in the past at the same level.

    The stop loss should be placed above the highest point (A) and the take profit someplace below the resistance zone. It is okay to expect a risk-to-reward of 1:2.

    BREAKOUT TRADE is one of the basic types of Forex trading

    Breakouts trades are usually made by a strong continuous movement in a direction.  Therefore, some traders call it an acceleration because the movement is fast.

    What are basic types of Forex trading? 3

    This is a typical example of the Breakout trade. Take a look!

    The bulls were confident and kept pushing the price higher and higher to point 1. At that price, the sellers became more aggressive and took control of the market until the buyers showed even more power.

    The level pointed with a 2 shows a price at which bears are known to get more aggressive in the market. But, they were not aggressive when the price reached that level.

    Because there were no traders wanting to sell the currency pair aggressively, more and more traders went long, thus pushing the price higher and breaking through the resistance level.

    The stop loss on that trade should be somewhat below the resistance zone that was broken. So, the take profit level is above the zone. It is okay to expect a risk-to-reward of 1:2.

    PULLBACK TRADE

    Pullback trades are usually more solid because the retracement back to a previous price level represents a certain confirmation.

    (Retracement is the temporary reversal in the direction of a stock’s price that goes against the prevailing trend. But remember, a retracement does not signify a change in the larger trend.)

    As you can see, a pullback trade is characterized by a retracement, often to the previous support or resistance zone.
    What are basic types of Forex trading? 4
    Take a look at the chart above!

    The price kept ranging between a support and resistance zone. At point 2, no one was aggressive enough to move the price significantly higher or lower. Once the price broke above the resistance zone at point 3, several traders began to feel excited about their profit so far.

    Most of them thought that this high price might be a good opportunity to take a profit. But, as more and more people took profit on long trades, the price slowly decreased. When the price got back to the previous resistance zone, some traders began to feel that this price was too low.

    The traders then bought the currency pair again (at point 4) to force the price up.

    The stop loss on that trade should be somewhat below the resistance zone that was broken. The take profit point should be someplace above the zone. It is okay to expect a risk-to-reward of 1:2.

    How to use the basic types of Forex trading

    Look at the top of this post.

    When a professional trader enters a trade, he knows exactly what he’s trading. But do you know too?

    Study your previous trades and recognize the types of trades you were entering. Then ask yourself this simple question:

    ”Did I make this as well as I could?”

    If you get YES as an answer, you are a very good trader. But if your answer is NO this will help you to make progress.

     

  • How to Buy Stock Options??

    How to Buy Stock Options??

    HOW TO BUY STOCK OPTIONS? 1
    Buying and selling stock options isn’t just new territory for many investors, it’s a whole new language, new world.

    By Guy Avtalyon

    Let’s see how to buy stock options. They are not new, there are historical findings that confirm their use during the Antiquity period.

    You might suppose these options markets are another superfine financial instrument that Wall Street gurus created for their own dishonest purposes, but you would be wrong.

    Actually, options contracts did not originate on Wall Street at all. These types of instruments exist for thousand – long before they began officially trading in 1973 under the name of the Chicago Board of Options.

    Since you have a better understanding of what options are (calls and puts) let’s look at how to buy a call option in a more detailed explanation.

    How to buy stock options

    At first, place, how to buy a call option. To buy a call you must first recognize the stock you think is going up and find the stock’s ticker image.  

    When you get a quote on a stock on most sites you may click on a link for that stock options chain which lists every actively traded call and put option that exists for that stock. 

    Let’s go step by step:

    1) Identify the stock that you think is going to go up in price
    2) Review stock Option Chain
    3) Select the Expiration Month
    4) Select the Strike Price
    5) Determine if the market price of the call option seems reasonable

    Are there the options for all and every stock?

    Well, this is a fantastic question because options cannot be traded for all stocks. Some of them don’t have the options. You can buy options for only the most popular stocks. They are tradable. Also, there is no possibility to always buy a call with the strike price that you want for some options.

    Strike prices are generally, in intervals of $5 e.g. $30, $35, $40. Occasionally, you can find $34,5 or $32,5 available for popular stocks.

    Also, there is no possibility to always find the expiration month you are looking for on the option for which you want to buy a call. Most of all, you will see the expiration months for the closest two months. Then every 3 months thereafter. Surprisingly, if you find the option that you want to buy a call on, you still need to make sure it has enough volume trading on it. Just to provide liquidity so that you can sell it if you decide to.

    Are options frequently traded on the most stocks?

    The most stock options are infrequently traded. Therefore have a higher bid/ask spread.

    To buy a call you have to understand what the option prices mean and you have to find one that is reasonably priced.

    If trading is at $22,5 a share in September and you are looking to buy a call of the November $32 call option, the call option price is regulated like a stock, fully on a supply and demand basis.

    If the price of the call option is $0.5 then not many people are expecting to rise above $60; and if the price of that call option is $4,00, then you know that a lot of people are expecting that option to rise above $60. The most important thing to understand when you want to buy a call is that option prices are a function of the price of the underlying stock, the price, period left to expiration, and volatility of stock itself. The volatility and the expected volatility of the stock are keeping traders in different opinions and hence drives prices.
    The most important\ thing to understand when you want to buy a call is that option prices are a function.

    The function of the price of the underlying stock, the price, period left to expiration, and volatility of stock itself.

    The volatility and the expected volatility of the stock are keeping traders in different opinions and hence drives prices.

    Many genuine investors and traders wake up in the morning and sneak a peek at the stock futures to anticipate where the market will open in comparison to the previous day’s close.

    What are the main characteristics of call options?

    – The security on which to buy call options.

    Suppose you think XYZ company stock is going to rise over a specific period of time. You can consider buying XYZ call options.

    – The number of options contracts to buy.

    Each option contract holds 100 shares of the underlying stock. Buying 3 call options contracts, for example, grants the owner the right, but not the obligation, to buy 300 shares (3 x 100 = 300)

    – The strike price.

    Strike price refers to the price at which the owner of options can buy, let’s say the stock when the option is exercised.

    For example, XYZ company ‘s 100 call options allow the owner the right to buy the stock at $30, regardless of what the current market price is. In this case, $30 is the strike price (this is known as the exercise price too).

    – The trade amount that can be supported.

    This means the maximum amount of money you want to use to buy call options.

    – The expiration month.

    Options do not last forever. They have an expiration date.

    Say, if the stock closes below the strike price and a call option has not been exercised by the expiration date. It expires worthless. And the trader no longer has the right to buy the underlying asset and the trader loses the premium paid for the option.

    Most stocks have options contracts that last up to nine months. Traditional options contracts typically expire on the third Friday of each month. So, you must be aware of how to buy stock options.

    –The price to pay for the options.

    When you buy the stock for the stock price, you buy options for what’s known as the premium.

    Premium is the price to buy options. In 100 XXX call options example, the premium might be $4 per contract.

    It means the total cost of buying one XXX 100 call option contract would be $400 ($4 premium per contract x 100 shares that the options control x 1 contract = $400).

    If the premium were $6 per contract, instead of $4, the total cost of buying 2 contracts would be $1,200 ($6 per contract x 100 shares that the options control x 2 total contracts = $1,200).

    – The type of order.

    Options prices are constantly changing, like stocks. So, you may choose the type of trading order with which to purchase some options contract.
    There are several types of orders, including market, limit, stop-loss, stop-limit, trailing-stop-loss, and trailing-stop-limit.

     

  • Facebook seems to be pushing forward with its blockchain plans

    Facebook seems to be pushing forward with its blockchain plans

    2 min read

    Facebook seems to be pushing forward with its blockchain plans

    The head of its cryptocurrency team David Marcus revealed he was leaving his role at Coinbase to focus on the social network’s strategy. Marcus announced Friday that he would step down from his seat on the board of cryptocurrency trading platform Coinbase. 

    Marcus gave a statement to TechCrunch explaining his stepping down “because of the new group I’m setting up at Facebook around blockchain,” pointing that “Getting to know Brian (Armstrong, CEO of Coinbase), who’s become a friend, and the whole Coinbase leadership team and board has been an immense privilege. I’ve been thoroughly impressed by the talent and execution the team has demonstrated during my tenure, and I wish the team all the success it deserves going forward.”

    According to Facebook, this move was made to “avoid the appearance of conflict” between Marcus’ two roles.

    Facebook and blockchain plans

    It’s not absolutely clear what exactly is going on in Facebook’s developing cryptocurrency division. But according to several reports, something is in progress.

    There are speculations about what this might be. Maybe Facebook and blockchain plans are not so unimaginable.

    Facebook could build a cryptocurrency wallet.  

    They could create their own token that could be used for paying things with partnered businesses or through Facebook ads. Blockchain makes transactions free or cheap, so Facebook and its partners could offer users “3% off for buying made with FacebookCoin” or something like that.

    Possible Facebook’s cryptocurrency feature could be well-positioned to run such an idea. They have extensive connections with more than six million advertisers and 65 million businesses that have Facebook Pages. The social network could offer less costs of running the program, the transaction fee savings on to the users, and promote partnership with Facebook Crypto as a way to boost sales for businesses. That could get clients to spend more money on Facebook ads because the discounts would increase conversion rates and discounts like this could bring users into.

    That could swiftly make Facebook a power player in the global payments ecosystem; or acquiring major blockchain startups, perhaps even Coinbase itself.

    Previously, Facebook announced that it won’t be building on the Stellar protocol.

    Facebook seems to be pushing forward with its blockchain plans 2
    Facebook already lets sending money through Messenger for free, but only with a connected debit card or PayPal account. In the future, they could offer cryptocurrency based payments between friends to let a wider range of users through Messenger. If Facebook Crypto wallet could be fund once with a payment, and with a one-time transaction fee, and then they could send and receive the tokens for free. Blockchain could further increase engagement with Messenger for its 1.3 billion users.

    Facebook offered to major banks to integrate financial data into its social platform. That step signaled Facebook’s ambitions to expand its role in finance and e-commerce. But in light of the site’s recent spate of controversies over privacy also raised red flags for many. That incident suggests several potential benefits of applying the technology, as well as some pitfalls. Facebook CEO Mark Zuckerberg said that technology like blockchain could give users more control, including over financial and other personal data. That could be helpful to moderate future consequences against the platform, which recently reported discouraging user growth.

    Why this is so important?

    A top problem of decentralized blockchain apps is how you bring your identity with you. Securely connecting your wallet, blockchain-based goods and biographical info to new apps can be a difficult process. Usually, users have to type in long, complex keys that are heavy and annoying to remember. Users of social apps like Facebook Connect, which uses an OAuth single sign-on which provides instantly join apps without creating a new username and password, or filling out a profile and uploading a photo, want this social network because of its simplicity too.

    Zuckerberg acknowledged that blockchain systems, which run on distributed swarms of servers, are “harder to control.”

    Facebook seems to be pushing forward with its blockchain plans 3
    In theory, the first cryptocurrency launched by Facebook would be usable outside of Facebook’s platform, because blockchain-based identity systems could obstruct Facebook’s efforts to gather user data. Even after many years of scandals about privacy, all data continue to exist on Facebook’s core asset. That suggests that any blockchain product have to be very delicate to simultaneously cater to users and shareholders. But Facebook has a strong record of not being traditionally hacked. It wasn’t a massive user data debacle like LinkedIn, Twitter and similar social networks. An openly centralized identity system to connect with decentralized apps might bring the UX comfort necessary to unlock a new wave of blockchain benefits.

    Anyway, it seems there are several reasons why David Marcus stepped down from Coinbase board.

    And we may guess about Facebook and blockchain plans.

    For instance, FB plans to launch exchange or to launch their own payment platform or, which is more possible, to launch its own crypto wallet.

    The conflict of interest narrative makes each of these assumptions seems real. Speculations about buying Coinbase are less probably because if Facebook wanted to buy Coinbase, Marcus would have stayed there and brought more of ”his people”.

    Risk Disclosure (read carefully!)



  • Options – What Are Options and How To Use Them

    Options – What Are Options and How To Use Them

    2 min read

    What Are Options 1

    Contracts that grant the right but not the obligation, to buy or sale of the underlying asset to which they relate at the price indicated in the option contract until a certain date.

    They can be issued on the basis of other financial instruments, financial non-material or real property. But behind each option must stand the asset to which the option is related.

    The historical findings

    There are historical findings that confirm their use during the Antiquity period. (The first options were used in ancient Greece to speculate on the olive harvest.)

    But the fact is, trade options made great prosper in the last 50 years.

    The most significant event that enabled their popularization was the establishment of the first arranged stock exchange option in Chicago in the year 1973. And under the name of the Chicago Board of Options.

    Since then, a number of stock options have been established in the US and around the world.

    Options are a very useful financial instrument because of their characteristics.

    They offer investors a range of options. Traders and investors can use options as an instrument for speculation, Also for the protection and management of market risks (hedging) or for arbitration.

    In this way to any investor in accordance with its goal of trading, current market position, expectations, and preferences.

    According to the risk and personal preferences, options can create the desired position.

    The right to buy is a call option and the right to sell is a put option.

    Once again, options are the type of derivative. People a bit familiar with derivatives may not see an evident difference between this definition and what a future or forward contract does.
    What Are Options
    To clarify this thing. Futures or forwards confer both the right and obligation to buy or sell at some point in the future. For example, somebody short a futures contract for corn and has an obligation to deliver real corn to a buyer unless they close out their positions before expiration. An options contract does not carry the same obligation, which is precisely why it is called an “option.” 

    Once again, options are a great way to add flexibility to your portfolio since they can be used for both hedging risk and speculation.

    Learn more to understand the World of Options

    The benefits of options


    The benefits that options offer are high profitability, risk limitation, financial leverage, flexibility. And, which is important too, the ability to stay on the market without the need to own a marketable asset.

    Unfortunately, the general public knows little about these instruments. So, part of the investors is not able to trade options because of ignorance about their use.

    The options, like all derivative instruments, are complex in nature. And we have to know their capabilities and limitations. So that we can effectively use them for the stated purposes.

    Trading with options is also specific and differs from trading with conventional financial instruments. That’s why the investor needs to be well aware of trading rules with options.

    The brief review of options basics:

    1) An option is a contract which brings to its holder the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day).

    After this given date, the option ceases to exist.

    The seller of an option is, in turn, obligated to sell (in the case a call) or buy (in the case of a put) the shares to (or from) the buyer of the option at the specified price upon the buyer’s request.

    Option contracts usually represent 100 shares of the underlying stock.

    2) Strike prices or exercise prices. These are the stated price per share for which the underlying security may be purchased in the case of a call or sold in the case of a put. By the option holder upon exercise of the option contract. The strike price, a fixed specification of an option contract, should not be confused with the premium. That is the price at which the contract trades, which fluctuates daily. 

    What Are Options 3Equity option strike prices are listed in increments of 21/2, 5, or 10 points, depending on their price level.

    3) Regulation to an option contract size or strike price may be created to account for stock splits, mergers or other corporate actions. Overall, at any given time a particular option can be bought with one of four expiration dates.

    4) Option holders do not enjoy the rights due to stockholders.

    They don’t have voting rights, regular cash or special dividends, etc. A call holder must exercise the option and take ownership of underlying shares to be eligible for these rights.

    5) Sellers and buyers in the exchange markets, where all trading is conducted in the competitive manner of an auction market, set option prices.

    Risk Disclosure (read carefully!)