Author: Editor

  • Personal Online Loans – Everything You Need To Know

    Personal Online Loans – Everything You Need To Know

    Personal Online Loans - Everything You Need To Know
    The lending process is much faster if you are taking out a personal loan online. The whole process can be made from your home. Very often, you’ll get the funds deposited into your account within one or two days.

    By Guy Avtalyon

    Personal online loans can be easy to apply for. Online lenders usually offer low-interest rates, so it is important to note when you have to decide should you do or not that. The other benefit of personal online loans is that it is so easy to compare different offers from different lenders. Easy and quick. Besides specialized online lenders, many others are allowing you to apply for a personal online loan. Sometimes, you may get a loan under better conditions using their services.

    A personal loan from some online lender can bring money into your account instantly. Sometimes during the same working day.
    Also, for personal online loans, you can apply through solely online lenders or through some financial companies or institutions that also have online loans as an offer.

    What is a personal loan? 

    It is a loan that you, as a private person, take out for a short, limited time. It can be between two and five years. The time is fixed and doesn’t vary, which is different from the line of credit or a credit card. For most US residents personal loan amounts are from $1.000 and $100.000. This depends on your demands and your creditworthiness. Banks and lenders have individual limitations, a set of rules, on how long and how much someone can borrow for a personal loan.

    One of the characteristics of personal loans is that they are typically unsecured. And that is an advantage of this kind of loan because you don’t need to provide some kind of collateral. For example, you don’t need a house as collateral backing the loan. 

    There are many lenders that offer personal loans. Lenders could be traditional brick-and-mortar banks or online-only. They accept borrowers with various credit scores, income, and other conditions needed to get personal online loans.

    We will walk you through the process of how you can find the right lender for you depending on your income, credit history, interest rates. We will explain to you what you can’t use the loan for. Picking the right lender may save you a lot of time but, as more important, a lot of money.

    Personal online loans offer a handy solution

    For example, you need cash and you need it quickly. The main advantage of online lenders is that they can give you a quick answer to your request. So, online lenders are a quick, suitable choice, maybe more than banks or credit unions. 

    The other benefit is that online lenders usually offer lower rates but there are also some other things, very important and useful if you choose to apply for personal online loans.

    First of all, the majority of online lenders allow you to pre-qualify. That is a unique offer because you can compare rates from different lenders by pre-qualifying online and find the lowest. The other benefit is that they can fund a loan very quickly, the approval will come on the same day, sometimes in the space of several minutes. The loan will be funded inside a day or two. 

    Those are important things that make online loans different from others.

    The purposes to get personal online loans

    Personal loans are not an answer to all financial circumstances. Yes, sometimes they are simply a band-aid on incorrect money management. But it can help you if you have credit card debt with high-interest rates, for example, that is almost 25% per year. If you succeed to get a personal loan with a lower interest rate, you’ll be able to pay off your credit card debt faster and pay less on interest.
    Such refinancing is a good example of the purpose to spend your personal loan.

    But we have bad purposes too.

    Don’t try to get a personal online loan if you want to invest in stocks, for example. For that kind of purpose, it is better to save and then invest.

    Maybe the worst purpose of getting a personal loan is for vacations, expenses such as a wedding, expensive rings, or similar. Also, it is better to save for that.

    Someone would like to repair a home and think the personal loan is the best solution. Well, it couldn’t be more wrong. For that purpose, it is better to use a home equity loan since it has a lower interest rate.

    Steps to take before applying for personal online loans

    Before you start the process, decide how much money you really need. The sum you want to borrow should be based on the debt you have to cover and your income. Avoid stretching yourself too thin. If you take out a too-small loan it wouldn’t cover your needs, but also, the too-large loan will put you into paying interest on a larger amount than needed. So, you have to calculate the amount you can handle and do it before applying.
    Also, pick the right type of lender.

    Banks and credit unions take much longer to process your request than online lenders. They also require fewer documents and the application itself is less complicated. And sometimes the speed is most important in getting personal loans.

    The advantages of personal online loans

    Personal online loans have a big advantage – they are comfortable. 

    Doesn’t matter if you choose an online-only or branch-based lender. Both will provide you the loan application online and the possibility to upload verification documents. For example, you’ll need a driver’s license. Well, some branch-based lenders will require your signature on the final documents at a real branch. That is a kind of disadvantage since you would like to apply online. You will not have such a problem with online-only lenders. The whole loan application process will be done online for sure. 

    Prequalification will not hurt your credit score. Moreover, you can submit several prequalification forms to expand the list of possible lenders. 

    The next step is to complete a loan application and agreement to a hard check on your credit reports. Both types of online lenders, online-only or branch-based, require a hard credit check before you sign for a loan. Generally, these inquiries could affect your credit score. But one inquiry will have a small influence on your overall credit score and shouldn’t discourage you from applying for a loan.

    The particularly great advantage of personal online loans is that you can easily compare all your options. The benefit is that you could get the best rates and loan terms for your needs this way. 

    If you want to compare lenders, find a website that allows you to instantly classify and match lenders and loan options based on your situation, and wanted loan sum.

    Disadvantages 

    Online loans may cost you. They are not cheap and usually, they are costlier than loans from credit unions. The problem can arise with different formulas for underwriting because almost every online lender has its own. Also, sometimes it can be difficult to go through the application process for some types of personal online loans. For example, secured personal loans or co-sign loans have complex processes. 

    Also, if you want a loan under $2.000 it might be hard to find a lender since most of them have a minimum at that sum. 

    The main problem is to find reputable online lenders. You can see the ads of some lenders that they don’t care about your credit score or something else that may sound very lucrative at first sight. In most cases they are scammers. Legitimate online lenders will always check your capability to pay the loan. Yes, they will charge you the annual rate from 10% to 30%. The rates will differ based on your creditworthiness, the period of the loan, the loan amount, and, of course, the lender. 

    So, you must be very careful when choosing the lender.

    How to shop for personal online loans? 

    Here are several questions that you’ll need to find the answers for while looking for lenders.

    Online lenders examine extra factors, for example, your education, profession; but only those information related to your credit score and credit history. If you have a bad credit score, you’ll need to fix it first. But remember, it isn’t impossible to get a loan even with a bad credit score.

    What you have to know is the annual percentage rate (short APR) below 36%. That is the amount of the interest rate and all fees. If it is below 36%, financial experts agree it is reasonable for you as a borrower. If some online lender offers APR over 36% you can be certain the loan is unreasonable even if your budget can afford it.

    Do you have all your documentation ready? You can get rate quotes by providing several personal data. But when you decide to apply for a loan, lenders will expect documentation. That is ID form and proof of income, a pay stub or W-2. Still, you can easily upload all documentation, some lenders will accept screenshots, PDFs, scanned documents, or photos taken by your phone.

    The cost of personal online loans depends on your credit score. If you have a better score, you’ll pay the lower rate and less interest. Pay attention to interest rate since it can influence your complete monthly payment as well as the term of payment. If you get a longer-term loan you’ll pay less per month, but the interest amount can be bigger.

  • Mistakes in Options Trading – How To Avoid Them?

    Mistakes in Options Trading – How To Avoid Them?

    Mistakes in Options Trading - How To Avoid Them?
    Options trading isn’t difficult once you understand the basic concepts. They provide great opportunities when you use them correctly and can be dangerous when you use them wrongly. 

    By Guy Avtalyon

    You could make a profit no matter if stocks go down, up, or sideways and these great possibilities could lead you to make mistakes in options trading.  Despite the fact that this sounds great, you could also lose everything you invested in options trading. And you can do that in a short time. 

    Do you want that? Of course not. No one wants to lose money. So, what do we have to do?

    It is important to understand where mistakes in options trading can come from and how to avoid them. The truth is that even the most experienced traders can make mistakes in options trading. They can misunderstand some opportunity, have less caution, literally almost any absence of focus may cause mistakes in options trading. 

    We will examine the most frequent mistakes and how to avoid them and, also, how to overcome them.
    These mistakes are typically made by beginner options traders. So, take time to evaluate them and you can avoid making costly wrong actions.

    What mistakes can you make in options trading?

    Mistake 1: You don’t plan your entries and exits 

    Options trading is more complicated than trading stocks. When you enter the position in options trading, there are a lot more elements to watch and be aware than it is the case when trading stocks. In options trading, you cannot just enter and exit the position. You have to make a lot of adjustments if you want to profit and decrease the risks involved. 

    So the first mistake in options trading is to trade without a plan. This means you’ll enter the position and what is next? What are you going to do? Will you let your emotions to handle your trading? What if the price move against you? Will you pretend nothing is happening and like a child you’ll close your eyes until all problems go away?

    Of course, we know it’s impossible to put emotions out. But, also, we know that you can’t allow your emotions to affect your trading decisions. If you do such a thing, your portfolio could blow out and you’ll end up in losses.

    How to avoid a Mistake 1?

    Simply, trade smarter. It’s easy to say but how to avoid mistakes in options trading, particularly this one?

    Start to plan your exits. Exits are not important just to reduce the losses when things are not going in your favor. You must have an exit plan, in any case, you shouldn’t even enter the position before you have a good exit plan. Your upside exit and downside exit points must be set in advance. That means you already know the price targets. Further, a time frame for each exit is important too so you have to plan it.

    Keep in mind that options are time decaying assets. As the expiration date nears, the scope of decay grows. For example, if you are a long call or put and your expectations are more likely not to happen in the expected time frame, get out of the trade. Don’t wait, just go on to the next one.

    Time decay will not always knock your trade, of course. For example, if you sell options without having them, time decay will work for you. You’ll have a winning trade if time decay erodes the option’s price. You’ll keep the premium for the sale. Yes, that will be all you’ll earn if you are a short seller of a call or put option. The bad thing is that you may expect a great risk if the trade goes wrong.

    So, it isn’t a matter of what do you like or not, what strategy you’re running. You MUST have an exit plan for each trade. Even when you have a winning or losing trade. If your trade is winning don’t be greedy and don’t wait around for more. Exit with profit. If it is the opposite and your trade is losing, don’t wait also because you’ll need to exit the losing trade. Waiting with the hope that losing trade will turn into your favor is too risky.

    With having the plan, when you know your entry and exit points you’ll profit more consistently, you’ll reduce your losses. 

    Mistake 2: Using only the long call and long put strategies

    The important element when starting to trade options is to have a vision for what is possible to happen. In other words, you’ll have to estimate but also, your estimation must be accurate. You can use technical and fundamental analysis or a mixture of both. By using technical analysis you’ll have an interpretation of the volume and price in the charts, also you’ll look for support and resistance zones, trends because you would like to recognize opportunities for buy or sell. Fundamental analysis will show you a company’s financial audits, performance data, and current trends so you’ll be able to view the company’s value. 

    While estimating the different options strategies, you have to be sure the strategy you pick is created to take advantage of the outlook you suppose. You have to decide which is most suitable for your current situation.

    If you limit your trades to long call and long put strategies you’ll limit the probability to use some more profitable strategies. Moreover, they are unique, for options only and not implementable on stocks. 

    How to avoid mistakes in options trading?

    In trading options, you can trade an upward as well as downward move, a move in each direction, or without movement. Besides, you can trade, for example, an increase in volatility, or a decrease in volatility, etc. Is there any reason why shouldn’t you use some of these strategies and add them to your trading toolbox?

    Of course, not all options strategies will be good for every trader. There are some trading strategies that you don’t enjoy running. Maybe you didn’t have luck with them in the past. It isn’t necessary to use them but it can be useful to know them. Just try out the new strategy in a small size. That will not increase the cost per trade but new strategies might be interesting but most importantly, maybe you’ll find your next favorite strategy.

    Mistake 3: You wait too long to buy back short strategy

    This strategy can turn into a great mistake. You must be ready to buy back short strategies early. For example, if a trade is going in your favor it is easy to love the fanfare, but the trade may easily turn in a different direction. 

    We have heard numerous explanations of why traders are waiting too long to buy back options they have sold. Some were betting the contract would expire worthlessly, some didn’t want to pay the commission to get out of the positions,  or were just greedy hoping to get more profit out of the trade. The list of excuses is very long.

    How to avoid all mistakes in options trading?

    When a short option gets out-of-the-money and you want to buy it back, just do it. Don’t hesitate. 

    There’s a rule-of-thumb. If you can maintain to hold 80% or more of your original gain from the sale, think about buying it back quickly. Contrarily, a short option will come back and hurt you if you wait too long to close the position.

    Let’s say this way. For instance, you sold a short strategy for $2 and, for example, a week before the expiration date, you have an opportunity to buy it back for $1. Take it! Quite rarely it will be worth an additional week of the risk. 

    Mistake 4: You are buying out-of-the-money options

    This is common for new traders. We almost all tried this in the beginning. The reason is obvious. Out-of-the-money options are the cheapest and it looks like a great plan to start with them. Well, they are that cheap with a great reason and we understood that later. These options have very little chances of ending in the money. Most frequently they end up worthlessly. Trading these options is more a lottery game where you have to buy numerous tickets to see one that pays off and break even.

    When you buy these options, you must be accurate in timing and direction both. Even if you hold these options longer, a move in the right direction will not help you out. With approaching expiration, there is less possibility for these options to end up in the money. It’s more likely they will remain cheap.

    How to avoid this mistake?

    Try to get long calls or long puts at the money or in the money. That will increase their value since the options will be more costly than the out-of-the-money equivalent. So the probability of success will increase and it will deserve money.

    Mistake 5: Trying to overcome the past losses by doubling up

    All traders have certain absolute rules. They are playing well unless a trade turns against you. That experience is common for every single trader. Almost everyone was faced with a trade that turned against expectations. The first reaction is to break all adopted trading rules and continue trading the same option they started with. 

    Have you ever heard a saying “doubling up to catch up?” But it falls into stock trading. For example, if you bought the stock at $50 and you loved it, you’ll still love it at $30 because the lower price will give you a chance to buy more shares. This isn’t relevant in the world of options trading. It can be one of the great mistakes in options trading.

    How to avoid this mistake?

    This strategy called doubling up isn’t suitable for options trading. Don’t use it. Keep in mind that options are derivatives and that their prices don’t move the same direction as the underlying stock. 

    Yes, this strategy can lower your cost per contract for the entire position, but it can compound the risks. So when a trade goes against you, just ask yourself: “Is this a trade I would like to execute?” So, what to do in this case. Simply close the trade to cut losses and find another opportunity. To say this simply, it is smarter to take a loss now than wait and have bigger losses later.

    Everyone can make mistakes in options trading. They can be costly especially if you are trading cheap options. 

    Never think that cheap options can give you the same value as low‑priced options. Cheap options might have a bigger risk. You can lose everything you invested in them and more. the lower the likelihood is that it will reach expiration in the money. Before taking any action try to understand where the mistakes in options trading may arise.

  • Create a Forex Strategy – How to Do That?

    Create a Forex Strategy – How to Do That?

    update: 2/1/22

    Create a Forex Strategy - How to Do That?
    Almost everyone can set up the rules but stick with them when things go bad means that you have confidence in your forex strategy. 

    Yes, the question of how to create a forex strategy is maybe the most tricky part for all you would like to know more about forex trading before entering the forex market.
    The main goal of finding how to create a forex strategy is to choose the one which will provide you the protection against the losing trades but give you a chance to have more winning ones. Otherwise, you’ll lose your money invested in the forex market.

    You can achieve this thanks to a proven forex strategy. 

    To know how to create a forex strategy you have to follow some rules. Well, it’s maybe better to call them steps. By using this set of rules you’ll be able to create any forex trading strategy, from the simplest one to the most complex.
    The main problem for the majority of forex traders is that they rely on some strategy that isn’t well tested. That leads them to great losses and failure. Even if you spend hours, days searching the internet, it may happen you’ll not find any suitable for you.

    The only solution is to learn how to create a forex strategy that can meet your goals.

    Knowing what rules to follow

    As we said, there are some rules you have to follow when you start to create a forex strategy. But firstly, we have to highlight one thing. It doesn’t require too much time to come up with a forex strategy, but it does take time and effort to test it. As you can see, you have to be patient with that because it can benefit you. If you create a forex strategy and test it extensively and you see it works for you, it could lead you to earn potentially a lot of money.

    Rule No 1

    The first rule is that you have to know what kind of forex trader you want to be. Do you want to be a day or swing trader? So, knowing the time frame is the first rule when you start to create a forex strategy.

    How to do that, how can you know what kind of trader you want to be?

    From the very beginning, you have to decide if you would prefer to look at charts every day, week, month or maybe every year. Also, the time frame rule will answer you about how long you would like to hold on to the positions. So, you have to define which time frame you want to use to trade. It’s true that you will look at various time frames, but this particular one will be your main time frame and the trade signal will come from there.

    Rule No 2

    The next rule is to detect indicators that will help you to identify a new trend. One of the main goals in forex trading is to recognize trends earliest possible. For that, you’ll need indicators.

    For example, the moving average is one of them. As we learned from elite traders and according to our experience, the best way is to use two indicators. It is quite simple. Just use one fast and one slow. All you have to do is to wait until the fast indicator crosses under or above the slow indicator. This is a so-called crossover. Moving average crossover is the simplest and fastest way to notice a new trend. There are many other indicators but this one is more comfortable to use and the easiest one.

    But be careful, the last thing you’ll need is to pick a fake trend so you’ll need a confirmation of the trend. For that, you have to use some other indicators. For example, RSI, MACD or Stochastic. It’s up to you to find the one that suits you the best but it will come after you gain more experience in forex trading.

    Rule No 3

    You have to know your risk tolerance. Before you implement any trading strategy or develop your rules, it is very important to define how much risk you want to take in each trade. In other words, how much money you can afford to lose per trade. However, no one would like to talk about losing trades, but it is crucial for everyone to consider potential losses much before you imagine how big your winning trade can be. So, you’ll have to learn about risk management. Risk tolerance is individual and differs from trader to trader.

    Rule No 4

    You have to know when to enter and exit the trade, so entry and exit points are extremely important. After you define how much money you are ready to lose per trade, it is time to figure out where to enter and exit the trade to get profit. Basically, you enter the trade as soon as your indicators provide you a sure signal. Some traders enter the trade before the candle in their charts is closed, some will enter when it is closed. It’s up to you and your trading style, meaning are you an aggressive trader or not. 

    What really matters is to stick to your practices. After all, you are the one who developed it.

    Create a forex strategy on your own

    When you are looking to create a forex trading strategy, you would like to know how to do that and how to develop trust in the strategy you created. Your forex trading strategy MUST give you a strongly rooted belief that you can trade it and profit. Otherwise, you’ll fail.

    So, before you use it, you’ll have to test it.

    Before you even start to create a forex strategy you must have some presumptions. You’ll need a feeling that it might work for you. Yes, it will be a struggle but once when things get going you’ll be unbelievably satisfied.

    Frankly, creating a forex strategy isn’t an easy job. You’ll have to define what exactly you need. This is extremely important because you’ll need to test your strategy precisely. That means you’ll need to know both entries and exits. But it is a small part of creating a forex strategy.

    What should you know before starting to create a forex strategy?

    Here are some questions that you may follow to find the answers and when you have done it, you’ll see that you have your strategy. Maybe not all fall into creating a strategy but they will surely help you a lot to create a forex strategy. 

    First, you have to decide on which currency pairs you can trade your strategy.

    So, make a market selection.

    The other question you should ask and find out the answer is will your strategy work on different market conditions. For example, is it useful in trending markets, high volatile markets, bull or bear markets?

    Also, as we mentioned above, the entry time frame is important. Ask yourself which time frame to use to enter the trade. Would you prefer a lower time frame to entry or high time frame for trend direction? What circumstances have to be met to enter a trade? When it comes to exits you have to figure out do you want to use a fixed take profit level or profit level based on average true range. That is a technical indicator invented to read market volatility.

    The decision of which chart setup you’ll use can be of great importance.

    The type of chart, what indicators to include, which settings for the indicators, etc.

    Further, you’ll have to choose a position sizing strategy. That means you’ll have to decide will you use a percentage-based position sizing. Maybe you would like to increase your position size periodically. Will you use some fixed lot or contract sizes?

    Also, just to repeat, define your risk tolerance and money management. You have to determine the risk-reward ratio you want to get. Will you use a trailing stop-loss? Which one: based on percentages, volatility-based, fixed pips values or ticks values? Will you use stop-loss orders and how will you move them? 

    Do you plan to enter various correlated currency pairs at once? How will you hedge your position? By using inversely correlated pairs or something else? Are you planning to monitor your trades constantly? Would you hold your trades over the weekends?

    Maybe the last but for sure not the least, do you follow the news and how frequent? 

    If you want to create a forex strategy, you’ll need the answers to all these questions. So, take your time.

    The next step is backtesting. To get accurate information about how good your strategy is you have to follow your strategy, never change the rules while testing or your data will not be accurate. For testing use a representative sample of your trades based on the questions above. Examine how your strategy is working in different market conditions for different currency pairs. 

    And you’ll be able to trade for real after you have done all of this. But keep in mind that live trading with real money can differ from your tests because the real money is involved.

    Bottom line

    So, you started to create a forex strategy. Is it simple? Of course, it isn’t for good reason. But you must have the confidence to trade your strategy and to incorporate it into your trading plan.

    Traders-Paradise recommends starting with the smallest lot size your picked platform permits. If it shows the profitability you may keep using your forex trading strategy. Later, you can increase your position size. The strategy you created should work in the long run.

    If you prefer to trade stock patterns we are recommending to learn it more from the “Two Fold Formula” book and. Also to test it with a virtual trading system.

  • How Options Trading Make Money?

    How Options Trading Make Money?

    How To Trade Options And Make The Best Returns?
    Options trading strategies include the whole range from simple trades to extremely complex. No matter simple or complex, they’re based on two fundamental option types: calls and puts.

    By Guy Avtalyon

    There are unlimited ways to learn how to trade options and make money. How to find the best options trading strategy is also very important. You have to choose and find the right time to use your options trading strategy. That will result in huge profit potential for the traders. If you never learn you’ll be stuck in the question of how to trade options and miss a chance to make the best returns.

    You may ask why trade options instead of direct assets?

    Trading options have some advantages that could benefit you more than direct assets. Before we explain to you how to trade options, we want to tell you where you can do that. 

    In the US CBOE or the Chicago Board of Options Exchange is the largest exchange for trading options, actually, it is the largest in the world. Its offer is in the range from single stocks, ETFs to indexes. 

    In Europe, the situation is a bit more complex since we have a specific type of option. More about this READ HERE
    Recently, the market maker demanded from regulators to bring the new rules about derivatives trades. But if you want to trade options CME Group or Intercontinental Exchange can be the right places.

    Anyway, whichever you choose you’ll have to create the proper options strategy, one or more. You can choose from a very simple buy or sell strategy to extremely complex that require many simultaneous option positions.

    How to trade options for income?

    Traders frequently enter the trading options with limited or lack of understanding of options trading strategies. It is quite hard to explain why because they can learn how to trade options and find plenty of strategies that could limit the risk of trading and, at the same time, give the best returns. 

    That requires a little effort but gives an opportunity to take advantage. Traders who know how to trade options can enjoy the power of options trading. And they are very powerful. Having that in mind, we are giving you the shortened version of how to trade options along with the most powerful strategies you can use to generate the best returns. These strategies will teach you how to trade options and direct you on the right path.

    Basic strategies to learn how to trade options

    Options trading strategies appear in the range from simple, for example, one-legged strategies to fascinating multi-legged that seem like they are coming from the other planet but from one more advanced than ours. Simple or complex doesn’t matter. All of them are based on primary option types: calls and puts. 

    When we say “simple” that doesn’t mean there are no risks involved but that simple strategies are a good starting point to understand how to trade options. Also, they are able to give good returns. 

    So let’s start with what traders call one-legged strategies.

    The long call

    This is a strategy when you buy a call option. In other words, you go long. This strategy means that you are betting that the underlying stock price will go up, higher than the strike price by expiry date. 

    For example, the stock you want to trade is at $40 per share and the call is accessible for $2. The expiration date will come in 6 months. As you know, you have to buy 100 shares at least which is a standard option contract, so your contract is for that amount of shares. That will cost you $200.

    $2 premium x 100 = $200

    Here are three possible scenarios with your long call option.

    The key variables in our imaginary case are:

    The strike price is $45
    Initial price in the example is $2
    Current underlying price is $40

    If the underlying price is lower than the strike price at expiration, your option will expire worthlessly. The result of your long call trade will be the loss. That loss is equal to the amount of money you paid for 100 shares, in our case study it is $200 which is the initial cost. The option’s total profit or loss depends on the underlying price. For example, if the underlying price is, let’s say, $42 why should you exercise the option? That would allow you to buy the underlying asset at, for example, at $45 which is more expensive than you buy it on the market.

    But here is the good news. In the long call trade, the loss will be always limited, you cannot lose more than your initial cost was. Even in case the underlying price drop to zero. You’ll lose the $200, the amount you paid for the call option.

    The second possible scenario is when the underlying price is equal to the strike price. That is a very rare case but still. In such a case there is no reason to exercise your option. You could simply buy it on the market since the price is the same. You’ll end up the same as in the first case scenario. Your loss will be equal to the initial cost.

    But what if the underlying price is higher than the strike price?

    Actually, you are buying the long call option for this scenario. That is the best possible case. When the underlying price is higher than the strike price that meant the option is in the money and you have to exercise it.

    For example, the underlying price rose to $50. As you already know, the options give you the right to buy the underlying asset at the strike price, in our example, it is $45. What can you do? Immediately sell it at the underlying price, meaning you have to exercise the option. That will bring you a cash flow of $5 per share, and as you have 100 shares which means $500 for that option contract.

    To calculate the profit from the trade you have to subtract the amount you initially paid.

    ($5 – $2) x 100 = $300

    That is your profit from one long call trade.

    The long put

    It is similar to the long call, but in this options trade, you’re betting on a stock’s decline because you don’t want it to rise. You are buying a put option, wagering the stock will fall under the strike price by expiration.
    For example, the stock trades at $40 per share, a long put option at $40 strike is available at a $4. The date expires in 6 months, for example.

    This long put will cost you $400 for 100 shares and you bought 10 contracts.

    $4 x 100 = $400

    The long put value is the biggest when the stock is worth $0 per share. That leads us to conclude, and we’ll be right, the stock’s maximal price is the strike price multiplied by 100 shares and multiplied by the number of contracts. 

    In our example, it is $4.000.

    $4 x 100 x 10 = $4.000

    When the stock increases, you can sell the put and save part of the premium, if there’s some time to expiration. The greatest downside is a total loss of the premium or $400 in this example.

    A long put is a way to bet on a stock’s drop if you can allow the possible loss of the whole premium. If the stock drops notably, you’ll earn significantly more if you own puts than you would by short-selling the stock. The other advantage is that you can use a long put to limit potential losses. In the case of short selling, you could take an incredible risk because the stock price could continue to rise. The stock has no expiration.

    How to trade options – The short put

    The short put is the inverse of the long put. The trader is selling a put, or in other words, going short. This strategy is best to use when you assume the stock will stay the same, meaning it will be flat or increase till the expiration. That will mean the put expires worthless and the put seller will take the whole premium. A short put is similar to a long call, but there are some differences. It is, so-to-say, a modest bet that the stock will rise so the payoff is modest too.

    If you use this strategy in the best case you can expect the maximum return same as the premium but you’ll as the seller will receive that upfront. The premium will be paid as a whole if the stock price increases above the strike price or stays the same. If the stock goes below the strike price at expiration, the seller will have great losses because such will be forced to buy the stock at the strike price.

    This strategy is useful for…

    But this strategy is suitable for traders who want to generate income by selling the premium to other traders. Particularly to traders who are betting the stock will drop. Put sellers want to sell the premium, that’s all that matters.

    Traders very often use short puts to reach a better buy price on a very expensive stock. They simply sell puts at a strike price, where they would like to buy the stock. For example, with the stock at $40, a trader will sell a put with a $30 strike price for $3.

    If the stock drops below the strike price at expiration, the trader is assigned the stock and the premium will offset the buying price. The trader pays a $27 per share, or the $50 strike price lessen for the $3 premium that he/she already got. 

    But if the stock continues above the strike at expiration, the put seller will hold the cash. So such can decide to try the strategy again.

    Is trading options a good idea?

    Yes, of course, and cheaper than trading stocks. Well, it’s obvious why trading stocks is interesting. It’s somehow simple to understand and definitely there is money that traders can make. But some other financial instruments can produce the benefits that stocks do not.
    Options trading, especially, has many advantages. Trading options is a very good idea and I’ll explain why even if it is more complex than stock trading and traders have to learn so much about it.
    First of all, in trading options, traders can make meaningful profits without having a large sum of money. So, it is perfect for beginners that want to start trading with a little money. Also, it is very profitable for those with large budgets. This potential to make a big profit with a little money comes from the leverage. The leverage is what provides your capital with much more trading power.

    A real-life example

    For example, you have $500 to invest and you want to invest it in Company ABC stock. Its stock is currently trading at $10, but you expect it to rise. If you buy this stock using your $500, then you could buy 50 shares of that stock. If you were right and the stock really rose to, for example, $15 you will make a profit of $5 per share which is $250 for the total. That’s a 25% return on your initial investment.
    Let’s see what will happen if you chose to buy call options on that stock.

    Alternatively, you could choose to buy call options on the same stock, giving you the right to purchase the stock. If call options with a strike price of $10 were trading at $1.00 each, you could buy 500 options with your budget of $500. That will give you a chance to buy 500 shares if the stock rise. So, let’s say the stock rises to $15, and you might exercise your option and buy 500 shares. If you sell them quickly your profit will be $2,500.
    Deduct your initial investment of $500 used to buy options. So, you’ll pocket $2.000. So the return of your capital invested is 200%.
    This is a simple example but tells more about trading options than everything.

    There are numerous profitable strategies for options trading. Traders-Paradise introduces you just four of the many strategies and ways how to trade options.  Of course, we will continue writing about all strategies we know or find from other traders.
    As we already said, there are countless ways to learn how to trade options and we are willing to present them. 

    Stay tuned, we are here for you. 

  • Forex Strategy That Works For You

    Forex Strategy That Works For You

    Forex Strategy That Works For You
    Having discipline is a key feature of forex trading. How can you have discipline when you are in a trade? One way is to have a trading strategy that works for you. The key part is the profit. 

    By Guy Avtalyon

    It will require some time to find a forex strategy that works for you especially. Every forex trader has a unique style, risk tolerance, amount of money available, and trading goals. So, your forex trading strategy that works for you not necessarily will work for other traders. But some forex trading strategies can be suitable for everyone. 

    First of all, let’s explain what a forex trading strategy is.

    What is a forex trading strategy?

    It is a technique that a forex trader uses to discover when to buy or sell a currency pair. There are numerous forex strategies that traders can practice. For example, technical analysis and fundamental analysis. A forex trading strategy that works should provide you to analyze the market and execute trades with clear risk management systems.

    A Forex strategy that works

    Forex strategies are divided into several organizational structures which is a great help to traders to find a forex trading strategy that works for each trader the best. The main point is to locate the most suitable strategy. 

    So, we can divide forex trading strategies into main categories: Price action trading that includes Trend trading, Scalp trading, Position trading, Range trading, Day trading, Swing Trading, and Carry trading.

    Forex trading demands to put together various factors to form a particular forex trading strategy that works for you. There are innumerable strategies that traders can use. What really matters is to understand and feel comfy with the strategy you create and use. Each forex trader has individual intentions and sources. That fact must be taken into factor when you want to pick or create a forex strategy that works for you particularly. 

    You can use three criteria to analyze distinct strategies based on their convenience. To find a forex strategy that works you have to determine what time resource is required. Further, what are the frequency of trading chances? And last but not the least, what is the ideal distance to a target.

    To compare the forex strategies based on these three criteria, you have to know how efficient they are based on other traders’ experiences. It is always smart to check how a particular forex strategy works for others. 

    How to find a forex strategy that works?

    The crucial is the risk-reward ratio. So, based on historical data and traders’ experience position trading will provide you the highest risk-reward ratio. 

    Further, you have to examine how much time you’ll need to invest to monitor your trades. For example, scalp trading is a high-frequency strategy so it will require most of your time.

    In order to help you to find a forex strategy that works for you, we’ll explain how each of them works.

    What is price action trading?

    Price action trading means studying historical prices to create technical trading strategies. The advantage of this strategy is that you can use it as a stand-alone. However, you can use it in combination with an indicator. Fundamentals are rarely applied, but sometimes it is smart to include economic circumstances as a supporting part.

    The price action strategy actually covers several other strategies. 

    For example, the length of trade. The strategy gives you an opportunity to use multiple time frames in trading. It is suitable for long, medium, and short-term tradings. 

    What is most important with this strategy and the most convenient you can use it without any indicators, complex techniques. It can be used based on simple price action.

    Few more words about price action strategy

    All price action in forex trading comes from buyers (that are bulls) and sellers (that are bears). When the GBP/USD currency pair goes up it’s due to more bulls than bears. Of course, when this pair is going down it is vice versa. So, you may conclude, and you’ll be right, that we have a permanent fight between bulls and bears in the forex market.

    This forex trading strategy is all about examining who controls price, bulls, or bears and who’ll control the price. 

    When bulls are in control and you have proof they will continue that, it is the right time to go long, meaning you can buy. The opposite is when the bears are in control of price. That means it’s time to short, meaning you can sell.

    But how to examine who is in control?

    This forex strategy that works always is quite simple to use. The essential is to use just two price action methods or techniques.

    One is support and resistance zones. The buy and sell zones are easy to identify and add them to your charts. When the price hits these zones there are two possible directions: the price will halt or reverse. So you’ll know that is the right time to buy or sell.

    The price action forex strategy that works in all conditions

    It doesn’t matter if it is trending, low volatility, high volatility forex market, this strategy will work anyway, and generate profit. It is different from strategies based on indicators that are suitable for particular market conditions. For example, if you use an indicator strategy that is good for the high volatility market, it will slip in other market conditions. It is due to indicators’ inability to adjust for different market conditions. One indicator is good for one market condition. 

    Price action is what can be adjusted to the time frames, different currency pairs, market conditions, and moreover, and to many traders though. The point of this forex trading strategy is that it literally works for everyone because it keeps the trading simple.

    What is the purpose of price action strategy 

    The best forex strategies use price action. As we mentioned above it is also known as technical analysis. Speaking about technical currency trading strategies, we can recognize two main techniques: follow the trend and counter-trend trading. Both are aimed to profit by identifying and utilizing price patterns.

    To profit from price patterns, the most powerful approach is to identify support and resistance. In other words, both show the market tends to bounce back from prior lows and highs. Support means the market tends to increase from an earlier confirmed low. Resistance is the market that tends to fall from an earlier confirmed high. This happens because traders want to predict the next prices against current highs and lows.

    What happens when the market approaches recent lows? 

    It is obvious that buyers will seek what they see as cheap and buy. On the other hand, when the market nears the recent highs, the sellers will lock in a profit since it is a great opportunity to sell at expensive prices. So, recent highs and lows are measures to evaluate the current price. 

    Also, support and resistance levels. Both happen because traders predict specific price action at these points and play according to their expectations. This has a great impact on the market because their actions can cause the market to go in their direction.

    But keep in mind some rules. 

    First, support and resistance levels aren’t fixed rules. They are a consequence of the action of traders.
    When traders follow the trend they actually want to profit from support and resistance break-downs.
    Counter-trending is the opposite of trend following. The traders that use this technique will sell when a new high is touched, and buy when a new low is reached.

    The main goal in forex trading is the same as it is in any other trading: eliminate the losses and have more winning trades. You can have it if you use the forex trading strategy that works. It is essential to find the one that suits you the best. That means you have to develop a set of rules and follow them if they work. If not, simply change them. However, the best practice is to follow some proven strategy. Especially if you are planning to enter forex trading and you don’t have enough knowledge and experience. Relying on strategies that are not proven and tested might lead you to enormous losses and failures. So, the best chance for you is to find the right forex trading strategy that works and use it.

    Stay tuned, we will write more about forex trading and powerful forex trading strategies and techniques.

  • Growth Stock Investing Strategy

    Growth Stock Investing Strategy

    Growth Stock Investing Strategy
    Growth investing strategy can be a great way to get high returns, but the key is to understand what growth stocks are. Your time horizon and risk tolerance are major factors.

    By Guy Avtalyon

    This is all about the growth stock investing strategy. It is the art of science implemented in investing. Investing requires significant research. But to create the growth stock investing strategy you’ll need a really good understanding and knowledge about growth stocks and underlying business. 

    Why did we say it is the art of science?

    Well, buying a stock is the art itself. Growth stocks are elite stocks because they are what could make a lot of money for you. So, you will need a great growth stock investing strategy to ensure the great gains they are able to provide. Growth stock’s value can be boosted and some careless traders could be faced with its decreased price with no warnings. To avoid losses you’ll need a stable growth stock investing strategy.

    What is growth stock investing strategy? 

    Growth stocks are a popular investment. The reason is quite clear: If some investors can make money by investing in them, why shouldn’t you? But if you want that, you’ll need knowledge, system, growth stock investing strategy to know when and how to react when the right time comes.

    To recognize the right time for investing in the growth stocks the essential part is to know when some company can grow. It could happen due to organic growth, expansion, and in case of an acquisition. But keep in mind, not all growth is a good one.

    Let’s make clear all of these cases of growth.

    When the company improves its operations and capabilities from year to year we can talk about organic growth. But organic growth can shift negative if circumstances change. So, since it is changeable it is still good but not the best growth.

    The growth caused by the expansion of the company means the company is reinvesting. It is actually expanding its operations. For example, the company may invest in its equipment, facilities, new branches, etc. As a result, you’ll notice low or no EPS and a high debt ratio. Sometimes both are visible. Of course, you can ignore low EPS if it is caused due to the company’s development and you see the company is reinvesting.

    We are talking about acquisition and growth caused by that when one company buys the other one. For example, two companies have had a problem with organic and expansionary growth for many years. To solve the problem they bought smaller companies to increase revenue and earnings. This type of growth is very good for dividend investors. 

    But is it good for growth stock investors? We are afraid it isn’t. Growth stock investors prefer expansionary growth. That may give them high returns. That is exactly happening, for example, with companies that started as small but with the potential to expand a big.

    How to develop a growth stock investing strategy

    Growth investing is an investment strategy directed on capital appreciation. Investors who implement this style are recognized as growth investors. But how to get in the race? How to know when is the right time? For that, you’ll need a growth stock investing strategy. 

    First of all, you have to be able to make a difference between the normal market and the situation when the market is not normal. The worst growth stock investing strategy is to jump into the market and make a mess and losses. You will need time to build knowledge when the market is normal. Hence, you’ll need the practice to know when the market is normal to be able to recognize when it isn’t. 

    Why is it so important to know when the market isn’t normal? What are you supposed to do in the markets that are not normal? This part may sound like nonsense but the periods when the markets are not normal are the best time to buy or sell stocks. That’s all wisdom.

    So, you have to maintain your trading journal. That may include everything you read and learn about investing and trading. For example, you can follow economic data for determined periods. No matter if they are weeks or months. Also, your journal should include the market’s movements and investment decisions. 

    Do it effortlessly. You have to know what’s happening in the market, you need to watch how the stocks on your watchlists are performing.

    That will arm you against the emotional risks of trading and making bad trades. Also, that will give you a chance to build an objective, repeatable trading strategy, so your portfolio will perform better.

    You have to understand how the market movements are driven. For example, the market movements are handled by fundamental conditions which are long term, economics which is midterm but also the news which is short term. Economic and fundamental conditions are crucial for growth stocks. What do you mean, how the company can grow if the fundamental or economic conditions are against its progress? It’s impossible. 

    How to select stock for growth investing

    Choosing stocks is not the way you may become rich. That is a mistake and don’t fall into that. You are not just picking a stock, you are choosing it after you estimate it well. In other words, you have to be familiar with stock. So, that to say, choosing stock is a very good way to obtain more education. When you get good knowledge about the market, you’ll be in harmony with the market. 

    Being in harmony with the market will provide you to know when is the right time to enter or exit the position. With this fine-tuned sense of market movements, you will know why the market is doing what it is doing, why it is better to buy or sell, why some stock is going up or dropping down.

    While you are picking stocks, you are actually creating your watch list. Of course, you’ll add only the stocks you are interested in, meaning they meet your investment criteria.

    Making a watch list can improve your growth stock investing strategy. Selected stocks are what you want to know more about, nothing else matters. 

    Of course, it is absolutely okay if you have more than one watch list. You can create it depending on types of stocks, investing style, etc. Also, you can find growth stocks in almost every industry or sector, so you can make a watch list for each sector, for instance, and update them after the earnings cycles end.

    Indicators important for growth stock investing strategy

    That to say, it is always better to follow the trend, not the other investors. Sometimes you’ll need to be patient with your watch list and pay attention constantly. You have to follow the prices’ changes, also the news, and to wait. Always keep in mind that growth stocks are impressive and exciting. Media makes a big noise sometimes about growth companies publishing good information and avoiding bad. That could lead to the stock’s price to rise because the fresh money is coming. But try to avoid following the masses. If you follow the crowd you will never get a favorable price. 

    Wait for the right time to pull the trigger. Sometimes the hardest part of growth stock investing is to recognize when it is the right time to buy. During hype, the prices will go up. But everything will be changed when bad news is on the scene. They will cause the stock price to go down. 

    The growth stocks are flying higher by optimism, desires, and exaltation. Well, investing isn’t based on current earnings. It is based on future earnings.

    For a successful growth stock investing strategy is a more important report that suggests the changes in the future outlook. As a growth investor, you would like to see that the market can reset its expectations. If there is confirmation of such changes you’ll know that the price will drop, sometimes very quick and sharp. That’s the moment when you are going to buy the stock because the price is low. Oh, yes! The reward will come later.

    Using indicators

    Just use technical analysis. You have literally thousands of techniques to analyze the market by using technical analysis. The most important is the trend, support, and resistance levels. If these levels are not clear enough,  check the trading volume. It is maybe the best indicator of the direction of a stock price. 

    When the volume is rising along with the increasing prices it represents the expanding demand and a high possibility the trend will remain to rise. The big secret of growth investing in comparison to the value investing is that growth will win each time.

    Other indicators for growth stock investing are stochastic and MACD. MACD measures the momentum of a stock’s move by the convergence and divergence of two moving averages. Stochastics believe that daily price movement is random inside a general trend. 

    A drop in stock prices inside the uptrend that is supported by bullish signals in MACD and stochastic is one of the most powerful technical entry signals. 

    Is growth investing strategy hard?

    It may seem difficult to create a growth stock investing strategy but it is quite simple. The goal is to discover and invest in growth stocks. Buying them is easy but selling can be the trickier part. Until you sell the stock you’ll not earn money. That’s a simple rule. At least it should be simple unless your emotions are involved. It can be hard to sell the stock that makes a profit. Don’t be greedy. Do it in the peaks. Never think you can do more because in most cases you never do.

    Take profit when you can. Set the take profit point and stop-loss point. 

    At the end of the day, all that matters is profit. 

    Be patient with your growth stock Investing strategy. It is key. Never hunt the higher prices, you can lose money. When you enter a position, wait for prices to go higher. When you notice a selling opportunity, always take the possibility to profit.

  • Beginner Investment Portfolio- How Should It Look Like?

    Beginner Investment Portfolio- How Should It Look Like?

    Beginner Investment Portfolio
    These tips are kind of a guide to new investors for building a good stock portfolio. Selecting stocks needs analysis, time, and the ability to estimate different parameters for the stock, industry, and overall market.

    By Guy Avtalyon

    We are going to show you how a beginner investment portfolio should look like. Of course, if you think the stock market is getting crazy, you couldn’t be more right. DJIA is going up, going down, S&P 500 Index also. The graphs are looking like ECG of some very vulnerable hearts. Maybe you don’t believe it, but this is the right time to enter the stock market. A stock market is truly a wealth-building tool. Moreover, entering the stock market is easier than ever. But, as you are new in this field, you would like to know what to buy or, in other words, how a beginner investment portfolio should look like.

    There are so many ways to invest the money and can pick the level of risk you’re willing to take. So, it is obvious the first thing you have to decide – the level of risk you can tolerate.

    High-risk investments mean greater chances for high rewards. Wait, that also means bigger chances for losses. As a beginner investor, you should avoid high-risk investments if you don’t want your capital to throw through the window. Later, when you become more experienced and earn more cash, you’ll understand how to handle the risk, for now, here are some tips of how a beginner investment portfolio should look like

    We know that a lot of beginners think of investing as attempting to get a short-term gain in the stock market. But if you want to build wealth, you have to think about long-term investing. 

    Beginner investment portfolio in 2020

    ETFs

    The world of the stock market and investing can be confused for beginners. There are individual stocks, mutual funds, bonds, mutual funds, etc.

    Our first suggestion for you is some low-cost ETF. But there is a question: is it worth it? You’ll need time to build an individual stock portfolio.

    Exchange-traded funds (ETFs) can be an excellent investment way for small investors. You can trade these funds like stocks. They can give you to expand the diversity of your portfolio and to do that without spending too much time on it. 

    Here is how an ETF works. A fund provider holds the underlying assets. Such creates a fund to follow the performance of underlying assets. At some point, such a provider decides to sell shares in that fund to other investors. As a shareholder, you’ll own a part of an ETF, but you will not own the underlying assets in the fund. 

    ETF tracks a stock index. So, as a shareholder of the ETF, you’ll get dividends, which you can reinvest, for the stocks included to the index.

    ETFs are a passive approach to investing. Brokers will not charge you trading costs for ETFs. It is zero. Just make an automatic investment each week or month, it’s up to you.

    Include the gold

    Due to the coronavirus pandemic, the global economy is suffering. In the first quarter, only five main asset classes posted gains. Among them, apart from the US dollar and yen which are currencies, the list includes gold. Gold always was a great way to protect the portfolio and historically it was known as a safe-haven investment. It is the same nowadays. You can add some gold into your portfolio while you are waiting to come into stocks because today they can be too volatile for beginner investors. So, you should grow the exposure to gold. Gold works great when the dollar is flat-to-down. Also, gold can be a great hedge against inflation.

    Moreover, it performs best when investors are worried about low growth on other assets. Basically, if we take a look at its historical performances, we’ll notice that gold played best and rose fastest when other economic measures were falling quickly. We have such a situation today.

    We have negative interest rates, bond yields are almost zero, so gold could be a very good opportunity to hold it. Add it as very good protection to your portfolios.

    A beginner investment portfolio should include mutual funds

    Mutual funds are still amazingly popular. Especially target-date mutual funds in retirement plans, so add them in your beginner investment portfolio. Mutual funds are basically a basket of investments. When you buy a share in some mutual fund you are actually investing in all holdings included to the fund with just one step. 

    A target-date mutual fund usually is a mix of stocks and bonds. 

    How to invest in target-date mutual funds? 

    For example, you plan to retire in 20 years and everything you have to do is to pick the fund with 2045 in the name. But you have to know, so don’t be surprised, the fund you choose will hold stocks essentially. How is that possible? Your retirement is far away, and stocks have higher returns in the long run, higher than any other asset. As time goes by, the fund manager will shift part of your investment toward bonds because they are less risky. You wouldn’t like to take too much risk while you are approaching the date of your retirement.

    Add Index funds to the beginner investment portfolio

    If you don’t want to employ a manager to create and manage your beginner investment portfolio, index funds are a good choice for you since they track a market index. What is the market index? It is a collection of different investments that represent a part of the market. For example the S&P 500 Index. It is a market index that covers the stocks of about 500 biggest companies in the US. So, an S&P 500 index fund will reflect the performance of the S&P 500, by purchasing the stocks in that index.

    Index funds represent another passive approach to invest just like ETFs. They carry lower fees charged based on the sum you have invested. The advantage of these funds is that some brokerages offer a range of index funds without an established minimum. So you can start investing in some index fund at $100 or less.

    Help to create the portfolio

    For example a robo-advisor. Let’s assume you would like to invest but you’re not the DIY type. Well, we have some good news for you. You have a lot of robo-advisors out there. They will handle your investment by using very complex algorithms. But don’t be worried. It will cost you less than a human advisor, usually, it will be from 0.25% to 0.50% of your account per year. Also, robo-advisers will let you open an account without the minimum required.

    Robo-advisors are an excellent way for beginners to get started investing. Look, you are a beginner and you don’t have good knowledge about investing yet. So, robo-advisors will do all that hard work for you and you’ll need a little money for them. All you have to do is to check your portfolio from time to time. So to say, it’s your money invested. Also, they will give you a chance to learn more about investing since they’ll provide you tools and educational material.

    Investment apps are also extremely helpful. You can easily find some aimed at beginners.

    Traders-Paradise recommends

    For example, M1 Finance is excellent if you want to build a free portfolio for long-term investments. This app offers commission-free investing, automated deposit, buying fractional shares, and has many other features like free maintenance of a portfolio, diversified portfolio, etc.

    Fidelity is another great app that offers full service at zero trade prices. It allows you to invest for free, a variety of ETFs that it offers can help you to build a well-balanced portfolio, stocks, or options trades and all for free.

    TD Ameritrade offers free options trading. If you want to become a trader rather than an investor, it’s a really good pick for you. We already wrote about this app but we would like to point again how excellent it is. For example, its platform “Thinkorswim” is one of the best. It will not charge you a commission for trading stocks, options or ETFs.

    After deeper investigation, you might choose to invest in the companies that offer the chance for growth. Just keep in mind, your portfolio has to be diversified. Never expect that each stock can generate great returns. That is the reason for diversification. It appears especially when we are talking about a beginner investment portfolio. But that doesn’t mean you’ll need a large collection of investments. You’ll need just a few stocks but they have to run together in your favor.

    Today’s volatile stock market offers discounts on great stocks. So, this is a great time to start investing and create your beginner investment portfolio that will generate you amazing gains in the future. 

  • Time To Buy Stocks Is Right Now!

    Time To Buy Stocks Is Right Now!

    Time To Buy Stocks Is Right Now!
    The advantage of buying stocks right now is that you can get more for your money. If you are young, the more you do with your money now, the more it will be able to grow throughout your lifetime.

    By Guy Avtalyon

    Yes, this is time to buy stocks.  That would be a short answer but here is why this is a time to buy stocks. 

    Stock prices are changing violently because of the economic slowdown caused by a new coronavirus outbreak. So, the volatility makes it especially challenging to answer this question because it may vary on a daily basis. Maybe the most critical part of any investment decision is the stock valuation on which we base our decisions, should we buy or sell the stock. Moreover, that can tell us a lot about other investors’ feelings toward some particular stock. So, you need an explanation of our observation that this is time to buy stocks.

    Here are some real examples but we have to go back in the old days. 

    The historical overview

    It was the year 1974.

    In the period of 1973-1974 bear market ultimately bottomed. It marked a 43% decline for the Dow Jones in a time frame of two years or even less. This bear market ended December 6, 1974, when the Dow Jones hit 577.60. The large sell-off caused a lot of damage to the U.S. market and it took approximately 20 years to entirely recover. But, at the same time, every investor who had guts to buy stocks then, had great returns later.

    The second occasion was in 1982. 

    The Bear Market of 1982. The market had been falling for almost one year and two months, actually exactly 451 days. In just one day, it was February 22, the S&P 500 Index was down for almost 21%. Inflation in the US was at 13.58% but also, it was a rough year for the rest of the world. But some investors were smart and made their life-time investment by buying stocks.

    The next was the stock market crash of 1987. 

    This market crash originally came from the US but had a great impact on the global economy. In October that year, DJIA fell by 22,6%. It was a well-known Black Monday. Until then, Dow Jones never had such a drop in one day. And as in previous cases, some investors made smart choices,  and bought stocks rather than sell them and it was a very profitable decision for them.

    Horrible 2008/09

    The most recent event, before 2020, happened in 2008 and 2009. This bear market actually lasted from October 9, 2007, to March 9, 2009. 

    The S&P 500 Index lost about 50% of its value, and the DJIA fell 777.68 points in intraday trading. It was the largest drop point fall until this year’s market crash. Also, some were smarter than others and they bought the stocks instead of selling them. In other words, during the market’s crashes during history, the most successful investors were buying.

    What do these events have in common?

    They were all connected to some kind of crisis. And each market situation was characterized by capitulation. 

    The stock market capitulation means giving up. It is the point when investors are giving up on attempting to recover lost gains caused by falling stock prices. For example, a stock you own has dropped by 20%. You have two alternatives: to wait it out with hope the stock starts to appreciate again, and the other solution is to compensate for your loss by selling the stock. When most of the investors choose to wait it out, the stock price will probably continue almost stable. But if most of the investors choose to give up on the stock, the stock price will decrease further and sharply. When this event is relevant to the entire market, it is a market capitulation.

    What else is in common for these market crashes? The most profitable investors were buying stocks. It looks like selling wasn’t the right option for them.

    So, we can easily conclude that time to buy stocks is right now. This is an amazing chance to buy stocks because they are cheap now.

    When is the right time to buy stocks?

    The truth is that almost all investors are scared. The possibility of losing all capital is enormous and some of them are starting to get out of the market. Everyday volatility, stock prices changes in milliseconds, have a great influence on investors’ emotions.

    The markets’ crashes, we mentioned above, weren’t quite severe as this one is. This bear market marked a 20% drop from the recent market highs. So, despite the fact that this drop is so sharp, it could be a good time to buy stocks.

    Yes, we know that investing in this time may sound strange and nonsense for someone. But, at the same time, if you are seeking long-term investment it could be the best time. For example, you can buy some blue-chips at a very favorable price. Such are, for instance, Walt Disney, or Coca-Cola. Just follow the KIS rule and look at the most prominent. These companies and similar survived through previous market crashes and came out stronger providing great returns.

    You can create real wealth in stocks now. Just don’t watch from the sideline. React and do it now.

    Is this time good to buy stocks?

    Stop dreaming and guessing. Listen to good advice only. Have an investing plan.
    Start investing with an edge, that will give you an advantage over other investors. Buy the stocks that were the best players last year. 

    Watch what the world’s billionaires do, the path they made. Allow them to show you what stock to buy. They are strong enough to fight for their investments, but at the same time, they will increase the value of yours. 

    It isn’t time yet to estimate the accurate impact the coronavirus pandemic will have on the companies. The results will differ by company. Some will manage better than others, but that’s how things go. What we can do is to find the company built to last. Take a look at their revenues for the past several years or at least for the last one. Some did great. So buy its stock at a discount. 

    You have to know that this pandemic will have influence over the next several years. Just don’t panic. This is not the time for that. This is a time to buy stocks if you have some extra money that you’ll not need in the coming years. Just invest it in brands. This lesson came from history. 

    Investing is more available than ever. That means you don’t have to rely on some difficult strategy to start earning money. You can buy options, you have help from free trading platforms, apps to create an investment plan that matches your goals, and risk tolerance. You are investing for the long haul. Ignore the panic and understand why it is the right time to buy stocks. Set clear goals, and recognize your limits. Keep in mind, investing in stocks is one of the easiest ways to put your money to work.

  • Day Trading Stocks – Most Profitable Type Of Trading

    Day Trading Stocks – Most Profitable Type Of Trading

    For day trading stocks you need volume, volatility, and a trend or range tendency. When using a stock screener, enter your rules into the relevant fields to narrow the surplus of stocks down to a few.

    Maybe it is too difficult to explicitly say that one type of trading stocks is more profitable than the others but Day trading stocks is the choice of active traders because of its profitability. Why did we say it is difficult to point to the special one? Because it depends on what kind of trader someone is and, maybe much more, on which strategy the trader chooses to use. Also, it isn’t the same which market you trade and what assets you are trading. 

    The individual traders can make a few trades per day since it isn’t hard to enter and exit several trades daily. Of course, big investors would prefer long-term opportunities. 

    One is sure, getting into day trading stocks is a decision that no one should make in a hurry. You should take time to examine all difficulties, to learn them since day trading stocks requires very careful planning. Only in that way, you’ll be able to earn your life-time capital in just a few hours. Yes, it is possible because day trading stock is one of the most profitable types of trading.

    Before we jump into the day trading stocks we have to explain what day trading is.

    What is Day trading stocks? 

    Day trading stocks means the trader is opening and closing the position during one trading day. When a trader opens a trade at 10 PM and closes it before 2 PM we are talking about day trading. You can find the traders who trade day only, some will perform it depending on the situation and opportunities, but also, so many traders never implement day trading stocks.

    How does a day trader pick the stock?

    Of course, a day trader is very careful and never just picks a stock no matter which one. Day traders always estimate the reasons to trade a particular stock. And as the reasons are different, traders have different criteria and strategies.

    Since there are thousands of stocks in the market to choose from, the main question is how to do that? What is the best criterion, measure, method? It differs too. And if we try to figure it out, we can get confused. Look, some traders can find a new stock every single day. They are seeking stocks that are breaking out of patterns. Some are looking for the most volatile stock or the stocks that breakout of support or resistance levels. Also, some traders have the favorite stock or two and trade them every day for months or years. This isn’t without a good reason behind. If you know the particular stock very well, you’ll need less research on it. Since you already have the chosen one, you don’t need to search further for new stocks and breakouts or volatility. 

    How to find a stock for day trading?

    If you want to become a day trader, you have to pay attention to several things.

    Volume

    For a day trader, a stock volume is important to enter and exit trades. To explain this more. When the volume of the stock is high it is much easier to enter and exit the position and to do without slippage or with very little. Why is it important to avoid slippage or to lessen it? Slippage happens almost all times but generally during periods of high volatility when traders use the market orders. 

    It happens when a trader gets a different price than expected, no matter if such a trader is on an entry or exit from a trade. Slippage occurs when the market order or your stop-loss point shifts somewhere between the time of your entry and the time of the execution. This is especially noticeable during periods of higher volatility when orders are bigger than the usual amount of shares on the bid or offer.

    While choices vary, but many day traders will trade stocks with a daily volume of several million, some have over 90 million. That is a big number and it is hard to manage that. So day traders usually narrow the number of stocks down by using a stock screener. If they still have too many stocks to observe, the traders commonly reduce it to stocks with a volume of 3 of 4 million on a daily average.

    Volatility

    Volatility is important too because day traders need stocks with strong change during the day. The stocks have different volatility. Some will move 0.5% daily but others will move 5% or more per day. Picking the stock may depend on many factors, for example, reflexes, a trading style, your temper, etc. For the majority of traders, the stocks that shift 0.5% to 2% daily are the best choice since they can handle that volatility. Volatility over 5% daily is hard to handle. Only the most experienced traders trade these stocks.

    Trend and range

    These two components are important in day trading stocks. Traders differ by what they are trading, so we have trend traders, range traders and some that use both excellently. As you know, the trend is the direction of stock’s price, while the range is the difference between low and high prices over a particular trading time. The stock price is moving all the time. It can go down or up showing a downtrend or uptrend. A stock screener is very helpful here and will separate stocks with trend or range depending on your setups for the strategy you chose.

    How to learn day trading stocks?

    There are many ideas and methods to maximize profits from day trading. Nevertheless, managing the risks connected to day trading is most important.

    First, trade only the amount you can afford to lose. You must have aside some amount of money for day trading. Don’t rent money for day trading because it’s possible to lose it. Start with a small amount and keep strong control over losses until you get some knowledge and experience. Don’t think you can quit your day job immediately. Day trading is seductive, we know that. But you need to test your strategy when the markets get rocky, for example, during the recession. If you are profitable, you can easily shift to day trading.

    When to buy?

    Day traders try to make money by using small price movements in assets. They have to leverage vast amounts of money to do so. They are focused on liquidity. That allows them to enter and exit a stock at a favorable price. Further, they keep an eye on volatility, higher volatility leads to greater profits or losses. Trading volume is another thing that they are considering. High volume means there are a lot of people interested in the particular stock. When the volume is increasing that is a sign that the price will drop or go up. After you choose a stock you want to trade you have to learn how to recognize the entry point. Some tools can help you. For example, some news services, but it has to be a real-time service because the stock prices can be influenced by news.

    Quotes are important too. Electronic communication networks, for example, display the best open bid and ask quotes from various market players and can automatically pair and execute orders. 

    Intraday candlestick charts are useful but provide a rough analysis of price action. 

    Your entry point has to be defined very accurately, you have to know the exact point when you are going to enter the position. For example “during the downtrend” isn’t precisely defined. You have to define more specifically and test it too and find if there is a chance for that to be generated each day or more often. 

    Also, the direction has to be tested. You would like the price to go in your expected direction. After you check and test everything you may have a potential entry for your strategy. 

    After finding an entry point you’ll need to judge how to exit, or sell, your trades.

    When to sell?

    There are many ways to exit a winning position. For example, trailing stop and profit target. The profit target is the most popular. The other well-known price target strategies are scalping, fading, daily pivots, momentum. The best time to exit is when the interest in the stock is decreasing. The volume will show that. Your profit target should provide you more profit on winning trade than you would have a loss in a bad trade. For example, if your stop-loss is 2% away from your entry price, your take profit level should be more than 2% away. You have to know your exit before you even enter the trade. The exit level has to be precise.

    Bottom line

    Day trading means to take advantage of small price changes. It can be a profitable game if you play it carefully. Hence it can be a risky game for new and inexperienced traders who don’t have a strong trading strategy. This type of trading is connected to the high volume of trades. So you have to respect some general principles if you want to become a day trader.

    You may have profitable trades by following the patterns. More about it learn from the “Two Fold Formula” book, we recommend. But we also recommend to test it by using our preferred trading platform firstly.

    You might find these interesting too:

     >>> Is Day Trading Like Gambling?

    >>> Swing Trading and Day Trading – The Difference

    >>> The pattern day trader rule

    >>> Day Trading the Best Methods – Day Trading for Beginners

    >>> Day trading stocks – How to find best trading platform

    >>> What is the best day trading strategy?

    >>> Money Required to Start the Day Trading