Category: How to Start Trading – Beginners

Types of orders execution – How to Buy and Sell
There are different types of orders execution and each of them has a strictly defined function.

By Guy Avtalyon

Types of orders are market orders, limit orders, and stop-loss orders.

So, you have to understand what happens when you click the “enter” button on your online trading account. Your order isn’t always filled immediately, you have to know that.

The variety of potential ways in which an order can be filled can be surprising.

How and where your order is executed have an influence on the cost of your transaction and the price you pay for the stock.

Types of execution orders
- Instant Execution
These execution types of orders type mean the broker guarantees to carry out the order at the price set by the trader or not to execute the order at all.

The trader can set a slippage or a maximum allowable price deviation or at which the order can be executed.

When it happens that the price has varied during the processing request but still remained within the set slippage, the order will be executed with a price correction.

In the case that the price has gone beyond the limits of the slippage corridor or the slippage parameter has not been set, the order will be rejected. Therefore, the trader will receive a requote price change message.

In such a situation the trader can accept the new price and the order will be executed or can refuse the order.

The advantage of instant execution as types of orders is the opportunity to enter the market at a fixed price. Hence, that is of great importance for some trading strategies.

Also, the main disadvantage of instant execution is ‘requotes’. Their number of which increases or decreases depending on the volatility of the market.
- Market Execution
This execution type practically allows any order from the trader will be executed at the current price on the market at the moment of order processing. The price can be either higher or lower than the one the trader can see in the window of the screen.

As a rule, the trader accesses the market quicker when using market execution. The foremost benefit of this execution type is the chance for 100% market access.

Its disadvantage is a high risk of a lossmaking position when the market is highly volatile, when the price may strongly fluctuate during short periods of time.

What are the different types of orders

Market order

This is an order for buying or selling security quickly. Market order guarantees that your order will be executed, but does not guarantee the price you’ll get. This order will execute at or close to the current bid or ask price.

Yet, it is important for you to remember that the last traded price is not certainly the price at which a market order will be executed.

A market order is the most common type of order and it is almost always filled because no price is defined.

Limit order

This is an order to buy or sell a security at a specific price, which is called limit, or better.

A buy limit order will always be executed at the limit price or lower.

The sell limit order will always be executed at the limit price or higher.

For example, if you want to buy shares of ABC stock for no more than $20. So, you can set a limit order for this price level and your order will only execute if the price of ABC stock is $20 or lower.

Limit orders are suitable only for investors who strictly determined the price at which they are willing to trade.

Stop order is one of the types of orders

Stop order is also known as a stop-loss order This is the type of order that allows traders to buy or sell a stock once the price of the stock reaches the specified price, known as the stop price. When the stop price level is reached, your stop order will become a market order.

Buy stop order

This means, entered at a stop price above the current market price. Use a buy stop order to reduce a loss or protect a profit on a stock that you want to sell short.

A sell stop order is entered at a stop price lower than the current market price. Use this order to reduce a loss or protect a profit on a stock you own.

GTC or Good till canceled

This is a modification of a limit order. Traders use it either to buy or to sell a security. This type of order remains in force until it is canceled by the customer or executed by the broker.

Fill-or-Kill order

This type of order is sent to the floor for immediate execution. If it cannot be filled immediately, it is automatically canceled.

AON All-or-None

In this type of limit order, the broker is focused to attempt to fill the entire amount of the order or none of it. This order differs from a fill-or-kill order because, with an all-or-none order, here is no requests for quick execution.

Are orders execution so mattering?

The importance of orders execution depends on the type of order you submit.

For example, if you are putting a limit order, your risk is the order might not be filled. But, if you are setting a market order, speed and price execution is more critical.

You have to know, the execution is no backup for an investment plan.

Today’s markets include real risks, therefore they can cause the execution of orders at prices significantly different than anticipated. But, with a long-term extent, these varieties are only one step on the road to successful investing.
15th March 2019
Forex trading for a living – How and Why

3 min read

Forex trading for a living is valid for retail investors. Well, that means that trading Forex for a living is possible. The trouble for most people is that they commonly lack the needed trading skill, steadiness, training, or pragmatic mindset to make it trading Forex full time.

The Forex market is the most liquid market in the world. There are various shareholders from across the world trading in it.
Thanks to the Internet Forex trading is accessible for almost anyone. This means the market is no longer for the sharks of investment banks and multinational companies.

From some reasons, forex trading has a bad reputation. The reasons are well-known. Scam artists and brokers that trade against their customers are the main reason for that.

But for some people, forex trading for a living is a way of life and profession as well.

Can you trading Forex market for a living

Ambitious traders often ask is it really possible to make a living trading the Forex market.

The answer is yes.

But we owe you a true answer.

Yes, you can be trading Forex market but you have to do a lot of things in a proper way.

The key is simple. You have to learn to become a profitable trader and then act.

Easier said than done. But, you can be trading Forex market for a living, and we personally know people who make steady money in the markets.

So, there are no barriers.

So, what it takes to be able to trading Forex for a living?

To do so, however, you have to put a large number of banknotes on the market, and trading them regularly.

How much money do you need for Forex trading for a living?

If you want to make a living trading the Forex market is sufficient starting capital. If you don’t have enough you have to accept that you will not be making a living from trading Forex quickly.

The exact amount of money to trade full-time is different for everyone. Generally speaking, you will need a nice amount of money at your disposal. Of course, in order to trade a large position size and make enough money.

And, at the same time, not risking too much of your account on any one trade.

Maybe you should start as a part-time trader for extra income. It is easier to achieve in the early stages of your trading work. Instead of putting pressure on yourself to make a lot of money fast, you should focus on creating a consistently profitable track record and self-confidence.

And the money will come.

It is interesting, even when you have a large amount of money to trade with, if you do not focus on the principles of successful Forex trading, you will lose anyway.

How should you start Forex trading for a living?

Gradually! Perhaps it will take about six months to get the basic knowledge and understand how everything works.

You have to read a lot of trading literature at the time, for instance. Maybe you will talk to traders on different forums, exchange notes and ideas for the strategies and ask a lot of questions. That will be a good way to learn

This community will answer your questions and help you understand a lot of the most difficult theories.

Then, you should start with a demo account.

There you will trade without real money involved.

It’s a good plan to feel the stress of actual trading but you will not risk your real money.

You should practice trading a couple of weeks, getting how to use it, and then start an account with real money. Honestly, some traders think that trading with real money is the only way to learn.

It is a good idea to start with a small account. For example, with $20 or $25. If you gain a profit quickly, don’t worry, you will lose it faster. But it will be a good lesson.

You will realize what ‘risk management’ really is and why traders think that it’s important. So, go back to the books, and try to develop your own trading strategy.

Real trading will start later, on a standard account with a $500 deposit, for example.

Basic paths on Forex trading for a living

Each path has its advantages and disadvantages. It’s up to you to consider each of them before you decide for forex trading for a living.

You have to prove to yourself that you are able to make money trading forex.

This means, you can make money consistently and you’ve increased your skills to be a successful forex trader.

After you recognize this rule, you can start to trade full time.

If you have a day job, it can be quite a challenge to trade forex full time.

In that case, you have a good cash defense to keep you going for some time.

Actually, you need to have some cash saved. The ideal situation is to have at least 2 years worth of cash to live on.

This may give you a stress-free trading environment from the start.

The determination to succeed is another path.

This is when you’ve started making some good amount of money and you think you can do it as a full-time thing.

Or maybe you already have enough money in the bank and forex trading forms an only little part of that.

For example, you have $200,000 cash in the bank and you put in $70,000 to start trading forex full time.

The $200,000 is for you to live, as a reserve, whilst that $70,000 trading account is what you try to make your living on. That’s why you might want to put that amount on Forex trading for a living.

The truth is, you need to very carefully consider all your options before you jump into the Forex market.

Frankly, you have only two options: you can succeed or you can fail.

Why do people decide for Forex trading for a Living?

For the money, of course!

We are not going to lie. People get into trading because they want to make large amounts of money and travel the world doing it. Some people trade because they obsessively love it and it is a part of their identity.

So, the reasons can be very different.

Lots of people have heard stories about people coming to the Forex market and making a killing overnight. Maybe some of those stories are what set you out on your journey to trading Forex for a living. Those stories can be true, but what they have forgotten to mention is that behind such success are the years of hard work and fight. It isn’t easy to make it to the top.

What tools do you need for Forex trading for a living?

Education. This is a big topic to consider. You can read our tutorials. If you know nothing about Forex trading then this is probably the best place to start your learning journey.

Broker and trading account. Also, you can find all about the best platforms and brokerages on our Wall of Fame.

Good platform. Once you sign up with some broker of your choice (check out our broker review page HERE.) you then need to download and install the platform. And if you are into algorithms their platform will suit you. Try using a demo account first so that you can learn how to use the platform properly.

The bottom line

Here are all the basics that you need to get started Forex trading for a living. It’s up to you to do the work and put in the time. Trading for a living requires a lot of hard work, enthusiasm, and commitment to make it work.

You have to be firm to make it work even in the times when something is going wrong.

But, if you give it your all, the rewards at the other end are unquestionably worth it. When you approach trading with the respect and commitment it deserves then you can live the dream of Forex trading for a living.

Don’t waste your money!

risk disclosure

14th March 2019
Currency Carry Trade – What is It and How to Profit from It?

3 min read

A currency carry trade is a popular technique among currency traders.

It is when a trader borrows a currency at a low-interest rate to fund the purchase of another currency earning a higher interest rate.

In the forex market, currencies are traded in pairs, as you already know. For example, when you buy USD/GBP you are actually buying the U.S. dollar and selling Great Britain pound at the same time.

You pay interest on the currency you sell and collect interest on the currency you buy.

In the forex market, interest payments occur every trading day based on your position.

Actually, all positions are closed at the end of the day in the forex market. But you don’t see it happen if you hold a position to the next day.

Brokers just close and reopen your position. Then they credit or debit you the overnight interest rate differential between the currencies.

This is the cost of “carrying” a position to the next day.

The amount of leverage makes the carry trade very popular.

Most forex trading is margin based. That means you have to place a small amount of the position and your broker will place the rest. Majority of brokers requires as little as 1% or 2% of a position.

The currency carry trade is borrowing in the currency of a country with a low-interest rate and using the funds to invest in the currency of another country with a higher interest rate.

And, of course, profiting from the difference.

For example, the popular carry trade is borrowing funds in Japanese yen and investing it in U.S. dollars.

How does currency carry trade work

Currency markets offer investors access to an asset class that is highly liquid and has the potential for gaining risk-adjusted returns. It, also, can show some similarity to traditional investments in a diversified portfolio.

The main goal in currency markets is to capture the gain of interest rate differentials between currencies, known as ‘the carry’.
The short-term interest rates can vary significantly across countries because of their different policy objectives. The macroeconomic imbalances have the influence too.

Countries with higher growth rates tend to have higher interest rates and stronger currencies.

A so-called ‘positive carry’ trade is one in which an investor borrows money in countries where interest rates are low and invests in a country where interest rates are higher.

This means that the investor sells (goes short) a position in low-interest rate currencies and buys (goes long) a higher interest rate currency.

The difference in interest rates between the two countries, ‘the carry’, will, over a period of time, be offset by the change in the exchange rate between the two countries.

However, exchange rates move in the expected direction, but not enough to offset the carry. This means that a positive return can be expected.

The inefficiency of the markets offers investors the opportunity to gain from exchange rate movements in addition to benefiting from the carry.

The profit or loss from a positive carry trade can be calculated:

Profit from ‘the carry’ (interest rate differential) + Profit/loss from exchange rate movements

In simple words, the traders pay a low-interest rate on the borrowed/sold currency, they simultaneously collect higher interest rates on the currency that they bought.

The interest rate differential between the two currencies is profit.

Currency carry trade gives traders a choice to “buy low and sell high”. Most forex “carry” trades involve currency pairs such as the NZD/JPY and AUD/JPY because of the high-interest rate spreads.

Pros and cons of currency carry trade

In addition to trading gains, currency carry trade gives you also interest earnings. Carry trading also lets you make use of leverage to trade assets you would not differently be able to yield.

The daily interest paid on the currency carry trade is based on the leveraged amount. That can make for enormous profits from an inexpensive outlay.

Still, currency carry trading brings significant risk. This comes due to the uncertainty in exchange rates.

If a trader fails to hedge their position appropriately, high levels of leverage employed in carry trades could result in large losses. This means that even small movements in exchange rates may cause losses.

So, we can say, currency carry trading is a good option for traders with a high-risk desire.

The currency carry trade, is potentially profitable, but gives a decent amount of risk.

Why is this? This is because the best currencies for this kind of trading are some of the most volatile.

Every single market sentiment among traders in the currency market can have a hard impact on “carry pair” currencies. Without sufficient risk management, a trader’s account can be wiped out by a cruel twist.

The best time to enter carry trades is when fundamentals and market sentiment support them. At times of positive market sentiment when investors are in a buying mood.

The bottom line

Currency carry trade has the potential to be very profitable over the long term if precisely managed. It can be a constant stream of income. Also, it can mitigate you from the negative effects of exchange rate movements.

In a currency carry trade, an investor potentially stands to profit or lose both from the relative movement of the exchange rate and the interest rate differential between the two currencies. Markets that present a high-interest rate differential often present higher currency volatility and an unexpected weakening of the target currency purchased could generate losses. To be profitable, the interest rate differential of a carry trade must be greater than the possible weakening of the target currency over the period of time that the trade is executed.

Don’t waste your money.

risk disclosure

14th March 2019
Invest in Stocks with Little Money
Why do you think you must have a lot of money to start investing in stocks? It is completely opposite.

By Guy Avtalyon

Many think that can’t invest in the stock market with little money. Honestly, you don’t need thousands of dollars to start investing. Yes, we know a lot of people who believed it’s impossible to invest in stocks with little money.

Think you don’t have enough money to invest?

Frankly, you can start with as little as $4. So, the money isn’t the reason why shouldn’t you start earning now. Truth is the opposite, not investing in stocks may be risky. Even a few dollars can go far. It’s understandable why many think that can’t invest in the stock market with little money. That’s because investing can be confusing. Also, there is a belief that only wealthy people can make money in the stock market.

You don’t have to be a master to invest in the stock market. Also, you don’t need to have thousands of dollars to start.
There are many tools that can help the new investors do pretty well, especially with limited resources.

There are a lot of schemes to invest in stocks with little money.

Many online and app-based platforms making it easier than ever. All you have to do is start somewhere.
Once you do, it will get easier as time goes on. In the future, you will love what you did in the past.

Here are some ways to start:
- Use a robo advisor to automatically invest.
- Buy individual stocks through a discount brokerage firm.
- Purchase securities.
- Find low minimum mutual funds.
Use robo advisor to invest in stocks with little money

Thanks to the rise in the popularity of robo advisors, investing is now more available than ever. You don’t have to go it individual, be rich, have a lot of investment experience. You don’t need to hire an expensive financial advisor.

Why?

Because robo advisors can do all of this for you and at a low annual fee. Robo advisors, also known as automated online advisors, are technology-based investment platforms that offer fully automated online investing. These fintech firms are developing fast and mostly target new and younger investors, such as Millennials, for example.

But which ones are the best choice for your investment?

Robo advisors have a big advantage. They have lower minimums than financial advisors have. By having minimums as low as $0, robo advisors dispense previously unaffordable retirement planning and portfolio balancing advice to a broader selection of people. Robo advisors generally cost 0.25%-0.5% of the portfolio. They are algorithms that ordinarily look for the lowest cost solution to fit a client’s needs.

It will always be available as long as you have access to the internet.

Robo advisors also will offer you an advanced feature, tax-loss harvesting, to balance gains in a portfolio. The divested security is then replaced by similar security, helping you to maintain the optimal asset allocation by keeping a portfolio’s diversification. Due to their value proposition, robo advisors are growing very fast.

Trading apps allow investments as low as $5 for a list of funds.

Buy individual stocks through a discount brokerage firm

Opening a brokerage account is so easy. Just fill the account application, present proof of identification, and decide how you want to fund the account. You may fund your account by mailing a check or transferring funds electronically.

At most brokers suitable for new investors, stock trading commissions run between $5 and $10. Low commission costs are important to active traders, those who place 10 or more trades per month.

Having a lot of individual stocks inside a single investment gives you prompt diversification. Also, it minimizes risk over time. The stocks owned within a fund may go down, that’s the truth. But they can be compensated by others that rise. You should look for terms like large-cap, mid-cap, and small-cap in the names of stock funds.

What is the cap?

Cap is short for market capitalization. That is the value of a company’s stock shares. Hence, a large-cap mutual fund means that it only owns shares of big companies.

Low minimum mutual funds

Mutual funds are investment securities that allow you to invest in a portfolio of stocks with a single transaction. That is excellent for new investors.

The problem is many mutual fund companies require initial minimum investments of between $500 and $5,000. If you’re a new investor with little money to invest, those minimums can be a problem. But some mutual fund companies will ignore the account minimums if you agree to automatic monthly investments of between $50 and $100.

Purchase securities

Assume you want to invest with the lowest imaginable risk. Well, treasury securities are good for you. They have a fantastic advantage. The securities do not change as the market does. Treasury securities are predictable.

Each security has its own maturity date. They vary from 30 days to 30 years.

Make sure to only invest money you can divide with until the maturity date. If you cash the bill in earlier, you risk losing a portion of the principal.

Start to invest in stocks with little money

If you don’t have a lot of extra money at the end of the month, it’s easy to put off long-term needs like investing.

Your delusions about investing may be holding you far away from saving for your future. The myth is that you must have a fat wallet to use a brokerage account.

Contrary, there are so many online brokerage firms allowing investments lower than $1,000.

Some brokerages ignore their minimum investment demand in exchange for regular monthly deposits, as we said. All you have to do is to sign a contract to agree to a specific monthly deposit. You can easily find firms that offer minimum deposit requirements of $100 per month. And with really low initial investments.

You could invest $100 in a diversified fund. Why wouldn’t you take that chance? Diversification in your portfolio is the best way to reduce your risk. Moreover, it’s not for rich investors only. Many companies offer ETFs. So, it is possible to invest in a mixture of investments with little money. Think about the S&P 500 index.

Buying ETF shares gives you a piece of the portfolio of the complete index. Some stocks in the index may play well, but others may do unsuccessfully. They balance each other out. That lowers your risk.

You are not limited to penny stocks until you earn big money.

Of course, being a new investor, you don’t want to invest in extremely volatile penny stocks.

Yes, penny stocks are stocks trading for less than $5. But they’re priced low for a reason. The companies behind them are just starting out. Investing with little money is better with blue-chip companies. The highs and lows are normally less volatile than penny stocks. Our opinion, here in Traders Paradise, is that everyone should invest. But we will never tell when the right time is for you. Only you know when the time is right.

Don’t invest if you have a card debt. Never start without an emergency fund.

But the earlier you begin the faster you can grow your capital.
13th March 2019
One share of stock – is it worth buying

3 min read

One share of stock – Is there any benefit to buying one? Is it better to have a bunch of shares or not? A dozen? 100? 150? 200? The answer is typically less than the number of fingers on the hand. A ruling principle of stock investing is to spread your portfolio throughout several companies.
But, what if you don’t? What if something bad happens to your single investment? You will have practically no way to cushion the disaster. The misconception in managing a portfolio is that should contain numerous stocks.

Why is this opinion a mistake?

Yes, your exposure to risk in individual stocks is smaller. But, at the same time, you are also reducing the chance to make large profits in the big winners. There is a simple reason behind this: You won’t have enough shares to enjoy the gains. But there is a disadvantage of an over-diversified portfolio is that it takes a lot of commitment to watch over many companies, follow their rise, reports, and other progress.

If you have a smaller number of shares, it’s easier to follow the companies you own.

Yes, truth is, investing all of your money in the stock of only one company is very risky. You can suddenly lose most of your money. But it also has the potential for huge returns. There are numberless stories about investors getting into a company that went onto great things.

For example, if someone was able to buy Apple in its early days, such has made a lot of money nowadays. Moreover, one share of stock was good enough.

But, there are a lot of risks here.

Very often, those stories don’t include the fact that the investor made a lot of investments that failed before the big success happened. If you make 25 investments and they’re all average and suddenly make one that earns a big return, your overall return is not that big. The stocks can sometimes increase value, but companies can often totally fail. In that case, their stock is worthless.

In fact, entire business areas can become insignificant over time. Some companies were probably good investments several decades ago.

For example, producers of VHS cassettes or floppy disks. What we want to say is, you can invest in a big company to reduce the risk of losing, but that also drastically reduces the chance of big success, too. Some companies can be as steady as a rock, but still, it’s not likely to quickly double your money, either.

Is buying one share of stock worth It?

It is not about how many shares of a stock you buy or sell in one transaction.

Stock brokerage firms usually charge the same commission. For smaller transactions, the fees represent a higher percentage of what you’re paying for the stock itself.

Buying under 100 shares can still be worthwhile if you think you’re going to make sufficient money on the investment to cover the fees. To decide for yourself if a small trade is worth it, you’ll want to look at your brokerage’s commission and the actual stock price.
Buying 50 shares of Berkshire Hathaway could cost $15 million since one class of stock in the company has traded above $300,000 a share, for example. But, other companies’ stock trades for as little as a penny, so buying 50 shares would cost you 50 cents. A commission of $5 dollars on a 50-cent purchase has a much different effect on the total cost than a $5 commission on a $15 million purchase. Don’t you think? It is important to evaluate whether or not the commission fees charged to you will still make the investment profitable.

One share of stock – Fewer is better

For a beginner portfolio of about $3,000, just two stocks are enough. But for a portfolio of $5,000 to $20,000, three stocks can be an easy load. Hence, for portfolios up to $200,000, four or five stocks are enough. Also, those who have more than a million dollars to invest should restrict themselves to six or seven stocks. To have success with some of the stocks, you have to make the right selection. This doesn’t mean you have to make excellent choices.

All you need is a careful process of selecting companies with superior profit and sales growth. Deduct the stocks lacking good chart profiles, and you end up with a shorter list of potential investments.

How to evaluate

Watch at the current share price, calculate the price at which you would sell that stock, and determine the difference. Now, calculate that price by the number of shares you plan to trade to see how much your profit would be. It is without commissions. Then, deduct the commissions you’d pay to both buy and sell the stock. And you will find if the transactions seem worth it.

Remember, you have to consider the risk involved. The stock might not play as well as you suppose.

Lower share price means less expensive

That’s where most people start. But it is wrong. The price per share of any company you want to buy should be almost trivial to you. You should think in terms of your overall money invested. That’s how you should allocate. Don’t even think of what a stock’s price is, or how many shares you get.

You have to be sure that you are buying solid companies that you feel it is good for you. Your portfolio should reflect your idea of the company’s future. The share price is meaningless. For example, Google is $700 per share, Apple is $100 per share, that doesn’t say anything about either company or whether or not one is a better investment over the other.

Why the price of a share doesn’t matter?

You should not make an investment decision based on the price of a share. Look at the books to decide if the company is worth owning, then decide if it’s worth owning at its current price. The price of the stock is made by how many shares were issued and how much people think the company is worth and will be worth it. The first factor can change in a stock split and without the others changing.

What you really need to look at is what you think the future of that company looks like. But as most important, what that might do to the stock price and to the dividends it pays to stock owners.

One share of stock can be good

Honestly, there is no difference between more shares of a cheaper stock and fewer shares of more expensive stock. When you invest in a stock, the increase in the share price results in gains. This is a major concept of investing.
Trading real money can be difficult without a sharp understanding of the principles involved. Investing your money without good knowledge will be stressful. It could have a discouraging effect if it doesn’t go properly.

The bottom line

There is no minimum order limit on the purchase of a publicly-traded company’s stock. It’s prudent to buy portions of stock with a minimum value of $500 to $1,000. As you already know, there are commissions on the trade. Whether you own 10 shares at $200 or 200 shares at $10, you still own $2,000 of a company. If that company’s market value grows by 10%, you earn $200 in any case.
It is easy to find online discount brokers that allow you to buy fractions of shares of higher-priced stocks. So, if you don’t have enough to buy a full share it shouldn’t stop you. Also, if a company you want to own but you don’t have enough saved to buy a share, keep saving. Simple as that. It doesn’t matter if you buy now or a few months from now.

You might find these interesting too:

>>> The best stocks to invest during the inflation

>>> Trading With Signals – Full Guide on How To Trade with Signals

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

>>> Trading Options – Understand the World of Options

>>> How to invest in a mutual fund

13th March 2019
Stock screeners – Why and how to use

3 min read

Stock screeners are tools which display the stocks a user chooses to seek out.

Stock screening is a tool that investors use to filter a large database of stocks. They can help you cut through the market noise and figure out the best stocks to buy based on your investment objective and goals.

Stock screening tools can be web-based tools or downloadable software.

You can find some free screeners, as well as more advanced programs that can be quite costly.

We will use finance.yahoo.com/screener to show you how they can be helpful.

This is discipline at its best!

When you design the stock screen model, by using an inexpensive stock screening software or free tools on the internet, you can determine which stocks meet the criteria with a single click. This is far more efficient than digesting every piece of available information. Not to mention that most stock screeners can analyze thousands of stocks in seconds. It would be difficult for even a large team of researchers to accomplish the same task in weeks.

Let’s go into more detail into each of these benefits.

How stock screeners save you time

The data set could include hundreds to thousands of stocks. And thoroughly analyzing all of them would be impossible for most investors. Delving into each company’s financial statements, ratios, multiples, and historical and future growth prospects would take entirely too long.

Once you determine which metrics will go into your stock screen, the screener filters out stocks that don’t meet your criteria and produces a list of stocks that do.

The stricter the screening criteria, the fewer stocks will pass the screen.

For example, if you’re looking for undervalued stocks, you may search for stocks with a price-to-earnings (P/E) ratio below a specific level. If you’re less concerned with valuation and more concerned with growth, you may look for stocks with a high level of year-over-year earnings growth.

Once you have a collection of stocks that have passed your screen, you have to determine which stocks qualify for further analysis. This may be based on fundamental analysis, additional market research, or your current portfolio’s allocation to specific sectors or industries.

Based on your filter applied you will find what you want. Like this:

A stock screener is a powerful tool that helps to filter stocks according to a wide range of criteria. You can find a wide range of criteria, such as Price, 1-Year change, Market Cap, P/E Ratio and more. The criteria are separated into categories like price, ratios, fundamental, etc.

Stock screeners remove behavioral prejudice

Investors have natural tendencies to make foolish investing decisions. These are generally called “behavioral biases.” They can be difficult to detect and avoid. These biases can lead investors to make irrational investment decisions which may hurt returns.
For example, investors will often change their strategy so that certain stocks will fit into it. Say you really liked some company. You might convince yourself that you should buy the stock even if it had too high of a price-to-earnings (P/E) ratio or too little revenue growth.

Stock screening helps to remove these types of biases and helps investors to remain objective.

But, a stock screener won’t save you from behavioral biases entirely. For example, if you wanted that company to pass your screen, you could change your screening criteria until it passed. In other words, you can cheat yourself.

Stock screeners are just one of the many tools in the investor’s toolbox.

They can help you narrow down your potential investments. It’s important to do your own research into companies’ businesses and decide whether or not you believe in their long-term prospects. Just because a stock passes your screen doesn’t mean it’s a good investment.

Don’t waste your money.

Think you know where are the markets gonna go?

risk disclosure

12th March 2019
Short Call Option Strategy Explained
3 min read

What is the short call option? The simplest way to classify “short” trade is any trade short of that from which you will profit if it falls in relative value.

A short call option is one of the trading strategies in which the trader is speculating the price of the asset on which option is placed is going to drop.

In short, a call option is the right to buy the underlying futures contract at a certain price.

That means, also, that the writer does not own an equivalent position in the underlying security represented by their options contracts.

Would you like to make a healthy return from a stock that drops in value in a short frame time?

If your answer is YES, you should think about the short call strategy.

Short Call Option in Practice

When you short a call you’re selling it up-front. That means that you get a credit to your account right away. But also, you will earn a positive return when the call option price drops.

Shorting, or selling, a call has many benefits, but the risks too.

In addition to the benefit of decreasing time, a short call option position is flexible.

This characteristic allows you to set the call’s strike price and your trade’s breakeven points above resistance levels you can see in your technical analysis.

This will boost the chances of a prosperous trade outcome.

Selling a call is a bearish trade.

Why? Because you are selling the call first, for a high price. And you hope to buy it back later for a lower price when the underlying stock declines. Sometimes, it means you let it expire worthlessly.

You should note that most traders believe that selling calls is a bigger risk strategy than selling puts. Most stocks and market indexes have a long term tendency to trend up.

That tendency to trend up cause most bearish trades less likely to end profitably. This grows the importance of evaluating

trends and finding the weakest stocks to trade.

Let’s see this graph.

Call option

Selling the call obligates you to sell stock at strike price A (take a look at letter A) if the option is assigned.
When driving this strategy, you want the call you sell to expire worthlessly. That’s why most investors sell out-of-the-money options.

This strategy has a low-profit potential if the stock remains below strike A at expiration. Hence, the unlimited potential risk if the stock goes up.

The reason some traders operate this strategy is that there is a high possibility for success when selling very out-of-the-money options.

If the market moves against you, then you must have a stop-loss plan in place.

You have to keep an eye on this strategy as it is open out.

And, you have to consider ensuring that strike A is around one standard deviation out-of-the-money at the beginning. That will boost your chance of success.

Yet, the higher the strike price, the lower the premium collected from this strategy.

Some investors run short call option strategy using index options rather than options on individual stocks.

Historically, indexes have not been as volatile as individual stocks. Variations in an index component stock prices tend to cancel one another out. Hence, lessening the volatility of the index as a whole is on the scene.

There are two ways that a call option price will decrease in value:
- The price of the underlying stock drops
- Or the price of the underlying stock stays approximately the same as you get closer to contract expiration
Short Call Option – Strategy Characteristics

As we already say, the sale of a call option is a bearish options strategy that consists of selling a call option on a stock that a trader believes will decrease in price.

Let’s go over the strategy’s general characteristics:

Profit Potential: Credit received x 100
Loss Potential: Unlimited
Expiration breakeven price: Call Strike Price + Credit Received
The probability of profit: Higher than 50%
The position after expiration: If the trader holds an in-the-money short call through expiration, the trader will take an assignment of -100 shares per contract.

Are there some assignment risks?

When the short call is in-the-money before expiration, the trader is at risk of being assigned -100 shares of stock per call contract.

The risk of a short stock assignment is highest when the in-the-money call has small extrinsic value. Especially when the underlying stock is close to being paid out a dividend that exceeds the extrinsic value of the call.

Expiration profits and losses for a short call option position

Take a look at a short call position from the following option chain:

Call option chain

You will, for example, sell the 100 call for $10. Let’s, therefore, assume that the stock price is trading for $100 when you sell the call option.

Initial Stock Price: $100
Call Strike Price: $100
Call Sale Price: $10

If you sell this call option, your potential profits and losses at expiration are illustrated by the following graph:

Selling a call option

So, this table describes different scenarios of this short call position at expiration:

Stock Price Below the Short Call Strike (Below $100):

The call expires worthless, and the maximum profit potential is $1,000.

Stock price between $100 and $110: The call expires with intrinsic value, but not more than the initial $10 sale price of the call.

The result is partial profits at expiration.

If the call is held through expiration, the trader will be assigned -100 shares of stock per call contract.

The stock price at the breakeven price is at $110:

The call expires with $10 of intrinsic value. Because the call was initially sold for $10, the short call trader breaks even.

If the call is held through expiration, the trader will be assigned -100 shares of stock per call contract.

Stock price above $110:

The call expires with more than $10 of intrinsic value, and therefore the short call trader gains losses.

The exact loss is equal to: (Short Call Breakeven Price – Stock Price) x 100.

If the trader holds the call through expiration, they will be assigned -100 shares of stock per call contract.

Advantages and Risks of Short Call Options

Advantages

Immediate return – You get your maximum profit right away. Of course, you could lose that profit if the underlying stock price drops, so don’t get too excited.

Significant returns in the short term – Options operate with leverage. That means you can see significant returns over just a few months.

Risks

Unlimited loss – There’s nothing to prevent a stock price from skyrocketing once you’ve sold the call option. In that case, you’ll take a huge loss.

Margin wipe-out – If the trade goes south, you could end up spending a lot of cash out of your account to cover the short call. With less cash in your account, your margin funds will decrease accordingly.

Don’t waste your money.

Don’t start before you test your skills on virtual money and read this risk disclosure
10th March 2019
Forex market – The differences with other markets
3 min read

Forex market and other markets have more differences that you can imagine. The difference may appear to be great between the forex market and other markets. But this is not to suggest that they are similar. Not many of the experienced traders have dared to crossover the boundaries of their trusted market domains unless they made sufficient preparations and studied the new market.

Can someone who profitably trades shares also make money with forex?

The answer is yes. But with some hints on trading style. Also, with a recognition of the differences between the two types of market.

The forex aims to favor short-term trades.

Unlike stocks, futures or options, currency trading does not take place on a regulated exchange. It is not controlled by any central governing body. There are no clearing houses to guarantee the trades. Also, there is no arbitration panel to decide disputes. All members trade with each other based on credit agreements.

Let’s see how the forex market differs from stock markets.

So here are the differences between the Forex market and others.
1. The forex market is 24 hours opened, unlike the stock market. It is not a country or geographically particular specified. Major markets open in Tokyo. When it closes, London takes over and then the New York market goes live till the next day when the Tokyo market opens again. This kind of continuity isn’t available in case of stock trading.
2. Forex market is the global largest exchange market. Not even the transactions of the entire world’s equity markets’ put together can meet this. The liquidity is never questionable, for example.
3. The equity market is ruled by a number of technical and microeconomic parameters and indices. In the forex market, there is no such thing.
4. The above point also characterizes that the concept of single exchange trading as nullified and what takes its position is over-the-counter trading.
5. There are no commissions to be paid to the brokers. The reason is simple. Traders are directly dealing with currency.
6. Currencies can decrease over long periods but can never be zero. This is an extremely incredible situation in the forex market. The traders can hold their short positions for as long as they possibly can without the danger of getting their capital wiped out.
More differences

Concentration

On various stock exchanges around the world, there are hundreds of large companies with shares that are very liquid. On the other hand, for example, the S&P 500 or FTSE 100, there are only three major currency pairs: EUR/USD, USD/JPY and GBP/USD. But, USD/CAD, AUD/USD and USD/CHY are also very prominent pairs and they take place in the forex market.

Spreads on these main pairs are the closest. Hence, they are the most suitable for day traders and scalpers because the transaction costs are lowest. However, for longer-term traders, attractive possibilities can occur nearby more exotic currencies such as NOK, SEK, SGD, and NZD. But, spreads will be wider on pairs involving ‘exotics’ as liquidity is much lower.

This concentration gives traders the possibility to specialize. For example, some will only trade EUR/USD or GBP/USD and become skilled on just one of those pairs.

Stock market traders can decide to specialize just in a few very liquid stocks.

However, those strategies also typically involve having to monitor the major equity indexes. There are software programs that can locate those fast-moving shares, but a lack of specialization in those stocks can leave traders open to making losses.

Trading in the Forex market is cheaper

The spreads on the major currency pairs tend to be wedge thin and closer than on stocks. This makes for cheaper transaction costs, which is important. Moreover, there is no commission to pay on forex trades. Maybe that’s the reason why the forex market is many times bigger than the world’s equity markets.

Also, competition between forex platforms is powerful.

Shorting stocks through stockbrokers can be difficult and very costly.

However, shorting stocks can be very dangerous and far more so than for currencies. Consider shorting the stocks of a company where a takeover bid is announced after trading hours. That means a trader can’t cover their short position until the market opens again.

Takeovers regularly happen at a premium to the day’s share price. It’s not unusual for shares to rally 40% even 100% under such conditions. That can destroy a trader’s capital, especially if leverage is involved.

Higher leverage and lower transaction costs provide the possibility to trade successfully with less capital than required for stocks.

The Forex market is different from other markets in some other key ways too.

Think that the EUR/USD is going to go downward? Short the pair!

There is no uptick rule in Forex as there is in stocks. There are no limits on the size of your position.

For example, if you have enough capital, you could sell $200 billion worth of currency.

More benefits, if you get information that the Bank of England is planning to raise rates at its next meeting, you could go right ahead and buy as many pounds as you like.

No one will ever sue you for insider trading should your bet pay off. There is no such thing as insider trading in Forex.

In fact, some countries economic data, are often known days before they are officially released.

But remember that Forex is a leveraged product. Hence, there is a great chance that you will incur more losses because you can control a large amount of currency with a small margin.

For example, a 1:200 leverage means you will receive $200 in your account for every $1 you invested. If you invest $1000, you would be able to control $200,000 worth of currency trade. Money management is important to profit in Forex trading. You need to plan your risks, learn how to apply stop, losses and practice diversification in your trading practices.

The bottom line

Forex traders are closely watching the price changes, the volume of trades over time. It is important to take note of the price patterns to determine buying opportunities and risks. It is also important for a trader to understand the intrinsic risks, read the disclosures before making a trade.

risk disclosure
6th March 2019
Day Trading the Best Methods – Day Trading for Beginners

3 min read

The methods of day trading contrast with the long-term trades underlying buy and hold and value investing strategies.

Some of the day-traded financial instruments are stocks, options, currencies, and a host of futures contracts, interest rate futures, currency futures, and commodity futures.

This method was an activity that was exclusive to financial firms and professional speculators. Many day traders are bank or investment company employees. They are working as specialists in equity investment and fund management. With the appearance of electronic trading and margin trading, day trading has become available to individuals.

What is Day trading

Day trading is speculation in securities, specifically buying and selling financial instruments within the same trading day.

Surely, day trading is trading only within a day. That means all positions are closed before the market closes for the trading day. Many traders may have day trading as one component of an overall strategy. Traders who engage in day trading are called day traders. They are therefore speculators.

For beginner traders, it can be both exciting and confusing. Many new traders are found in the market because they see the possible rewards when becoming a successful trader.

Of course, there is unlimited earning potential. You can work from home, and you can be your own chief. The rewards are obvious. The hard part of this game is figuring out what path you need to take to achieve your goal.

Day trading is when a trader buys and sells a futures contract within the same session.

Traders manage open positions within the limitations of an intraday methodology. There are no open positions held at the daily closing bell.

The discipline of day trading is questionable. Some traders argue that it relates to gambling it’s workable and potentially very profitable.

Frankly, there are no traders who take part in the markets only over day trading strategies.

However, beginners should take a few basic actions in the first days.

It is a good idea to ask yourself some questions. The current market is a fast-moving, and contemplation before entering is useful in mastering challenges.

Having knowledge about personal goals and abilities is an essential start in developing into a competent day trader.

So, what you have to examine before start day trading?

First, what kind of personality type you are.

Whether you are a risk taker or you like unpredictable action. That can impact the execution of trading dramatically.

What are your goals?

You have to find out a sustainable trading niche. So, you have to understand what your goals are before the start

What are your personal characteristics?

You must know the key personal strengths and weaknesses. Find the areas that need improvement. For example, you are not technologically savvy, then you have to improve this area. That can help boost your market system.

Honestly, day trading is not for everyone.

Think if it is for you.

If you are not familiar with the trading environment as a whole, maybe you should think twice. It is better to save time and money before placing your first trade.

Obtain the essential elements

The number of active traders has grown dramatically over the past several decades. Developing online technologies have reduced many of the common barriers to entry. It brings the markets to the crowds.

The modern market is a completely digital place. If you want to take part, there are some essential elements:

The basic computing power is a necessity. No matter if you are using a desktop or mobile phone.

Further, you must have a secure and functional internet connection.

It is essential for accessing brokerage and exchange platforms.

The platform is the trader’s portal to the market. Examining streaming data and placing market orders in real-time is best executed via robust software.

It’s never been easier to take part in the financial markets. Nothing will stop you. Your time zone, capital sources, or experience, mean nothing.

Attempting your market goals is possible all over the globe.

Have your plan and stick to it

A complete day trading plan must have:

Entry/exit point: It isn’t a piece of cake to identify good opportunity in a few seconds. The crucial part of any trading strategy is to know WHEN and WHERE. You have to be fast thinking trader if you want to exercise a day trading.

A rules-based approach can streamline the process. That can ensure optimal market entry and exit.

Position management: A strong plan can define the location of stop losses and profit targets on a per-trade basis. Good systems should include scaling, break-even, and trailing stop functions.

Risk management: Well, you want to get the most out of your risk capital when you are a day trader.

Knowing your exposure in the meaning of a viable risk vs reward is the key to not be overextended.

A complete strategy guarantees that trade-related actions are carried out in a logical and disciplined style.

Without a strategy, the profit or loss often is followed by a lack of luck.

Who wants to bet on luck?

The bottom line

Day trading can be financially rewarding. But the challenge, too. Nevertheless, given the proper due diligence, joining the markets successfully is possible.

Hope we helped you a bit in your endeavor.

Don’t waste your money!

risk disclosure

5th March 2019
What is the Forex Market?

2 min read

What is the Forex market? Actually simply. It’s the global market that provides the exchange of one currency for another.

Also known as foreign exchange, FX or currency trading is a decentralized global market where all the world’s currencies trade.

The forex market is the biggest, most liquid global market with an average daily trading volume exceeding $5 trillion. All the world’s stock markets together can’t even come close to this. But what does that really mean?

Forex has no centralized market. Instead, an Forex market exists wherever the trade of two foreign currencies are taking place.
Do you know it is open 24 hours a day, five days a week? Forex exists to handle investment and trade. The main trading centers are London, Paris, New York, Tokyo, Zurich, Frankfurt, Sydney, and Singapore.

All levels of traders, from central banks to speculators, trade currencies with one another.

The Foreign Exchange market, also called FOREX or FX, is the most exciting financial market in the world.

Whether you sell $100 to buy YEN or a bank exchange $200 million for EURO with another bank, we are speaking about Forex deals. The participants on the FOREX market range from huge financial organizations trading billions, to people trading a few hundred dollars.

Without this tool in place, foreign trade and investment would be obstructed. The major players on this field are the U.S. dollar, the British pound, and the euro. This machinery provides a clearinghouse to trade those major currencies.

Thanks to the internet, you can trade on the FOREX market the way traders from the largest banks and investment funds do.
All you need to get started is a computer with internet access and a trading account with a Forex broker.

If you’ve ever traveled to some foreign country, you’ve made a forex transaction. Take a trip to Germany and you convert your dollars or some other currency into euros. When you do so, the forex exchange rate between the two currencies determines how many euros you get for your dollars. And the exchange rate fluctuates continuously because, this market, like many others, is based on supply and demand.

How does Forex market work?

On the Forex market, one currency is exchanged for another. The single most important thing with respect to the Forex market is the exchange rate between two currencies (a currency pair).

You’ve probably seen it on the news or somewhere on the internet:

And you noticed the small changes if you paid attention. This small change may not seem like a big deal.

But think of it on a larger scale.

A giant international company may need to pay abroad employees. Imagine what that could do if simply exchanging one currency for another cost you more depending on when you do it? These few coins add up quickly. In both cases, you may want to hold your money until the forex exchange rate is more favorable.

An exchange rate can experience prompt changes. Sometimes several times a second. So there’s a lot of activity going on 24 hours a day, 5 days a week.

In overall, the currency exchange rate reflects the health of an economy in comparison to others. If the economies of the Eurozone are doing better than the US economy, the euro will go up compared to the dollar and vice-versa.

You can trade currency based on what you think its value is. Just like stocks. But the difference with forex is that you can trade up or down just as easily. If you think a currency will increase in value, you can buy it.

If you think it will decrease, you can sell it.

Honestly, finding a buyer when you’re selling and a seller when you’re buying is much easier than in other markets. Maybe you hear on the news that Australia (this is just an example, don’t worry) is devaluing its currency to attract more foreign interest into its country. If you think that trend will continue, you could make a forex trade by selling the Australian dollar currency against, say, the US dollar. The more the Australian dollar devalues against the US dollar, the higher your profits. If the Australian dollar increases in value while you have a sell position open, then your losses increase. Hence, you will like to get out of the trade.

In the moment of writing this post the chart looks like this:

When people talk about the “market”, they usually mean the stock market. So the NYSE, for example, sounds big.
But if you compare it to the forex market, it would look like this:

The currency market is over 200 times bigger!

The tremendous number of $5 trillion covers the complete global foreign exchange market. But daily trading volume from retail traders makes up between 5-6% of overall volume, or between $300-400 billion. So, you see. It isn’t so big.

The forex market is unmistakably huge, but not as huge as the others would like you to believe.

Just to be honest.

And remember’!

Don’t waste your money!

risk disclosure

4th March 2019