Category: Traders’ Secrets

Traders’ Secrets is something that everyone would like to know, right?
How is it possible that some traders are successful all the time while others fail to make a profit all the time?
That is exactly what Traders’ Secrets will show you.
Traders-Paradise’s team reveal all trading and investing secrets to you, our visitors.

What will you find here?

How to find, buy, trade stocks, currencies, cryptos. You’ll find here what are the best strategies you can use, all with full explanation and examples.
Traders-Paradise gives you, our readers, this unique chance to uncover and fully understand everything and anything about trading and investing. The material presented here is originated from the experience of many executed trades, many mistakes made by traders and investors but written on the way that teaches you how to avoid these mistakes.

Moreover, here you’ll find some rare techniques and strategies that are successful forever, for any market condition. Also, how to trade with a little money and gain consistent returns. By following these posts you’ll e able to trade with greater success. You’ll increase your profits and your wealth, of course.

The main secret of Traders’ Secrets is that there shouldn’t be any secret for traders and investors. Rise up your trade by reading these posts, articles, and analyses!

You’ll enjoy every word written here. Moreover, after all, your trading and investing knowledge will be more extensive and effective.

Traders’ Secrets will arm you with those skills, so you’ll never have a losing trade again.

Investing With Just $100 Per Month

You don’t believe it’s possible? Well, you should read this post.

By Guy Avtalyon

Ok, you have an extra $100 each month and you are enthusiastic about investing but you don’t how it works? Also, you are worried if $100 is enough? Investing with just $100 per month is possible, of course.

You don’t need thousands of dollars or euros or whatever to become an investor and get into investment. Traders-Paradise found several possibilities for investing with just $100 per month.

Reasonably, you will not make a ton of profit off a $100 investment, but the crucial thing is really getting started. $100 may not appear important, but you can make it expand into more.

This is where it gets a bit more difficult.

One of the hugest problems with investing a small sum is that brokerage fees can be expensive. For example, if you want to buy some stock that can cost you up to $20 with some brokerage and your investment easilly may become $80 worth. Yes, there is a simpler way and cheaper brokerage.

There is one way that will cost you less. Just use some investment app. Most of them will charge you a $1 per month fee. The great thing about investment apps is that you can easily pick the simple portfolios related to your goals, interests, and ideas about investing.

The app will do the rest.

Honestly, when it comes to investing, time is more significant than the sum. Let’s say you are in your 18s. With an interest rate of 7%, you could end with almost $50,000 after 20 years by investing with just $100 per month.

It’s never too start investing, but why should you waste your time and miss the opportunity to get the wealth.

Savings account

The best place for you to start with $100 per month is to set it in a savings account. That will be more an emergency fund than investing with current interest rates. But it will provide you to get into more serious investments because you will build a safety net. You will not capture great returns but you will be safe even if you lose your current job. At least by putting $100 every month on your savings account you will have several months of breath if such an incident appears.

Hold it as the source to something bigger. Wise investing can turn your $100 into a great future and you have to begin around.

The time frame will make an immense variance in how you should invest. So, suppose you want to invest in stocks.

Stock investing with just $100 per month

If you have $100 that you’re able to load every month, you should think to invest in individual stocks. I already mentioned that will cost you 20% of your investment and you may think it is too expensive. But think again. The misconception is that you need a lot of money to be able to invest in a stock. Investing with just $100 per month is quite good for the start.

Let’s debunk the theories.

For beginners, if you’re ready to do your homework and buy around amid brokers, you will find a great potential. For instance, you can find a broker with bare-bones $5 commission and without minimum deposit terms. What you have to think about is that low-cost brokers may charge you some additional costs, for example, inactivity fees or additional costs connected with buying stocks trading below $2 per share.

But, if you buy individual stocks you are entering the long run. Yes, it is possible to find a good stock for investing with just $100 if you have a long investment horizon. You will hold your stock for years. If you trade them you will pay 10% commission for every buying or selling, that’s true. If you don’t like to pay commissions every month you can make savings of $300 or $400 and buy stocks every 3 or 4 months, you don’t need to buy stocks every month. In this way, you can lessen your cumulative commission charges.

Certificates Of Deposit or CD

Of course, there is an alternative to investing in stocks. You can invest in CDs. This simple way. All you have to do is to loan your money to the bank and collect the interest on it. CDs range in time from 3 months to 10 years. The point is, the longer you invest, the higher interest you will catch.

Moreover, the CD is penalty-free. That gives you the possibility to withdraw your money if you want and without penalty. But read everything you have to sign, some CDs have penalties. Some banks can charge you if you withdraw your money before the maturity of the contract.

Another solution for your investing with just $100 per month is peer-to-peer (P2P) loans.

The cool thing with this type of investment is that you can decide not only how much you want to invest but also, how your investment will be used. You may choose one particular investment from the different loans, also, you can determine an interest rate and loan period. As an investor, you will get your money back according to repayment plans.

Index funds are a good choice for investing with just $100 per month

Some companies don’t have a minimum balance requirement for index funds. So you can invest $100 in a class of stocks. The primary index fund tracks the S&P 500, but you can find numerous other. Index funds are good because they give the diversification of your investment portfolio. Some stocks will rise in value, some will drop, but the final result is that you will profit.

What do you want wit that $100? Do you want to improve your current financial situation, or maybe you want your capital to grow? You have to figure out that.

If your finances are in good health, then there is no excuse to delay investing.

Start building your wealth. Don’t worry if you have just $100. It is enough to start, it will turn into more! But if you don’t begin investing, you will never have that chance to earn. The day when you will think how smart you were when invested $100 is so close. So, simply start investing with just $100 per month.

16th September 2019
How To Profit By Investing In Bad Companies

2 min read

You don’t believe it is possible. Profit by investing in bad companies sounds pretty stupid and naive. But it is possible.

To be more precise, sometimes it is possible to make notable investment returns by buying the stocks with minimum chances. The key is to recognize the companies which will grow in the future.

There is some math behind. The point is to make a difference between business and stocks.

Let’s be more clear!

For example, you have some money aside and want to invest in some cheap stocks. But you find two similar companies in the same industry, say gold.

Company ABC is a large one. Gold is currently at $100, its exploration and other costs are $60, that is a $40 profit. Not bad.

Company XYZ is a disastrous business. It’s exploration and other costs of $90, which is only $10 in profit at the current gold price of $100.

Which one to choose?

The logical answer would be ABC but the wrong one.

Let’s assume the hypothetical situation.

The price of gold suddenly rise in the market, and the current it is $300, for example.

Let’s see the numbers for those companies.

Company ABC offers $240 in profit.

$300 gold price – $60 in expenses = $240 profit

Company XYZ offers $210 in profit

$300 gold price – $90 in costs = $210

But here is where the math has the greatest influence.

Company ABC earns more money for any reason, its profit rose 600% from $40 to $240. But, compare it with company XYZ which grew its profit 2,100%.

Moreover, there is a phenomenon

It is very reasonable to assume that company XYZ will experience a multiple expansion, meaning added increase. The possible final result: company XYZs stock price is raising exponentially more, much more than the stock price of company ABC.

What to say? Company ABC is maybe a healthier business, but company XYZ is better as a market choice.

How is possible to profit by investing in bad companies?

This is recognized as operating leverage.

Operating leverage describes a company’s level of fixed costs in comparison to its revenue. Companies with high operating leverage have large fixed expenses. They are obliged to cover them as first. If fixed expenses are exceeded, the revenue will fall. Such a situation may cause great difficulties for the company, from large cuts to lower profits, even bankruptcy.

You can find companies with high operating leverage in almost all sectors and industries. Gold miners, airlines, crude oil companies, are some examples. Actually, you may find these companies where the business has enormous changes in revenue. You will notice enormous profitability fluctuations. That comes because fixed costs can’t always adapt as quickly as the market value.

But you have to know that investing in bad companies carry a lot of stress and risk. Investing in some of these companies can make you rich but it is almost impossible for them to provide you a constant profit.

It’s easier to invest in some solid businesses with steady profit and dividend. You should avoid headaches.

You would like to read How to Become A Trader or Investor in Just 10 Minutes

15th September 2019
Margin Call – How to Profit From The Trade
Every second in your account you must have 25% of the total price of the stock you hold to cover the maintenance margin.

By Guy Avtalyon

A margin call is something that every trader would like to avoid.
- Buying on margin means borrowing money from your broker to buy stocks.
- There is no profit without the risk involved.
Have you ever seen a better movie than Margin Call? A movie about the Financial Crisis? It just crossed my mind when I started to write this.

Okay, never mind. The subject of this article is a margin call in the stock market.

Let’s start from the beginning.

What turns around and around the stock market is a risk. I know that is the major problem for most of you. How to take the risk? Because the risk has its bright and dark side and you know that. For example, you are trading some stock without guarantees that it will perform well.

The identical risk that boosts stock prices one day can lower them tomorrow. Yes, the identical. Pretty scary.

But here we come to the bright side of the margin call. For investors who want to profit a lot and quickly nothing is better than buying on margin.

Buying on margin means borrowing money from your broker to buy stocks. Basically, it’s a loan from your broker.

How “buying on margin” works?

You can borrow from your broker up to 50% of the price of a stock.

For example, when the stock price is $20,000 you will pay $10,000 and your broker will lend you the rest which is another $10,000.

Let’s look at the possible scenarios.

Assume the stock price grows at $24,000. The return on your investment will be 40%. You invested $20,000, but you have to give back to your broker $10,000 and you will end with $14,000 in your hands. But you invested yours $10,000 so you will have $4,000 of profit. This is good and you can be happy because you made a profit.

But things may go in another direction.

Assume the stock price went down at $16,000. You will end up with a 40% loss on your investment. Even more, you have to give back the borrowed money to your broker increased by charges, fees, and interest on the loan, of course.

Buying on margin may be extremely risky. You may lose your entire investment. But you may lose more because of something known as a margin call.

Every second you must have an adequate amount in your account to cover the maintenance margin. That amount is 25% of the total price of the stock you hold.

What can happen if you don’t have enough cash in your account? Your broker will issue a margin call. That means, your broker is demanding you to cover the difference with more deposit and reach that 25% maintenance level.

Let’s go back to our example and situation when things went wrong. What will happen if the stock price drop at $12,000? Your loss is $8,000 and now you have only $2,000 in your account. The rule is that you MUST have 25% and $2,000 is not enough to cover that. So, you lost $8,000 and at the same time, you have to deposit an additional $500 in your margin account to stay in the market. Also, you have to pay back the money to your broker.

Is margin call dangerous to investors?

It can be extremely dangerous. In our example the missing deposit is small as the money invested isn’t big, but you can count how it is an enormous loss when the value of the investment is $200,000, $500,000, or million dollars.

The most frightful detail about margin call for you as new investors is that your broker has no obligation by law to warn you that your margin account is too low. So, what the broker will do?

The broker will sell your stock and liquidate your assets if it is necessary. He or she needs to ensure the maintenance level in your margin account. Even more, the broker can begin selling your stock even the margin call is issued. Such will not wait for you and will not give you a grace period. Damn, you are dealing with a un-patient broker. This is an extremely painful and dangerous situation. If you come up to this situation how will you earn your money back when the market turns in your favor. You have nothing to trade with.

The other danger about margin call is that you do not have an influence on which stock your broker may sell. Of course, the broker will choose the best players to cover fast and smooth the maintenance margin.

Moreover, the brokerage may change the rules and issue the margin call based on them. You will not have even zero chances to delay paying the margin call.

How to avoid the potential risk of a margin call

First, stay away if you don’t have enough experience in trading. Second, open some other account for an emergency with enough money to cover the margin call.

I can understand that you are willing to enter the market as a big player. At least to earn a big profit. Nothing is bad with that. Everyone wants the same. Just keep these things on your mind when you want to trade on margin. Buying on margin is an extremely exciting method, risky but with great potential to profit.

If you are 100% sure that you have a great player in your hands, and don’t have enough money to buy it, do it. Borrow from your broker. Sometimes, a great risk will bring a great profit. In the end, there is no profit without the risk involved.
13th September 2019
How Long To Hold Stock?

Patience is golden, but even being a golden rule of stock investing, it isn’t enough, there is more.

By Guy Avtalyon

Yes, you are asking the right question, because many stock investors ask: “How long to hold stock?” There are some possible answers.
You may hold your stock until it provides you a profit, or break your stop-loss rule, or you may hold your stock forever.

Actually, there’s no general rule that fits all stocks when the holding periods are in the question. So many variables can influence how long to hold stock.

The decision to hold stocks for the long term or the short term is individual. It depends on your poverty, expectations, or advisor. Several factors are involved in your personal decision especially if you have a winner in hand. The right question is: Will the winner be an excellent moneymaker in the future and how long?

How long to hold stock

A lot of factors will influence your decision.

First of all, the time you enter the market is important. If it is during a bull market you have to know two things. First, the usual bull market cycle will last from two to four years and you’ll be able to earn the majority of your profit during the first or second year. In simpler words, you have to wait until your stock rises up to 20 – 25% from buying price, that is the point where the profit can be taken. If your stock increase over 20% in the first 3 weeks or in a shorter period, hold it at least 8 weeks. After that period you have to examine the stock’s charts to check if your stock keeping up well. When you get this confirmation from the charts and the market is increasing too, there are a lot of chances that this trend will continue. You can expect the new breakouts and the value of your stock will rise more.

For genuine market winners, the average time from breakout to top will be from 12 to 18 months.

This looks like a pretty simple answer, but is it the right one?

What if your stock starts a downtrend and you see you can be stuck in a losing trade for a long time? That is why you must have settled rules before you enter a trade.

How to determine how long to hold a stock

The best way to determine how long to hold a stock is to do that based on your trading rules.

Before you purchase any stock you have to define what profit do you want to make. The next will be your ability to forecast how much your stock could decrease. Will your strategy provide you a bigger gain than loss? Is the stock in its downtrend, bottoming, or up-trend? You have to determine the largest possible loss you can afford.

Traders-Paradise has one suggestion for you.

The gain has to be minimum 1,5 to 2 times bigger than loss. There more variables you have to consider. For example, how much will you earn when sell your stock?

The golden rule in stock holding

Let us examine one possible scenario. You have bought the stock and you are 20% in profit after the first week. You predicted the worst scenario as a loss of 10%. In this case, your reward is at 2 to 1.

What you have to do? Should you sell? Well, the brief answer is No.

The right answer is that you should hold a stock for a longer time if you have, for example, a medium-term horizon. You have to hold your stock for several weeks or even months.

Hold the stock as long as you want to make a notable gain from a stock price move. Some traders would advise you to hold a stock something between two and 10 months to get the best reward. You have to be very blessed to develop a great profit overnight.

The average high-profit trade is 30% and the hold time is about 45 days. Also, the average drawdown is -11% to -15%. That is the statistics.

Patience is golden

You must be patient with a stock. Stocks need time to give you the profit you want. Long-term investments have made incredible profits.

Anyway, you must be careful because stocks can drop suddenly. To avoid a catastrophe you have to limit your loss but don’t place your stop-loss order at 5%. Usually, a stock may pull back 10-15%, and very soon after that, a profitable move happens.

12th September 2019
When To Buy Sell or Hold On The Stock

The enter or exit the investment must be in line with your investment plan.

by Guy Avtalyon

Beginners in the stock market are usually enthusiastic, but do they know when to buy, sell, or hold on to stocks to gain maximum growth and limit loss?

There are no guarantees for stock’s price, they can go up or down driven by various circumstances. So how to know when to buy, sell, or hold on stock?

No one can tell you about one specific, the best strategy, good for everyone. But advanced traders follow some “rules of thumb” when they examine their investment movements. They are establishing entry and exit points and evaluating fundamental factors. But they had to learn some universal systems at first and after that, they were able to choose the one or a few that suit them the best.

Examine Entry and Exit Points

An entry point is the price level where the trader buys an investment or “enters the position”. The exit point is a price where you sell or “exit”.

If you want to avoid the wrong decisions and if you want to know when to buy, sell, or hold on the stock you have to define your entry and exit points. That means you must have a clear strategy to lower the risk and enhance your return. In other words, you have to set the right entry point to maximize winnings.

Also, it is extremely important to define where to set a stop loss. This point is worth in case the stock price starts to drop. Yes, some traders will wait for the dropping price to grow, but that may be dangerous in case the stock value continues to decline. This is especially important for short-term traders with the idea to buy and sell in a short time.

Traders usually practice stop and limit orders to maintain the balance between gains and losses.

The point is to have more winning trades, right?

To avoid permanent watching the charts and price changes you can set stop or limit order. That will provide you to enter or exit the investment according to your investment plan.

A limit or stop order means that you decide how much stock you want to buy at a specific price or when it peaks a specific price. So, you can place a limit or stop order for a higher or lower price than the current market price. The market price is the prevailing price of the stock.

Stop and limit orders act separately but associate to the trader’s action in the same way. They enable traders to not have to continually watch price movements, but traders have various goals with these orders.

For example, when setting a limit order, the intent is to buy or sell a stock at a defined price. To be more clear, if a stock’s value is $85, and you want to buy it, you may set a buy limit order at $80 if you think it is your best entry point.

Thus, if you want to sell the stock, you may place a sell limit order of $90 if it is your projected or planned exit point.

Stop order is a defensive strategy to lower losses.

To secure your investment, in case the stock continues increasing in value, you may set a stop order at a point a lot bellow the current price. But if you expect that stock to be trading below, you may try to minimize your losses with a higher-stop order that will be close to the current price or just a bit under the current price.

Stop and limit orders are created to trigger when the pre-arranged price is reached. If you set a limit order at $90, the stock will be sold immediately when the stock increases, and $90 is touched. Or vice versa, if you set a stop order below the current price, the stock will be sold when the price drops and it reaches that price.

I hope the point is clear, the trader with the limit order wants to sell when the price rises, and the trader who placed the stop order wants to sell when the price drops.

Why is important to know when to buy, sell, or hold on the stock?

There is some risk involved in limit orders. A limit order “guarantees the limit price or better” but on the other side, what if it never gets filled?

A stop order means an exit from the stock position if the price drops, after your stock scores the stop you’ve set. In that case, your stop order becomes a market order and there are many competitors waiting to be filled. Hence, you don’t have a guarantee that your order will be filled at the specific price you placed. In some cases, you may end up selling the stock significantly below that level.

Moreover, if you have a sell stop at $90 and the price falls to $40, your order will be triggered at $60, which is a good thing. But things could go in the wrong way too. For example, if you purchased a stock at $80 and placed a stop at $75, the stock might go down to $70 and be sold, of course, but it can jump back to $90.

When to buy stock?

In investing, it is important to determine what a stock is worth. Will it rise up to the estimated value? Set a range at which you would like to buy a stock. That might be helpful. Will you pay that amount for a particular stock? Be honest while giving the answer.

If you don’t know the price target range, you will be in trouble with determining when to buy a stock.

Also, you have to know about the financial health of a company. It is possible through the company’s financial statements that have a treasure of information.

You have to pay attention to the company’s revenue, for example, or how it relates to its past reviews. Are the company’s sales growing or shrinking? Read the company’s guidance for revenue or sales, which reveals how it expects to perform in the future.

Cash flow is important too because it will provide you information about a company’s liquidity. A very good sign is when more money is coming into the company than it spends. It is a positive cash flow.

Further, a stock might be undervalued. So, you must estimate a company’s upcoming prospects. Compare it with current reports. In this way, you will find a possible price target. If the current stock price is lower, buy it.

When to sell the stock?

Whenever the expected price is bigger than the current stock price, you have a chance to earn.

The size of the return depends on how much of a discount a stock trades related to its expected value. Also, it is related to how much time the market needs to update its expectations. The higher the stock price discount and the sooner the market corrects its expectations, the higher the return.

You can sell your stock when it hits its expected value, or a more winning stock arises, or you change your expectations.

When to hold the stock

You have to know that it can take time for a stock to reach its real value. Any stock price forecasting is actually simple guessing.

Your stock may need several years for a stock to reach close to a price targeted. If you are sure your stock will grow, hold it 3 to 5 years. Very often, you will profit more. It is essential to know when to buy, sell, or hold on the stock if you want a profit.

11th September 2019
Should you buy a stock because of its dividend?

3 min read

Never buy a stock because of its dividend. A dividend shouldn’t be a reason to invest in a poor business. Most important is the performance of the business. That will drive a stock’s return and the company will be able to pay a dividend. So, you must pay attention to the business as a whole, the company’s plans, its goals, even to management and how they treat their employees.

Dividend stocks are recognized as safe investments, that is true. They are the highest valued companies. They have grown their dividends during the past 20 years and these are usually held as safe businesses.

But, just because a firm is providing dividends doesn’t mean it is a trustworthy investment. You have to learn how to avoid pitfalls that may arise, at first glance, with good dividends.

Executives can use the dividends to pacify nervous and fidgety investors when the stock price isn’t running as they are expecting. You must know how the management is handling the dividends in a company’s strategy, for example. If you notice a lack of growth, stay away. Such a business isn’t good to invest in, even if it provides good dividends.

Do you know what has happened in 2008?

A great stock’s dividend yields were forced to unnaturally high levels due to stock price drops. The dividend yields seemed fascinating, but as the economic crisis developed, the profits fell. That caused the numerous dividend plans to be canceled entirely. The best example is the banks’ stocks in 2008.

They were paying great dividends but whenever dividend is paid the stock value instantly falls by an equal amount. That’s the point. And you may ask if the bankers knew that? Of course, they did.

Let me explain you something.

Very often, the chief purpose why some company pays dividends is because the executives can’t discover some solid growth possibilities within their own company to invest its earned profits in.

Hence, the company allows extra earnings to stockholders by paying dividends. But this is good, you may say. Yes, but…

When a company gives a dividend equivalent to its profits, that is a sign that they are not able to find investment opportunity within their own business that would give greater return. If such a company stays for a long time in a similar situation, the growth will be slow. And at some point in time, they will stop paying dividends and the stock price will decrease to worthless.

That’s the secret. So when you ask yourself should you buy a stock because of its dividend, be careful and have a bigger picture in mind.

You should buy a stock because the company is paying attention to the development, research, infrastructure… Things that will increase your profit as the stock price is going up.

Now, can you answer me, should you buy a stock just because of its dividend?

Of course not.

Moreover, dividend-yielding stocks are taxable income.

A dividend is a delivery of a part of a company’s earnings to stockholders. It can be done in cash, stocks, or other assets. It is a bonus to investors.

Yes, many investors see dividends as the main point of stock holding. They want to hold the stock long-term and the dividends are an addon to income. Nothing is problematic in that. But buying a stock just because of dividend is very wrong.

Dividends are an indication that the company is doing well, dividends are not bad. It has profits to share, more cash than it demands and it can give it to its stockholders. And a stock’s price may rise quickly after a dividend is paid.

And there is a catch, on the ex-dividend day, the stock’s value will surely drop. The value of the stock will drop by a sum almost the same to the amount paid in dividends.

When you want to buy some stock do it because you believe in business or you think the value will rise. Don’t do it only because of a dividend.

You would like to know THIS

10th September 2019
October Effect – Investing When The Stock Market Go Lower

Is October effect just a myth or there is something?

By Guy Avtalyon

The October effect is a recognized market oddity when stocks tend to fail during October. The October effect is an irrational suspicion of some investors related to previous market crashes that happened during October. Investors become superstitious, you might think. Well, the fact is that some great historical market crashes happened this month.

We will point some of them. In 1907, the Panic, later, in 1929, were three large crashes – Black Tuesday, Black Thursday and Black Monday, after almost 60 years 1987, Black Monday happened October 19, when the Dow fell 22.6% in one day. Also, on Oct. 9, 2002, the market caught a five-year low. And the market plummeted 16% in October of 2008 when the Great Recession began.

When the stock market crashed in 1929, the investors were surprised. It was quite unusual because only a few weeks before the stock market was on the highest level ever, the stock prices were 25% higher than in the year before. In October 1929 stocks dropped nearly 25% for only two days. It cost investors billions of dollars. This market crash led to the Great Depression. October has accepted as a permanent warning to investors of how suddenly wealth can turn over.

What is October Effect?

There’s no proof that this great market crashes occurred in October for any other cause. Coincidence is truly a master of the game. Since there were not too many market crashes in October, we are free to say that investors will make money during October more often than they will lose.

According to research conducted by Yardeni Research, the medium monthly return in October 2015, was 0.4%.

It wasn’t a great return but still, it was. But can we say the chain of unfortunate market events over October is broken?

The truth is that if markets go down over October, they do it very hard and painful. But just for a sec try to be reasonable. Compare the drop of 4.7% in one month with 11 good months when the average gain was about 4.1%. Everything is math.

So, we can say, at least, that October could turn high in any direction.

For investors, September is statistically the worst month since they lose approx 1% during this month. History shows that September can be difficult for stocks. Since 1950, it has been the most critical month for the S&P 500, with declined at an average of 0.5%. But, for the last 10 years, the S&P 500 has a 0.9% profit in September.

Is it possible to predict the stock market?

It is hard to predict the stock market. Markets are going up and down. You can be sure of one thing: when it is down, it will climb up. The markets go up over time and you are a long-term investor you shouldn’t be worried about the market’s condition over one month. But if you are a short-term investor your portfolio should be built mostly on cash and bonds, less on stocks. That means it is better to be a conservative investor. So, the October effect will have no or less influence on your investments.

Investors’ sentiments can become negative when October is near. That may influence the stock market play. As investors’ feelings incline to the depressed, negative market growth can produce overreactions. They will start to sell stocks in panic and the negative influence will increase more.

Keep in your mind, statistically October isn’t the worst month, it is September. But due to the great market crashes that occurred over October, we have that scary phrase – October Effect.

By the way, do you know which month is the best for the stock market? July! Remember this.
It would be amazing if the market crashes chose to happen just in one particular month of the year. Honestly, it is impossible, like the impossible is to have just one incredible good market month.

October is just one of the 12 months of the year. The difference from others is that leaves start to fall. That is the October effect.

10th September 2019
Secrets of Stocks Scalping Strategy

3 min read

Scalp trading requires incredible self-control and trading focus. Traders are interested in scalp trading because it has less risk, they can place hundreds of trades per day and it provides much more trading opportunities.

Traders-Paradise reveals some secrets of the stocks scalping strategy. First of all, let’s make clear how to scalp trade.

If you want to practice scalp trading you will find several different ways to make money. One way is to set a profit target per trade related to the price of the security in the range between .%1 – .25%. The other way is to follow stocks breaking out, the new highs or lows and using Level II to take as much profit as possible. You will need a lot of concentration and perfect order execution for this. Finally, the third way is to watch the news and trade upon the events that can cause extended volatility periods of a stock.

It isn’t necessary, but we want to explain the Level II.

Level II is the order book for Nasdaq stocks. Level II shows a ranked list of the best bid and ask prices with detailed data about the price action. It is very important in day trading to know who is interested in the stock.

Winning is crucial in scalping. Your win/loss ratio must be high as the difference from the other strategies where the win/loss ratio may be less than 50%. This high level of winning trades shows that you have to be right much more often than wrong while scalping.

That is why the stock scalping strategy is a challenging way of making money in the market.

So, we have covered the basics. Let’s go further.

Secrets of stocks scalping strategy – use the oscillator

The idea behind scalping is that stocks can be more predictable covering extremely short periods. More than they can be over a longer time. For example, you can easily predict the course of stock in the next 20 minutes. Honestly, it is harder to predict where the stock will be in the next 20 weeks. At first glance, scalpers are sacrificing longer gains. Yes, that is probably true but they will not have longer-term losses if they are trading wrong.

One of the most successful ways to scalp the market is by using an oscillator but also, it is one of the toughest to nail down.

Oscillators can give you the wrong signals. If you are using one oscillator the possibility to predict the stock action is about 50%, which isn’t enough for this strategy.

The commission costs are too high for that win/loss ratio.

Also, scalp trading is possible with the slow stochastic oscillator. But the stochastic oscillator is not intended to be a standalone indicator. You will need some other form of proof to confirm the signal.

You can combine the stochastic oscillator with Bollinger bands.

So, it is smart to enter the market when the stochastic forms a proper overbought or oversold signal but is confirmed by the Bollinger bands.

The stochastic oscillator is a momentum indicator. It shows the position of the closing price related to its high and low prices over some period. Bollinger bands show volatility. Together, these indicators help a trader to recognize scalping opportunities.

Successful scalping requires a great knowledge of technical analysis to notice small deviations in the stock market and quick changes. A scalper will open a position for a few seconds or minutes and then close. Scalper needs higher frequency trading because the profits make per trade are regularly low.

Scalping also demands access to news feeds, real-time charts, and data. As a scalper, you must get breaking news or real-time data of price movements. It is an essential part of successful scalping. Lastly, scalpers can’t allow being confused. As a scalper, you will make numerous daily trades, so you must keep focus and closely monitor the market each trading day.

9th September 2019
Asset Allocation Models – Protect Your Investment

Here is how to protect your investment with different models of asset allocation

By Guy Avtalyon

Asset allocation models are the way to split your investment into different asset classes: stocks, mutual funds, bonds, private equity, etc. That will give you the possibility to lessen the risk of your investment. Every asset class carries some level of risk but different. For example, if the value of bonds rises, the stocks will fall. When the market is falling, real estate may provide you a nice return.

The point is to have a diversified portfolio built by the asset allocation model among asset classes. Every investor has its own model of asset allocation. It is based on individual investing goals and risk tolerance.

Also, personal asset classes can be separated into different sectors.

You can use different types of asset allocation models.

Asset allocation model created by your needs

For example, for some investors equities are more favorable than other asset classes. Or if you are in serious ages you may prefer to put your money in some source of fixed income that can provide you stable retirement income because your goal is to save what you earned during your working life. Thus, you are not worried about market fluctuations. So, you may have the majority of your portfolio in stocks.
But if you are a younger investor you may prefer some investment with faster returns.

What are the different models

Most asset allocation models come into four models: growth, preservation of capital, income, balanced.

The growth asset allocation model is suitable for beginners interested in long-term investments. If you are at the beginning of your professional career you will be interested to deposit some amount every year in long-term investment such as common stocks that may not pay you dividends but can be good in the long run. Fund managers could advise you to invest in some foreign equities to diversify your portfolio.

But if you want to preserve your capital you will like some other model of asset allocation, like preservation of capital. This model will suit you if you want to avoid risk to lose even a small part of your investment because you would like to use it in the next 12 months, for example, to buy a house. In this case, your investment portfolio will have about 80% in treasuries or commercial papers. There is some risk in this model of asset allocation due to the inflation that can lessen your buying power. Think about that.

Income as an asset allocation model

The usual income investor comes from a group of people near retirement because the need for cash in hand is of essential importance.

The balanced model of asset allocation is kind of halfway between income and growth. It is a compromise between long-term growth and current income. This mixture of assets that can provide cash but also the growth of principal value.

Balanced portfolios is built of medium-term investment and stocks of well-established companies.

The investor’s needs may change during the time.

The asset allocation will follow that change. For that reason, it is always smart to switch a portion of your investments before the important life changes. Do it occasionally. For example, you could move 10% of your investments to the income allocation model yearly as you are approaching retirement. So, you will have the whole of your portfolio adjusted to your new goals.

8th September 2019
Limit order vs Market order – When and How to Use

3 min read

When you are buying or selling a stock, you have two main ways to define the price you want to trade. You can choose the market order and the limit order. If you choose the market order, you trade the stock at the current price, whatever it is. By using a limit order, you can set a price and when the stock meets it you can say the trade is executed.

This is the basic difference. But to understand more, several things must be taken into consideration.

Limit order gives you the price you want

The benefit of the limit order is that you can set your price. When the stock meets that price, the order will be executed. It is usual to set a limit order to be executed in a frame of 3 months after you enter the position.

A limit order can be placed for buy or sell a stock at a particular price. A buy limit order will be filled only at the limit price or below. Hence, a sell limit order will be filled at the limit price or more expensive. For example, you want to buy the stock at $20 or less and you place a limit order for this sum. The order will be executed if the price of the stock is at $20 or below.

The disadvantage is that you are not promised to trade the stock.

In case the stock never hits the limit price, the trade will not be executed.

The other problem may arise if there is not adequate demand or supply to fill the order. That could be the case with illiquid stocks Also, the stock price may change during the 3 months and your trade may be fulfilled at a price extremely changed from what you could have made.

For example, you want to sell some company stock at, say at $90. Those stocks are suddenly traded from $85 up to $120. But your limit order is at $90. So, what can you do? Be informed on a daily base to avoid to end up with less money when you can get more.

The opposite can occur with a limit order to buy. You may be forced to buy at a costlier price than you think the stock is worth.

Use a limit order when you want to name your price a much different from the current. The other reason, you aspire to trade stocks that are illiquid. Also in the case when the bid-ask spread is great or you are trading a large number of shares.

A market order is executed quickly

The biggest benefit of a market order is that it can be executed quickly since you are choosing the best price possible at that time. The market order will be executed no matter what price the seller is asking or the buyer is offering.

The most important disadvantage of the market order is that you can not determine the price of the trade. It may influence if the price changes fast which could lead you to end up trading at a much-changed price from when you placed the order.

For example, you placed the market order after the closing hours. Suddenly, over the weekend, the stock price increased. What you have to do is to cancel your market order before the market’s opening.

Also, the lack of buyers or sellers able to cover your order may cause the price to increase or decrease.

Use a market order if you want an immediate fulfilling at any price or you are trading an extremely liquid stock. Also, if you trade several shares, meaning less than 100.

Limit order vs Market order

Limit orders will help you to save money on commissions. But you can save your money by a buy-and-hold approach to your investment.

Both limit order vs market order has its drawbacks and advantages. The final selection depends on you. The limit order can be expensive. A market order is simple to execute but can be a difficult choice during volatile market circumstances.

6th September 2019