Tag: trading tools

  • Moving Averages As Support and Resistance Levels

    Moving Averages As Support and Resistance Levels

    Moving Averages As Support and Resistance
    Finding the key support and resistance levels is a crucial component of trading. Moving averages can help.

    By Guy Avtalyon

    Is it possible to use moving averages as support and resistance? How can they help us in trading? Is there any trick on how to use them? We know from the previous article that moving averages are an average of closing prices during the recent days. How much info we can use in the meaning of moving averages as support and resistance levels?
    If you take a look at any chart with moving averages and trend lines that are formed you’ll understand why this is the subject. Moreover, this understanding may have a great impact on your profit.

    Moving averages as support and resistance are extremely powerful and we’ll show you why and how.

    What are the moving averages as support and resistance?

    First of all, these levels are not just like conventional support and resistance. Conventional, traditional levels are visible as horizontal lines in your charts but these provided by moving averages are dynamic. They are changing according to the recent changes in price.

    Dynamic support and resistance levels are zones where the market could pull back into and get support requiring to be at horizontal support or resistance levels. Why is it dynamic? Because it measures resistance and support using moving averages that are changing as market changes.

    You can find many forex traders that use moving averages as support and resistance levels. For example, it is common among them to sell when the price increases and reaches the moving average and tests it. As a forex trader, you cannot ignore when the price often checks out the moving averages before it bounces back. You must understand that something is happening when the price reaches these levels. 

    What happens is the market is developing, evolving. So you can’t always buy or sell at previously outlined levels. Also, trends’ momentum is dynamic too due to the order flows. Momentum can often be the primary forcing power of trends or movements.

    But to sum what we had here. So-called static support and resistance levels are horizontal and can’t move. On the other hand, dynamic support and resistance levels are moving and they are not horizontal. 

    What causes support and resistance?

    When a price goes up and down, it faces obstacles on the way. If obstacles act in a way to prevent the price to drop lower, we are talking about – support. Hence, when it stops the up progress, it is resistance.

    Support is formed when more traders are selling than buying. Sellers will usually cover their short positions and take the profit. The price will go lower and lower. As it happens, buyers will start to buy at that lower price and many of them will enter the new long positions. If the number of buyers is bigger than the sellers, they will create a support level eventually. But if the price moves up that means the more traders are buying and if the number of sellers is bigger than the number of buyers it is so-called resistance.

    How moving averages help to find support and resistance levels

    The question is how do we estimate the strength of the signal we’re seeing. Is it breakout or bounce? There are moving averages as support and resistance levels on the scene to help us. One of the benefits of using moving averages for this purpose is their ability to be handy even when the market price is going through a hidden area in our charts.

    Have you ever had trouble finding key support and resistance levels when looking at the charts? Of course, you had. It is pretty much usual that when looking at charts and notice a price action, you see the price is pulling back but you cannot find support or resistance levels in that zone. But if you try to reveal how the market is valuing dynamic levels, your charts will be more clear. Moreover, you’ll find some trading opportunities you were missing before. That’s kind of an “angle-changer”. You have one perspective more to judge your trade.

    One of the best ways to estimate the ability of support or resistance levels is to watch price action around them. It isn’t hard to read price action. For example, on candlestick charts it’s easy. 

    For example, if you use the 15-minute chart and the price rises to the 50 EMA. That could be a really good dynamic support or resistance level. You’ll notice that every time the price touches 50 EMA and tests it, you’ll see a bounce back down because the price uses this moving average as resistance. Try it, it’s simply amazing. But the price will not always perfectly bounce back from the moving average. Sometimes it will go a bit above before it starts going back in trend direction.

    Sometimes the price will simply explode through it all together. Some forex traders usually leap on two moving averages and buy or sell when the price is in the middle of the zone between the two moving averages.

    Does this really work?

    The logic behind why moving averages as support and resistance work are very similar to why price moves. Let’s say that the majority of traders use 10-days, 20-days. 50-days, 100-days or 200-days moving averages. So, what do you think, what can happen when almost 90% of them use all these five? Nothin special. But if they choose to use only one of them in expectation for it to operate as support or resistance? Yes, you’re right. The price will respect that. When more traders expect something to happen and they have a common goal, it will happen.
    Let’s examine this in the case of 10 and 20 EMAs that are providing support and resistance. What can you see?

    Can you see how the 10 and 20 EMAs are providing support and resistance?  These moving averages can be a powerful help but only if used with the right assembly factors. Let’s look at a setup where they unite several other factors.

    Can you see how the pin bar marked in the red circle rejected the 10 EMA and a key price action level both? We have a clear uptrend without resistance beyond this key level. This was an example of a great setup. Feel free to test it.
    The price will rarely bounce exactly, again, and again from the same moving average. Instead, it’s more efficient to form a support or resistance zone between two moving averages.
    When the price moves into the zone between the 20 MA and 50 MA, we should ask if a reversal is going to happen. That could be a danger zone, so it may be smart to hedge the position.

    How to use moving averages to lock in profit

    If you want to lock in profit, move up your stop level in your trend-following trade only if you have a clear signal of bounce from moving averages you use as support or resistance. That is one of the tricks for using moving averages as support and resistance. But you have to keep in mind that moving averages as support and resistance levels are just saying to us what’s going on at these levels. We still have to look out for additional signals and find them. 

    The truth is that if you add MAs you’ll have additional in-trade information that may help you to maximize your trades. But like everything in Forex, you’ll have no guarantees. Consider these averages as a tool in your trading toolkit that you can adopt and use to increase your trading success.

  • Online Tools for Stock Trading and Investing

    Online Tools for Stock Trading and Investing

    Online Tools for Stock Trading and Investing
    If you are risk-averse but want to become a successful trader and investor choose online tools for trading as an aid to reach your goals.

    Online tools for stock trading and investing must tell you the information needed to make a successful trade and provide you advanced research to boost your profit. By using online tools for trading and investing in the stock market, or any other market can streamline the whole process, from choosing a stock to exit with profit. For example, when the ups and downs, even small changes, in the market are present you’ll need a tool to time them. Some of these online tools for stock trading can be very useful, valuable, and profitable for beginners. 

    What online tools for stock trading to add to your trading toolbox?

    The most powerful tool is your knowledge of technical and fundamental analysis, that’s the truth. But some advanced technology can aid your trading. These online tools for stock trading are extremely important in your decision-making process, in buying and selling stocks. The technical analysis will show you the price trends of stock. So, you’ll need it to know to recognize trends for the particular stock to be able to decide will you buy it or not. But technical analysis isn’t enough. You’ll need more tools for stock trading.

    You’ll need fundamental analysis. This tool will help you to evaluate the company’s strength to grow further. This information is also very important before you make any decision on whether to buy or sell the stock.

    The importance of online tools for stock trading

    In fundamental analysis, tools for stock screening are a good starting point. When you pick the stocks and add them to your investment portfolio, you’ll need tools to track them and manage your portfolio.

    Tools for stock screening 

    Stock screening tools can identify companies according to your investment goals. They can provide you information about the company, industry, market capitalization. Stock screeners allow you a fast search for a stock based on the rules you’ve set. Almost all trading platforms have screeners. But you would like some with in-depth screening capacities that will help you to really recognize all trade opportunities. Also, you’ll need charts, market maps, and quotes. Moreover, by using them you’ll be able to examine revenue growth, valuation ratio, and many other ratios. 

    Portfolio tools

    For example, portfolio tools. They will allow you to maintain the balance in your portfolio. Let’s say, the small-capitalization stock has a strong run. What is the role of the portfolio tool here? It will allow you to cut that stock and allocate your funds to other assets.
    For technical analysis, the most important is to use interactive and advanced charting tools. If you use charts as one of the online tools for stock trading you can easily set trendlines and moving averages to determine the wanted pricing pattern. 

    Charting is essential for traders that use technical analysis. It gives them a possibility to evaluate past movements and to predict future performance by recognizing the patterns. When you can dig deep into the history of some stock, you’ll be able to understand when and why the stock was volatile, what forces them to move in a particular way. Some online brokers offer charting. When you do so you’ll be able to decide to buy or sell stock in an easy and trustworthy way.

    Take advantage of stock trading technology

    If you don’t use them, you are missing out maybe the best trade in your entire life. Everyone would like to boost returns. Some strong trading platforms could help you. Find a broker with a robust platform. Well, there can be some disadvantages. For example, brokers with superior trading platforms will charge you higher trading commissions. Maybe they will limit the number of trades, or demand the minimum number of your trades. Even more, some will require a minimum account balance to give you access to the platform.

    Traders-Paradise fully recommends TD Ameritrade. Read more HERE.

    Tools for idea generation

    You might have different ways to come up with trade ideas. But you can also subscribe to some online services. In this way, you’ll have market updates in real-time, which is extremely important. This kind of service will provide you previews to initial public offerings, reports about rising growth stocks, stock trends.

    Online tools for stock trading cover financial statements, company news, and reports that are written by experts. When you use them, you ‘ll have a precise idea of how the company is doing. Maybe you get some new trading ideas. The more analysis is available, the better.

    The other online tools for stock trading

    Choosing the right online tools for stock trading isn’t an easy task. You have to know what you want to get. Also, an important point is to recognize what you are not scared to lose. 

    But remember, not one tool will help you make an investment decision. Some online tools you should use to analyze your investments. For example, if you want to evaluate stock use assets valuation, discounted cash flow, P/E ratio, or EV/EBITDA (enterprise multiple) to determine the value of the company. Also, debt to equity, current ratios, and quick ratio are important tools. The next group of online tools for stock trading could be sales turnover, returns on equity and on capital, and assets turnover. All of them you can find also online. 

    Bottom line

    These are some of the online tools for stock trading used for estimating the position of the company. But there are some tricky parts. Even if the company shows great results in all criteria you apply, you still don’t have to invest in it. You’ll need more, let’s say, tools. That’s your ability, your sense, your guts, feelings. Someone said that trading is more an art, not a science. If you aren’t an artist in the trading, you’ll end up with the poor results from your trades. Relying on online tools only can be wrong, almost the same if you never use them. 

    We don’t want to say you’ll need an esoteric, spiritual knowledge, but you have to feel the spirit of trading. You must have it in your bones to be really successful. Otherwise, you’ll be one in a crowd. But you would like to be exceptional. Remember, trading or investing doesn’t lie in an Excel sheet or trading platform. It lies in your heart, lives in your mindset, survives in your mind. Don’t get us wrong, results, numbers, all that math, algos are important. But you must feel trading. You have to live it.

  • The Importance Of A Trading Journal

    The Importance Of A Trading Journal

    The Importance Of A Trading Journal
    If you want to become a successful trader you will do what is obvious, you’ll start keeping a trading journal. That will give you a lot of benefits.

    The importance of a trading journal isn’t arguable. A trading journal is helpful for every trader to track trades. Using a trading journal is one of the essential components for trading success. Even the most successful traders understand the importance of a trading journal and use it all the time.

    But still, some traders don’t understand the importance of the trading journal and use it inefficiently. The reason for doing so is quite hard to understand because using a trading journal is a great tool. Without it, you will not be able to execute your trades with higher efficiency. The importance of a trading journal is obvious if you know what kind of important data it can provide you. It could show you the info about what were the market conditions and you went through them, where you were panicked and wrong or had successful trades and under which conditions. Another importance of using a trading journal is that it can give you a clue for your future trading strategy since you have recorded your prior strategies.

    Keeping a trading journal is an exceptional strategy to improve performance and grow confidence in trading. Success in trading doesn’t matter if it is stock, options, forex trading demands a high level of planning and discipline. If you want to be successful in trading, you’ll need to go through a full learning process. And here we come to the importance of a trading journal, one of the best tools that will guide you and help to optimize your trading system and can drive you towards profitable trades.

    What is a trading journal?

    As we said, a trading journal is one of the most powerful tools for trade management. It is the place where you have recorded all your trades and you can always check for better output and for future trades. By using a journal you can track development as a trader but also examine mistakes you made when you enter or exit your trades. Without it, you cannot act. It is your best base for better future executions.

    The importance of a trading journal is that you have all data records ordered by the date with all trades that you ever take. You’ll have all entries, meaning every single trade ever taken. So, you’ll have a prompt overview of all trades you made, every entry and exit prices, the prices’ direction,  the size of all your positions, all trade results. Of course, you can add to your trading journal all data you want and find they can be useful for your trading success.

    Why keep a trading journal?

    The same as it is important to have a trading strategy, one or several of them, risk management, it is also important to keep a trading journal as a part of your trading plan.

    It is important to keep a quantifiable record of your trading performance and learn from past winnings and losers. However, past performance cannot predict future performance, but you can use a journal to learn from your trading history, to recognize the emotional actions, why did you or the price go against your strategy. So, your trading journal should include all your profitable trades, also unprofitable, market records, the reasons behind all your buying or selling the stock, and many other details. 

    At first glance, it looks very complicated and you may think it’s better to give up before even starting, but when you start it and recognize how beneficial it can be to keep a trading journal, you’ll stick with it throughout all your career. 

    What are the benefits?

    Your trading journal is the most important statistic of your trades. It keeps tracking your progress and it is by far the best way to estimate how successful you are. By keeping a trading journal you’ll have valuable feedback on your performances but also, you’ll have the patterns that will provide you important and accurate information about what you did well and what you have to change.

    As we mentioned above, it may seem like a complex work but in essence, a trading journal is a simple diary where you have to write down all your trades, the reasons behind them, and how it ended up. 

    We say the end is very important, we say it deliberately.

    If you plan to become a successful trader, all ends are important and should find their places in your trading journal. Never add only the winning trades or ignore the losing ones. You’ll need a valuable tool that will provide you accurate feedback into your trading method. That’s the main goal of keeping a trading journal.

    What traders do wrongly?

    There are several major mistakes (more about “option trading” mistakes in this article) in keeping a trading journal. Some traders will just add the stocks they trade but forget to write down how the trade ended, did they have the winning or losing trades. That is a common mistake that leads to keeping a journal incorrectly. You have to know whether you executed your trades in profits or losses and you’ll need that information documented later to recognize the patterns.

    Add to your journal what were your reasons before entry, where you placed the stop-loss, where was your target profit. Also, it is important to add how much risk you planned to take and write it down in money. The next step is to follow your own rules, right? That will show how you manage your trades.

    But let us explain why it is so important to add market conditions to your journal. If you don’t, there will be a great possibility to continue trading out the market context. Moreover, you’ll not be able to seek new approaches and ideas of trading. 

    More detailed explanation 

    If you have data about market conditions added to your journal you’ll be able to recognize the markets with a high possibility for more aggressive trades. In case you aren’t that kind of trader, you’ll just stay away because you’ll know when not to be in the market. On the other hand, if you like that kind of trade you’ll be ready to take a risk.

    Additionally, the trading journal will give you a great chance to monitor movements and risks, to recognize the strength and weaknesses in your portfolio. It will give a clear indication which stocks or other assets you trade well and which you don’t manage well. If you ignore this information you’ll not earn the money. It is more likely you’ll have consistent losses. What really you would like in such a case is to get your money back. 

    There is a difference between a bad trade and a bad stock and you have to realize that. Maybe the stock is quite good but you don’t trade it well. 

    The journal will show you which stocks you have to focus on.

    What things to add to your trading journal?

    The following are basics. 

    Add the stock price action before you enter the trade. It can be a one or two hours time frame. That will be the context in which you’ll open the position. Further, include a text note of your starting time to know if you enter the trade too early or too late. Also, why maybe you did miss some signals.

    One thing is also important and it is smart to add it. Add, it can be a kind of reminder, what are the market circumstances that could force you to stay away from trading or you missed the trade. When such a circumstance occurs, write it. Write down that you didn’t trade because of the news, for example.

    Write a note about the trends you saw. If you made a mistake, write it also. Do the same if you miss a trade or how many trades you made, make a note of it. Note how many winning or losing trades you had, calculate expressed in money how much you earned and loss, and write down the net result. But this method may have some disadvantages so it could be better if you, instead of money to use points for the futures, or cents for stocks, as well as pips for forex trades.

    Bottom line

    Keeping a trading journal makes a difference between amateur traders and professionals. Professionals understand the importance of a trading journal. You can count on a lot of benefits when you start keeping your trading journal. First of all, your whole comprehension of trading will be changed and you’ll get a better direction, of course. Moreover, you’ll be able to make progress from the very first day. You will have confidence and trust in your strategy and your skills when your journal backs you up with the statistics that verify that your strategy works.

    These are only a few benefits of a trading journal. If you want to become a successful trader just use this number one tool for professional traders. That will improve your trading.

  • How to Trade Stocks and Make Money?

    How to Trade Stocks and Make Money?

    How to Trade Stocks and Make Money?

    Everyone would like to know how to successfully trade stocks but only a few know how to do that. Here are some suggestions.

    There are not many people who know how to trade stocks and make money. Statistics confirm this. According to stats, only 5% of traders are successful. That means 95% of traders fail. Surprisingly, some stats show 80% of traders leave trading during their first two years. Moreover, almost half of all traders quit during the first month of trading. The other problem is that traders sell winners in a bigger percentage than losers.
    Profitable traders represent a tiny part of all traders with just 1.6% in the average year. Nevertheless, they are very active, the estimate is that they are accounting for 12% of all trading activities per day.

    Stock traders’ problems

    Maybe the biggest problem in the stock market is that traders don’t learn how to trade stocks and make money. They are gambling, to put it simply. Even when they are using some demo accounts or following elite traders, they use it to set up their trades automatically without a meaningful process or plan. We found an interesting thing, traders and investors usually overweight stocks in the industry in which they are working. That’s smart. That is the industry they know well, the companies are known to them too, so the probability of successful trades might enhance. But there can be some drawbacks too. The emotional approach to trade is one of them. Simply said, these traders may act as cheerleaders. That isn’t smart trading. Even if they have profitable trades, the percentage of such trades is small. Otherwise, there would be more efficient traders in the stock market. 

    Knowing these stats it’s understandable why traders fail. The trading decisions are not based on research or proven trading methods. They are based on emotions. Instead of learning how to trade stocks and make money, many traders view trading as a kind of game. Don’t hope to make millions with such an approach. It is more likely you will lose your shirt. Trading isn’t a game. On the contrary, it is a profession for which you’ll need skills, knowledge and continual education and development. It isn’t easy and no one should tell you it is. Hence, be careful of your trading decisions.

    How professional traders know how to trade stocks and make money?

    You might be questioning what professional traders know but you don’t. We are going to explain to you how to trade stocks and make money so you could act like a pro. It isn’t rocket science, actually, it is quite simple but we’ll need your full attention. 

    First of all, don’t think that becoming an elite trader is something you cannot achieve. You are just a few steps away from being that. All you need to unveil how to trade stocks and make money is just around the corner.

    So, let’s start!

    Successful traders usually don’t have any insider information that is unavailable to you. You can gather them also but the real question is why should you do that. In fact, all you need to have trading success is a small adjustment in how you think about trading. In simple words, it is all about your mindset. To become a successful trader you MUST change some of your trading practices if you want to know how to trade stocks and make money, of course.

    There is no secret recipe on how to trade stocks and make money

    Beginners in trading usually are looking for a secret and instant way to success. If you are not one of them, you probably don’t enjoy trading. It is possible you are looking for some tools that will guarantee the profit. Well, it isn’t wrong. There are so many tools out there. Many of them can make your life easier. But you have to love the trading process, even the charts reading and finding patterns. Yes, that isn’t the most exciting part of trading, some may say. But try to look at that from the other point of view. For example, finding just one good, steady, price pattern might enhance your trade and can be beneficial for a long time, maybe for your lifetime. 

    But let’s stay for a while on the subject of the joy of trading. The point is not to have fun (although you might have fun) but to understand what you are doing while trading and be ready to love it. There is no need to be an adrenaline addict but some dose of willingness to have excitement is necessary still. You have to understand the whole process, from the psychological perspectives, chart reading, to money management. And you have to love it. Otherwise, you will never succeed to become a really profitable trader. In other words, you need passion, knowledge, and tools.

    The importance of tools in trading

    When you start trading the stock market, you have to make three decisions: buy, sell, stay on the position. For that you need information. You have to know the stock historical performances. It is important to recognize the patterns. And that is exactly what one of the best books is giving to you. Let us introduce and recommend this particular one, the book The Two Formula: The Best Single Trading Pattern I Have Ever Used. This book doesn’t give you only theoretical knowledge. It is based on the personal experience of the author. That is the value per se. 

    What will you find in the book The Two Formula: The Best Single Trading Pattern I Have Ever Used?

    According to the author, Michael Swanson, the first time he used this trading pattern was in 1999. And how good this price pattern shows the fact he is using it for even more than 20 years. He reveals that just one single price pattern is quite enough for successful trading whatever you want stocks, funds, futures, commodities. Basically, you can use this price pattern for anything that you can draft on the technical charts. We have been reading a lot of books about trading. Also, we examined a lot of patterns but this particular one is extremely interesting. This trading strategy is completely unique. 

    Few words about trading strategies

    Essentially, a trading strategy is a method of buying and selling in the stock markets or some other markets. The trading strategy is based on rules that deem to end up with success in trading and in profit. So, most traders are guessing and trying to notice the bottom and the level where the price starts to go up in order to buy an asset in the hope it will rise further. The point is they are often wrong. Go back to the beginning of this article and you’ll see the stats. What do the majority of traders do? They are hunting price movement. But it very often turns into chaos. Why is that? They are not trading, instead, they are gambling, they place trades without a meaningful process. 

    When they see how big mistakes they have, traders use charts to figure out what is wrong and try to fix it. Sometimes they are spending hours, days even weeks, staring at the charts to predict how the price will go in the future by using technical indicators, a lot of them. And they are confused more and more. These complicated images can fry their brain but their trades will not become more successful.

    The simplicity of The Two Formula pattern

    For any trader, the simplicity of the pattern is extremely important. If you have too many indicators added to the chart you will have a blurred picture. The essence of profitable trading is to have a steady plan, something that really works when setting the position. You must have confidence in what you are doing and you have to know how your trade will end up. This “Two Fold Formula” book can help to achieve all of that.

    Where is the catch?

    This book shows how with a one price pattern setup you can make a profit while trading. Basically, it is a simple strategy and that’s why it is an effective one. Easy to understand, easy to use, without misunderstanding. Everything is explained clearly and smoothly and, what is most important, based on personal experience and proven. 

    Some traders have to lose, but you would have a chance to make a profit with this method. Any trade has only two ends: loss or profit. Why shouldn’t you profit? This may help you to trade like a pro. 

    Bottom line

    People are afraid of the risk, but these two formula pattern seems to be using some good indicators and a more “tuned” strategy. 

    Pro tip: use it with our preferred trading platform virtual trading system to see if it’s working before trying on real funds (68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money)