Tag: trading

All trading related articles are found here. Educative, informative and written clearly.

The Barriers to Learning About Stocks and how to avoid them

Be objective, don’t expect the success overnight, have reasonable expectations, think in all probabilities.

By Guy Avtalyon

First of all, never base your decisions on emotions, rumors, or rush to the next hot opportunity. This is one of the most influential barriers to learning about stocks.

You will end up losing money as a result. Some investors despite their problems, continue with the same actions and keep getting the same bad results.
Investors have to remove barriers on their path to success. Otherwise, success will never come. All investors must seek to continuously remove new barriers as they appear.

What kind of barriers to learning about stocks you may have?

Emotions

The fear and greed! Many investors experienced the obscure of ability to rationally consider through an investing opportunity. This leads to poor investment decisions and a loss of money.

For instance, it is in an investor’s best interest to sell high and buy low, investors hate to sell winners and are unwilling to buy out-of-favor stocks. Why so many investors hold winning investments too long? When they fall back, they continue to hold on to them, hoping they will return to their previous highs. They even lie that they will sell if the price returns to the level at which they bought it.

Also, there are investors who hold on to losing investments! Okay, they might be in love but why to hold for so long? They have some hope. If they wait and hold longer, their shares will recover. That might happen never.

They can sell to at least break even, very often such investors become losers. Because their capital is tied up in a losing investment and is unable to produce a return. This reduces account balances and expands stress levels.

Most investors admit that holding investments too long is the mistake that was most detrimental to their success.

Less knowledge

Some investors think if you just buy and sell the right stock, you will always make money.

That’s wrong! Totally mistake! Barriers to learning about stocks!

Sometimes, investors can have less understanding of how markets work. That drives stock prices and successful investing performance.

Also, so many investors tend to overestimate their strength to beat the market. As a result, they take on unnecessary risks. People are often drawn to powerful performance, even when it’s not sustainable.

Many investors follow the hottest sector and don’t have a sufficient understanding of the risks involved.

For instance, investors realize they should not overweight their portfolios with too much money in one investment, but they continue to do so. It isn’t rare that people buy too much stock in the company where they are employed, because the company’s available retirement funds and use of options as a part of their compensation package makes this easy.

Barriers to learning about stocks may leave investors with a portfolio that lacks diversification.

Some other investors don’t understand how bonds work, and they avoid them. Few of them realize that bonds hold a preferred position should a company declare bankruptcy.

Many others don’t realize that when interest rates rise, bond prices go down. When it comes to understanding important concepts such as how a central bank sets interest rates and the yield curve, even fewer investors have sufficient knowledge to make rational decisions.

And more interesting, most investors do not know when to sell a stock that has substantially appreciated. They continue to hold the stock instead of selling part of their position.

In that way, they could capture some of the profit and make capital convenient and available for other investments. They can’t realize that as the price of the stock goes up their portfolio becomes even more unbalanced.

The market has the ability to balance portfolios for investors, sometimes to their astonishment. Many investors are confused by the idea that rebalancing entails selling some of the investments that have performed best and buying more quality stocks that have lagged.

Losing the Bigger Picture

Despite many investors like to say they invest with a long-term perspective, they continue to make decisions based on short-term movements and ideas. Most investors believe that setting long-term goals for such things as buying a home or providing for retirement are important. But still, they fail to establish viable financial plans to do so.

Without these plans, their decisions are decaying. Basing decisions on unpredictable market fluctuations can be very dangerous because there is a good chance that these investors will make the wrong decision. That can obstruct their ability to achieve their long-term goals.

When the investors realize that the market has risen, they pour cash into stocks and mutual funds, trying to grab part of the profit the professionals have realized. When the market puts in a decline, some investors panic and sell close the bottom. And very often, this pattern continues, causing such investors to lose much of their capital.

How to remove barriers to learning about stocks

No matter what your barriers are, it is important to put together and plan to remove them. Here are some steps you can take to eliminate these barriers to your investing success. Experts advise doing this.

* Learn to monitor your performance: Measuring your performance creates a record of what has worked and what has not. This can help you to recognize problems that you repeat. You should record the overall market trend, the sector trend, the reason for making the trade, the exit target, and the trailing stop. Do this for each trade no matter if you sell or buy. This record is very useful in evaluating your investing activities and can be used to identify what barriers you are meeting that obstruct your success.

* After you have measured your actions, you can identify what you have to change: Inspect your past tradings and find patterns that show to barriers to success. Maybe you impulsively buy the next stock without thinking? Does your explanation prove to be wrong most of the time? The key is to identify the investing behavior that inhibits your performance.

Stay focused and avoid barriers

* Stay focused on what you need to change. Like any effort to change behavior, you must remain focused on the actions you take to reinforce the investing behavior you wish to have. If you think you are not focused on how to change your behavior, then take a break from your investing until you recover your focus.

* Determine how you will understand your losses. Keep in mind that losses are part of investing. Learning how to deal with them is one of the most important pieces of successful investing behavior. You have to define what your loss looks like through your stop loss and reasons for the trade. You must accept the loss as part of the trading. Accepting a loss is a trading skill that is a crucial behavior. Making a losing trade ahs to be an acceptable process in your trading strategy, you’ll eliminate the emotion and fear that comes from a loss. You’ll jump to the next opportunity without fear.

* Become an expert at one investing strategy: There are many ways to evaluate the market and select stocks that offer good investment opportunities. Don’t try to understand every perspective on a stock. It is best to get to know one reliable investing strategy. In that way, you will gain confidence in your investing access. This knowledge will form a valid base for your investing. And when you become an expert you can expand your knowledge base by adding a new approach.

Think twice to avoid barriers

* Think in probabilities: The market is in permanent movement. It forces the investor to continually evaluate the risk-reward ratio of each opportunity. You can’t move the market, that’s why you need to rate what is the greatest possibility that will move the market, key sectors and the stocks you are watching. Evaluating what is most possible to happen in the sense of probabilities could help you to make a valid investing estimation.

* Learn how to be objective: Many investors want to believe that the market will do what they think it should do, rather than what it actually does. Any limits you place on the market will usually turn out to be wrong. The market does what the market does. Investors are best served if they maintain an objective perspective. If you are neutral, then you will not feel any pressure to move quickly. You will not be afraid to make an investment decision. And the most important, you will not force your opinion on the market, but rather sense what the market is trying to tell you.

Do not expect this to happen overnight. Removing the barrier is a long-term process. But if you have a defined plan, you will be able to create a program to remove the barriers that keep you from achieving success as an investor.

31st August 2018
How To Start Trading?
Trading the stock market is easy if you know how to start.

By Guy Avtalyon

How to start trading? First of all, never do it on your own. Ask to be advised by some experts. It is always best to access a financial advisor who will tell you how you should invest or trade, established in your financial situation, and risk appetite. Talk to others who invest.
Read books, journals, and newspapers for recommendations. You can talk to your stockbroker for advice but don’t listen to everything he says.
Always take a second opinion as brokers might have vested interests. In the beginning, it is best to go for known brands and big companies that have a good business status.

What do you need to know before you start trading?

Without knowledge, you may feel lost. Let’s make clear the basics because you’ve decided to join the crazy world of trading stocks and shares.
You have to know that shareholders usually have a right to vote at company conferences.

Of course, if you own just one of the three billion Facebook shares don’t expect Mark Zuckerberg to listen to your ideas!
Another thing you need to know is that a company’s shares are indivisible.

You cannot buy fewer than one share.

Shares were pieces of paper that shareholders kept in a safe but since the ‘90s, this all changed to virtual shares. Before you start trading stocks, you have to buy them! You can do this in many different but easy ways.

Some companies allow you to buy their shares directly from them but If you can’t purchase the shares directly or you’re not sure which company to invest in, ask your bank. Also, banks offer an online trading service connected to your existing accounts.

Ask your bank to see if this option is possible. If your bank doesn’t offer a trading service, you can buy shares through a brokerage company. You can find many of trusty brokerages, just do a search. But be cautious. Never pick the first you find, read some reviews, ask around, visit forums.

Brokers buy and sell securities in exchange for a commission. You can set up a simple brokerage account online or hire a so-called ‘full-service broker’ who will trade stocks on your behalf. They can be a consultant or advisor for you. This will cost a little more but it is worth it because you know nothing about shares or stocks or trading or investing.

How to start trading?

So, you want to start trading stocks or CFDs, but you have always remembered three things:
1. Never invest more money than you can afford to lose. With shares and CFDs, there is a risk of losing all the money you have invested.
2. Follow your head, not your heart. Your heart will always pull you towards certain stocks. Stop and think. Only invest in companies that seem able to grow their profits, despite your emotions.
3. Never invest your savings in just one company. ‘Never put all your eggs in one basket,’ as the mantra goes. Place your investments across many different companies.
This way, you’ll significantly decrease the risk of loss, and increase the chance to multiply your investment.

When you set up your online broker account, simply take the leap and make your first trade.

Start with small, 1, 10, or 20 shares that will serve its purpose and bring you in the game.

If trading with real capital isn’t viable, start with a simulator for virtual trading. Numbers of different online brokers offer virtual trading for practicing and learning.

It’s too easy to lose money in a stock exchange, so start with a virtual where the money is virtual, but the stocks, stock prices, are real. Maybe the best way is to start your trading journey with virtual money, understand how they are performing, recognize when you can sell them, is it the right time, etc.

Before you start putting your real money, you would learn the tricks of the trade with virtual money. Take it slow. You’ll need time to understand everything. Not even the most experienced traders know everything. Most important for beginners in trading is to have a trading plan, trading strategy, and to stick to them. Also, never forget to keep up your trading journal. That is an amazing tool. Add to it all your entries, exits, price of assets you trade, at which price you bought it, and at which you sold it. That will provide you a full picture of how successful your trades were. Do it with virtual trading in a demo account, also.
28th August 2018
Are we witnesses of the historical period on the stock market?

1 min read

Is this really the historical period on the stock market?

Longest Bull Market in History?

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

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

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

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

Historical period on the stock market?

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

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

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

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

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

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

What is historical here?

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

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

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

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

Till then: Markets go up, markets go down.

Risk Disclosure (read carefully!)

22nd August 2018
How to research and choose stock?

Here you’ll find a full explanation on how to research stock.

By Guy Avtalyon

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

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

How to perform a technical analysis

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

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

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

Use patterns as a tool on how to research stock:

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

The low boundary is called “support.”

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

The most usual is “head and shoulders.”

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

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

What is the difference between a trader and an investor?

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

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

What orders do traders use?

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

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

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

What is short selling?

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

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

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

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

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

21st August 2018
Trade in Indian stock market and win in the markets
To trade in India, you must have an exit strategy. And hesitancy isn’t helpful.

By Guy Avtalyon

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

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

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

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

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

In India, the broker must be SEBI certified.

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

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

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

What should your plan have?

How to trade in the Indian stock market?

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

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

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

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

HOW TO MAKE YOUR RISK MANAGEMENT

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

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

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

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

Why trade in the Indian stock market

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

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

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

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

What can help you to trade in the Indian market?

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

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

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

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

Because leverage is used this is more important in trading.

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

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

Trading vs Investing

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

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

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

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

By refusing to sell short you forgo huge opportunity to make money when the markets are in bear zone.
Keep in mind, money can be made in 2 ways when trading:
1. Buying Low and Selling High!
2. Selling High and Buying Low!
The hardest thing in the financial markets is the ability to consistently execute the plan with strong discipline.

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

Whoever does it has wealth.

Trading and Investing are essentially connected with human emotions.

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

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

What is the math of profit

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

Reduce costs, profits will automatically increase.

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

And you have to go with the trend.

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

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

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

And read about the best Indian investors.
19th August 2018
How To Learn About Trading and Master it?

1 min read

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

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

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

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

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

The first step on how to learn about trading

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

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

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

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

The first called fundamental analysis and second called technical analysis.

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

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

Technical analysis

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

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

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

Before you enter the trade

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

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

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

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

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

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

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

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

The bottom line

In conclusion, educate yourself about financial performance indicators.

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

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

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

Risk Disclosure (read carefully!)

16th August 2018
What are the basic types of Forex trading?

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

Guy Avtalyon

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

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

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

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

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

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

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

Reversal trade
Breakout trade
Pullback trade

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

What are the basic types of Forex trading?

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

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

What is REVERSAL TRADE?

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

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

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

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

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

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

BREAKOUT TRADE is one of the basic types of Forex trading

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

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

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

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

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

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

PULLBACK TRADE

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

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

As you can see, a pullback trade is characterized by a retracement, often to the previous support or resistance zone.

Take a look at the chart above!

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

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

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

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

How to use the basic types of Forex trading

Look at the top of this post.

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

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

”Did I make this as well as I could?”

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

15th August 2018
How to Buy Stock Options??

Buying and selling stock options isn’t just new territory for many investors, it’s a whole new language, new world.

By Guy Avtalyon

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

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

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

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

How to buy stock options

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

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

Let’s go step by step:

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

Are there the options for all and every stock?

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

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

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

Are options frequently traded on the most stocks?

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

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

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

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

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

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

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

What are the main characteristics of call options?

– The security on which to buy call options.

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

– The number of options contracts to buy.

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

– The strike price.

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

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

– The trade amount that can be supported.

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

– The expiration month.

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

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

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

–The price to pay for the options.

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

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

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

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

– The type of order.

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

14th August 2018
Successful Forex traders – What are the characteristics of them?

2 min read

As we know almost 95% of Forex traders fails. But 5% have success.

So what is it that puts these traders in the top 5 percent?

Typical reasons such as experience, discipline, and fortitude?

We’ve all heard about that. But what is it that really makes them spot?

In this article, I’m going to analyze lesser-known characteristics that successful Forex traders have in common.

When I say successful Forex traders I mean consistently profitable.

Let me be crystal clear.

So many people talk about whether anyone can consistently profit from trading Forex.

I know because I made big research for finding proof on the internet. I found articles, testimonials, videos… And what I found is that is the truth.

Anyone can make consistent profit trading Forex and don’t ever let anyone tell you something different.

And what did I find?

What’s the secret to success?

I have to say, the only secret is that there is no secret.

But there is a piece of advice that will fully determine whether or not you are profitable. It’s a kind of habit.

Every single successful Forex trader has it in common, and it’s not something you can negotiate.

Successful traders never give up!

I know because I found the stories.

The ones about how some man tried for 3 years to make this Forex thing work, but with poor result. And he thought he just wasn’t for it. He failed because he didn’t recognize that his breakthrough moment was waiting for him just around the corner.

That is the problem.

There are so many traders who were fighting for years and suddenly took a break just before they made progress.

I know, they were exhausted by a large number of failures. But if they had a couple of trades more, they would have succeeded.

Never give up! This applies to all important things in life, but it’s never been truer than it is when it comes to becoming a successful Forex trader.

They don’t “lose”

Ok, every Forex trader has losses. That’s true.

But, there is some difference between how the novice trader loses and how the successful Forex trader loses. What makes this difference?

In one word – mindset.

Most novices in the Forex market view a loss as a bad thing.

Oh, no! It’s only one step on your way to winning.

The successful trader doesn’t view it as bad or wrong. It’s not a penalty because the Forex market isn’t able to do such things.

Forex market doesn’t know where you entered the market or where your stop loss was.

So, where you find a possibility to be punished? Nowhere, it is completely impossible.

Yes, I know! Making money is much more enjoyable than losing money.

If your trade doesn’t go your way doesn’t mean you should take it personally or emotionally. Stop to think like this and prevent this hole to be deeper! The successful Forex trader has the mindset that a loss is simply feedback.

Losses are useful, they are very good teachers, they can be a powerful way to learn. Even a trade that ends up as a loss can be the right decision. How is that possible? If you’ve defined your edge, and the setup met all of your criteria to enter the market, then you did all you can do. The rest is up to the market. But some days the market just doesn’t play along. It isn’t your fault.

Instead of giving up, you should ask yourself “would I take this same setup again next week if it presented itself?”

If your answer is YES you are on the right path. But every time your answer is NO, you need to take a step back, figure out where something went wrong and correct it for the next trade.

Each loss is an investment in your trading education. This is a constructive way of spending your own money. It is an investment with the best Forex trainer in the world – the market.

They use price action

Actually, they are using some form of price action as part of their trading strategy. Because price action plays a major role in any strategy.

It can develop and make stronger any trading strategy by providing areas to watch for potential entries as well as profit targets.

A successful Forex trader has defined edge.

Why the edge is so important?

An edge is everything about the way you trade. An edge can help you to put the odds in your favor.

Edge is a combination of the time frame you trade, your risk to reward ratio, the key levels you’ve identified, the price action strategies you use, etc.

It is also important for your pre and post-trade routine. How do you handle losses or what do you do when you win? All of this, make up your trading edge.

You don’t have to master all of these factors that make up your edge at once or to start putting the odds in your favor.

It is better to master one set of factors and then leisurely expand to others to further clarify your edge.

This should be the favorite way to learn. Become a master of two or three factors. You’ll find much less stressful than trying to become good at twenty factors. When you’ve mastered three or four things, expand the others to put together the odds in your favor.

Successful Forex trader never tries too hard.

Because the successful forex traders know, trying hard is a sign that something isn’t right. Trying to force a trading strategy to work will only lead to destructive behavior, such as emotional trading.

I remember the story of my friend when he first started trading Forex. He was spending countless hours studying setups. He spent hours and days and weeks doing so, ending up taking a completely different trade setup only to watch the original setup move in the intended direction without him.

He was trying too hard to make it work. As soon as he stopped over-analyzing trade setups and trying to make them work, his profit curve started to rise.

Now he is spending 20 minutes per day looking at his charts.

They think in terms of money risked.

You’ve never met a successful Forex trader who didn’t know how much money they were risking on any given trade.

Surprising, the small number of traders don’t think about how much money is at risk before opening a trade. This is because they’re using an arbitrary percentage to calculate risk, such as one or two percent of their trading account balance.

The trader’s only interested in how much money is at risk – they could care less about the percentage. They always define their risk in terms of money.

They may use a percentage as an entrance of how much they’re allowed to risk, but when it comes to fully accept the risk before putting on the trade, they think only about money.

And successful Forex traders know when to walk away.

Walking away can be especially difficult after a trade. Our emotions are running wild and often take the best of us. Taking a break after a win will allow your emotions to settle. After the win, you may feel excited and proud of yourself.

Yeah, you have every right to be. But pride and excitement are inadmissible in the Forex market.

After a loss, you can go straight to the trap if try to go through the charts again looking for a new setup. Remember, your loss in some trade is just feedback. Take it as a signal to look at what you could have done differently. Successful Forex traders never do that.

The key to becoming successful isn’t about eliminating emotions after a loss, it’s about channeling them in a way that will make you a better trader.

And let’s go to the top of this article.

The only way you can fail at becoming a successful Forex trader\ is if you give up. The next time you lose a trade just remember that not giving up is the #1 key to becoming a successful Forex trader.

And you know what?

Becoming a successful Forex trader is a marathon, not a sprint. So, keep it in your mind!

Risk Disclosure (read carefully!)

8th August 2018
Entry Trading Strategies That Make It Easier – Forex Trading

2 min read

Entry trading strategies can be very complex but simple too. Forex traders have many activities working against them, and among them, the biggest enemy is – traders themselves. Basic mistakes, lack of planning and weak or ineffective strategies, are the major cause of high forex failure rates.

One of the trader’s mistakes is entry trading strategies complexity.

The best entry strategies are those that are simply designed and simple to perform. The biggest enemy of effective trading is complexity. You should never identify complexity with quality. If you think the more moving parts in a strategy can give you the greater chances of profit, you are totally wrong.

For example, you have an entry signal that has a 10 point checklist to trigger. And you want to apply that in live trading on a minute chart.

What are the chances that you can keep track of all 10 checklist criteria?

If you can’t identify that trade in real time, you will gonna miss it.

And it will cost you money.

What this means is, complex strategies lead you to missed trades.

Your forex entries will be more effective if you keep them simple. Stay stick to this wisdom and you will be able to create a durable forex strategy.

The second enemy in your entry trading strategies can be the timeframe.

Jumping from timeframe to timeframe in order to find the perfect one is not the most effective way. Also, many traders choose the first one that grabs their attention – wrong too. Forex time intervals are a personal choice connected with trader’s character, personality, and nature.

If you are impatient you would like to see your trade spread rather soon than later. And you wouldn’t wait for trades that take a long time. That means that faster timeframes suit you better.

But faster timeframes also means you have to stay more engaged so you don’t miss key setups. And be careful, every extra second is a chance to do something emotional, like move a stop or take profits too early.

The faster the timeframe, the less chance for mischief.

But maybe the slower timeframe better suits you.

Maybe you enjoy to plan and manage the trade with less furious tempo. Slower timeframes give you time to think.

That can be a great advantage if you like having time to analyze.

Especially if you want to put on more than one trade at the same time.

Slower timeframes may give you more time to manage trades and perform them well. With longer time frames, you have more spare time.

No timeframe will ever be perfect.

If you choose well, it can be a good match for your trading style. And most importantly, you’ll have taken a step towards your own Forex strategy.

One of the most important aspects of any trade is its size.

This represents the amount of money in initial size and in total risk.

General truth in trading is to keep your risk small and constant.

Where is the point if you win on 3 trades making $400 each and if the fourth one loses $5000.

Forex is the market with the greatest ability to sizing money risk. But only if you plan ahead. If you want to risk $1000, make sure you size your position to risk $1000. Don’t try to sensate your way into a trade.

Decide up front the maximum it will cost if it goes against you.

Sizing control is a fantastic attribute of the Forex market.

But this attribute can be a benefit if used in the right way. You have to plan ahead to cap your risk at the right level. If you do this right, your Forex entries will be more in good shape.

And start with fixed outcomes. A fixed outcome is a pre-set plan for how you will exit a trade and usually it comes in as stop limit or profit taking the order. A fixed outcome is a pre-set plan for how you will exit a trade and usually it comes in as stop limit or profit taking the order.

The fixed outcome will reduce the risk of changing your mind and moving the stop to take on more risk, your profit aim will be set and you can relax without wondering when to take profits. It’s a good habit in case something drags you away from your screens. Your trade can function without you right from the start. Fix your outcomes in order to cut down impulsiveness in your trading.

Forex strategies can be a great deal simpler and more effective than many traders make them.

If you have not yet mastered a trading method, you will not be able to get good entries into the market. Thus, the first step is taking some time to get proper training in an effective trading strategy. Find some good one!

And good luck!

Risk Disclosure (read carefully!)

26th July 2018