Money, Cash & Finance

Technical analysis of the stock market, or any other market such as Forex, futures, is how most traders and investors make their trading decisions. This is as opposed to fundamental analysis which most people more agree is pretty much done as a way of making trading decisions, unless of course you are Warren Buffet!.

You only have to think back to recent stock market scams like Enron to know that it is almost impossible for the average, and even very sophisticated fund manager or hedge fund trader to really know what the real financial state of a company is.

Just by reading the balance sheet and other quaterly reports they release gives you a very poor insight into the real health of the company. Whereas the technical analysis charts of the company tend to give the real picture of what the market thinks of the value of the company. In the case of Enron even simple technical analysis told you to SELL when the stock was in the $80-90 range, this is why technical analysis of stocks is so popular.

So what are the secrets to technical analysis?, I’m about to tell you, here are my golden rules:

* Only use 3-5 simple technical analysis indicators

* Make sure that you understand how the indicators that you have selected work, what the parameter settings are and in what market conditions they are effective

* After selecting your indicators and parameter settings don’t mess with them.

The real secret to technical analysis is to become VERY familiar with your choosen indicators, and really this can only be done by watching and studying the market, so that you get to the point that you TRUST them.

The fact is that in any market, for each bar period, there are only 5 pieces of information, the open, close, high, low and volume, yet there are now hundreds of indicators. Most of these indicators are displaying much the same information and so are redundant.

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

But the way I use them is quite special, to learn more about how to become an expert at technical analysis visit:

Top Dog Trading Review

Bonds are one of the main stream types of investment along with stocks and real estate, and if you want to learn how to trade bonds make sure that you get a good education in the subject 1st. There are certain things you must understand about bonds before you start investing in them. Not understanding these things may cause you to purchase the wrong bonds, at the wrong maturity date.

Like all investments it is important to learn about what you are investing in, and certainly don’t just take the advice given to you by a bond seller without checking it out 1st yourself. The three most important things that must be considered when purchasing a bond include the par value, the maturity date, and the coupon rate.

The par value of a bond refers to the amount of money you will receive when the bond reaches its maturity date. In other words, you will receive your initial investment back when the bond reaches maturity.

The maturity date is of course the date that the bond will reach its full value. On this date, you will receive your initial investment, and the interest that your money has earned.

Corporate and State and Local Government bonds can be “called” before they reach their maturity, at which time the corporation or issuing Government will return your initial investment, along with the cash that it has earned thus far. Federal bonds cannot be “called”.

The coupon rate is the interest rate that you will receive when the bond reaches maturity. This number is written as a %, and you must use other information to find out what the interest will be. A bond that has a par value of say 00, with a coupon rate of 5% would earn 0 per year until it reaches maturity.

Because bonds are not issued by banks, many people don’t understand how to go about buying one. There are two ways this can be done.

You can use a broker or brokerage firm to buy them for you or you can go directly to the Government. If you use a broker, you will more than likely be charged a commission fee. If you want to use a broker, you should shop around for the lowest commissions!

Purchasing directly through the Government isn’t nearly as hard as it once was. There is a program called Treasury Direct which will allow you to purchase bonds and all of your bonds will be held in one account, that you will have easy access to. This will allow you to avoid using a broker or brokerage firm.

More advanced traders may try to buy and sell bonds to take advantage of the price movements, you can even swing trade them. But this is a very risky business if you don’t know what you are doing, you will need to take a swing trading course if this was something that wanted to, but again most people just buy and hold.

Although it may seem obvious to most stock market traders there are a number of simple rules that you can follow which will ensure that you have more success when buying stocks:

In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These stock indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.

For example the DOW30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).

Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to quickly buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered very liquid it should trade at least 500,000 shares per day, ideally even more.

It is best to aviod stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008/9 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime.

Another consideration to make is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option inorder to protect your stock.

Be very cautious about buying a stock just before it’s earnings are released, stocks often drop significantly if they come out with a poor report. Earnings releases are 4 times a year with one of them being the annual report.

If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.

Technical analysis of the stock market, or any other market such as Forex, futures, is how most traders and investors make their trading decisions. This is as opposed to fundamental analysis which most people more agree is pretty much done as a way of making trading decisions, unless of course you are Warren Buffet!.

You only have to think back to recent stock market scams like Enron to know that it is almost impossible for the average, and even very sophisticated fund manager or hedge fund trader to really know what the real financial state of a company is.

Just by reading the balance sheet and other quaterly reports they release gives you a very poor insight into the real health of the company. Whereas the technical analysis charts of the company tend to give the real picture of what the market thinks of the value of the company. In the case of Enron even simple technical analysis told you to SELL when the stock was in the $80-90 range, this is why technical analysis of stocks is so popular.

So what are the secrets to technical analysis?, I’m about to tell you, here are my golden rules:

* Only use 3-5 simple technical analysis indicators

* Make sure that you understand how the indicators that you have selected work, what the parameter settings are and in what market conditions they are effective

* After selecting your indicators and parameter settings don’t mess with them.

The real secret to technical analysis is to get VERY familiar with your choosen indicators, and really this can only be done by watching and studying the market, so that you get to the point that you TRUST them.

The fact is that in any market, for each bar period, there are only 5 pieces of information, the open, close, high, low and volume, yet there are now hundreds of indicators. Most of these indicators are displaying the same information and so are redundant.

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

But the way I use them is quite special, to learn more about how to become an expert at technical analysis visit:

Top Dog Trading Review

There is a lot of hype surrounding options trading, and for good reason, it’s a good way make a lot of money fast, or can be used to grow your capital consistently month after month.

There’s also a lot of hype about how complicated it is to learn and why you need to spend thousands of dollars on options trading education before you get started. Needless to say this last statement usually comes from trading seminar companies trying to sell your their trading course on options.

Lets cover a few of the basics about options and set you straight about a few important points. Firstly yes it is true that you can make a lot of cash trading options, but of course you can also lose just as fast.

When trading stocks your leverage is 1:1, if you go on margin you can get get 1:2 leverage, but thats about it. With options it is not quite as straight forward to calculate the leverage but generally speaking you can get between 1:5 and 1:10 when you buy an option on a stock, or ETF.

So with 1:10 leverage, when the stock increases by 5% your option can increase by approx 50%, and this can happen in just a few days, this is why swing trading strategies using options on stocks is so popular.

However the downside is that the reverse can happen, if the stock drops by 5% your option can also drop by 50%, at which point you may want to close the trade and save some of your option value, it really depends on what your stop loss and risk management plan is.

What I’ve described above is called directional option trading where you are betting on the getting the direction of the stock movement correct, this is highly speculative. Options can also be used in option strategies which are much more non-directional, such as covered call trades, credit spreads and Iron Condors. In these trades there is much less dependance on getting the stock direction correct, but it still matters.

So should you trades options?, in my opinion you should not do directional option trades until you become an expert stock trader 1st. This is because you really need to be very precise with your entry and exit strategy and trading plan, and be very good at technical analysis.

Whereas if you want to do non directional option trades you don’t need to be such an experianced stock trader to be successful, but of course it does not hurt either.

Learning how to trade options is a very useful skill you have, but don’t rush into it and blow out your account. Make sure that you get a good options trading education before you start, and also make sure that you have a very solid stock trading education as well, such one from Top Dog Trading Review.

Bonds are one of the main stream types of investment along with stocks and real estate, and if you want to learn how to trade bonds make sure that you get a good education in the subject 1st. There are certain things you must understand about bonds before you start investing in them. Not understanding these things may cause you to purchase the wrong bonds, at the wrong maturity date.

Like all investments it is important to learn about what you are investing in, and certainly don’t just take the advice given to you by a bond seller without checking it out 1st yourself. The three most important things that must be considered when purchasing a bond include the par value, the maturity date, and the coupon rate.

The par value of a bond refers to the amount of money you will receive when the bond reaches its maturity date. In other words, you will receive your initial investment back when the bond reaches maturity.

The maturity date is of course the date that the bond will reach its full value. On this date, you will receive your initial investment, plus the interest that your money has earned.

Corporate and State and Local Government bonds can be ‘called’ before they reach their maturity, at which time the corporation or issuing Government will return your initial investment, along with the interest that it has earned thus far. Federal bonds cannot be “called”.

The coupon rate is the interest rate that you will receive when the bond reaches maturity. This number is written as a %, and you must use other information to find out what the interest will be. A bond that has a par value of $2000, with a coupon rate of 5% would earn $100 per year until it reaches maturity.

Because bonds are not issued by banks, many people don’t understand how to go about buying one. There are two ways this can be done.

You can use a broker or brokerage firm to buy them for you or you can go directly to the Government. If you use a broker, you will more than likely be charged a commission fee. If you want to use a broker, shop around for the lowest commissions!

Purchasing directly through the Government is not nearly as hard as it once was. There is a program called Treasury Direct which will allow you to purchase bonds and all of your bonds will be held in one account, that you will have easy access to. This will allow you to avoid paying a broker or brokerage firm.

More advanced traders may try to buy and sell bonds to take advantage of the price movements, you can even swing trade them. But this is a very risky business if you don’t know what you are doing, you will need to take a swing trading course if this was something that wanted to, but again most people just buy and hold.