I'm sorry for the readers of my Explosive Stocks Trading Systems blog. I'm not quite sure what happened, but somehow my blog got hacked or something. I believe the email address that allows me to publish via email was hacked and used to spam. I tried recovering it but I could not do so successfully. So my 300 posts or whatever the heck it was is gone wihout a way to recover it.
However, I was fortunate enough to recover my URL.
Additionally, in the meantime I've been working off my own domain name talking about stock, trading, investments and other things such as trading systems.
I will try to reconstruct the posts to the best of my abilities on this blog, but in the meantime be sure to check out the following website.
http://stocktradinginvestments.com/
Thanks.
update: I had about 300 posts on my old blog. The bad thing is I won't get anywhere near as many back. The good news is Archive.org is going to allow me to go back and get a handful, and I also will be able to identify several post titles there and try to reconstruct them on my own. Should not be fun to redo everything but it must be done.
Wednesday, October 27, 2010
Monday, July 12, 2010
we went bear hunting today at lightning
Wow... we sure got a lot of bear hunting in today... Since the Dow went up nearly 300 today, I guess we need to speed things up...
This video seems much more appropriate than the first one.
note: This was one of the fraction of the 300 posts I had that I was able to recover thanks to archive.org
This video seems much more appropriate than the first one.
note: This was one of the fraction of the 300 posts I had that I was able to recover thanks to archive.org
Wednesday, March 17, 2010
penny stocks to watch
Penny stock to watch – penny stocks offer investors ways to trade, buy, or sell stocks. Investors can invest $1 and get a turnaround of $35. The risks however make it harder for investors to earn money. Hot penny stocks to watch should be considered because you can stay alert to the shifts in the stock markets. The trading industry is one of the largest growing businesses on the market. Penny stocks are making its way in stocks since people are drawn to the low startup costs to get into the stock market. Yet...
...although investing in the penny market is reasonable, there are risks involved. Learning which penny stocks to watch for can help you reduce those risks. People often confuse stocks that are penny stocks with having upside. company is worth $10 million it can double to $20 million easier than a $100 billion dollar business can go to $200 billion. So a $1 stock must go to $2 quicker than a $100 stock can go to $200. But that's flawed logic. Stocks are priced based on their market cap divided by shares. So a $100 billion dollar company could be selling at $1 per share or 1 share of $100 billion. What people are generally looking for is not a penny stock but a small cap stock. Actually, generally the penny stock buyers are the "lotto ticket" type that just want to buy a dream. In reality, these people would be better making intelligent decisions with regards to which stock to buy, and buying stock options instead out of the money. This way they still have the extreme high risk high reward and they can still spend a small amount of capital while taking that risk.
stocks to watch 2010
According to the latest stock news, Potash Corporation of Saskatchewan Incorporation (POT) Shares is in the break out mode. It is predicting that in 2010 the company’s sales will increase. It is a forecast that tells investors that it is time to become a shareholder since the market is warm.
Apple (AAPL) is another company that is increasing sales during 2010. The iPhone market in particular has already increased per quarter. This means that more Apple, Mac sales will occur this year. It would be easy to gain around 30 to 50 percent by investing in Apple’s company.
General Electric (GE) is doing well also. GE is one of the most recommended companies to invest in because it is safer. They have already hit over $15 in stocks and expect to increase to $8 more this year.
GMCR (Green Mountain Coffee Roasters) is growing in the stock shares. The Keurig coffer marker is a hot item. This is another hot small cap stock to watch. Since the company allowed Wal-Mart to sell their coffee marker, and since they bought the Timothy coffee marker and made it available in Canada, there has been a battle in bidding amid GMCR and Peet’s coffee maker. Current trading for GMCR is over $60. Some people are projecting it will hit $90 this year.
Other stocks to watch in 2010 include Citigroup © and Research in Motion (RIMM). Citigroup may reach up to $7 during 2010. This means that it could gain as much as 80 or 100%.
RIMM shares are in the low 60s at this time since Black Berry struggles against competitors. The company is trading at around 13 times the 2010 earnings. It is projected that it will increase to $90.
Penny stocks are claimed to be riskier than other stock marketing. Thus, if you have not gotten in on the latest penny stock news now is the time to get started. This is a few of the hot stocks for 2010, but we recommend that you go online and so some more research if you plan to become an investor.
Other companies you may want to research or put on your penny stocks to watch list is Sirius XM Radio (SIRI) and Cell Therapeutics (CTIC). These companies are projected to do well this year also.
...although investing in the penny market is reasonable, there are risks involved. Learning which penny stocks to watch for can help you reduce those risks. People often confuse stocks that are penny stocks with having upside. company is worth $10 million it can double to $20 million easier than a $100 billion dollar business can go to $200 billion. So a $1 stock must go to $2 quicker than a $100 stock can go to $200. But that's flawed logic. Stocks are priced based on their market cap divided by shares. So a $100 billion dollar company could be selling at $1 per share or 1 share of $100 billion. What people are generally looking for is not a penny stock but a small cap stock. Actually, generally the penny stock buyers are the "lotto ticket" type that just want to buy a dream. In reality, these people would be better making intelligent decisions with regards to which stock to buy, and buying stock options instead out of the money. This way they still have the extreme high risk high reward and they can still spend a small amount of capital while taking that risk.
stocks to watch 2010
According to the latest stock news, Potash Corporation of Saskatchewan Incorporation (POT) Shares is in the break out mode. It is predicting that in 2010 the company’s sales will increase. It is a forecast that tells investors that it is time to become a shareholder since the market is warm.
Apple (AAPL) is another company that is increasing sales during 2010. The iPhone market in particular has already increased per quarter. This means that more Apple, Mac sales will occur this year. It would be easy to gain around 30 to 50 percent by investing in Apple’s company.
General Electric (GE) is doing well also. GE is one of the most recommended companies to invest in because it is safer. They have already hit over $15 in stocks and expect to increase to $8 more this year.
GMCR (Green Mountain Coffee Roasters) is growing in the stock shares. The Keurig coffer marker is a hot item. This is another hot small cap stock to watch. Since the company allowed Wal-Mart to sell their coffee marker, and since they bought the Timothy coffee marker and made it available in Canada, there has been a battle in bidding amid GMCR and Peet’s coffee maker. Current trading for GMCR is over $60. Some people are projecting it will hit $90 this year.
Other stocks to watch in 2010 include Citigroup © and Research in Motion (RIMM). Citigroup may reach up to $7 during 2010. This means that it could gain as much as 80 or 100%.
RIMM shares are in the low 60s at this time since Black Berry struggles against competitors. The company is trading at around 13 times the 2010 earnings. It is projected that it will increase to $90.
Penny stocks are claimed to be riskier than other stock marketing. Thus, if you have not gotten in on the latest penny stock news now is the time to get started. This is a few of the hot stocks for 2010, but we recommend that you go online and so some more research if you plan to become an investor.
Other companies you may want to research or put on your penny stocks to watch list is Sirius XM Radio (SIRI) and Cell Therapeutics (CTIC). These companies are projected to do well this year also.
Wednesday, March 3, 2010
buy shares
The stock market gives everyone the opportunity to buy a piece of a company that offers shares or stocks to the public. People from all types of financial backgrounds can buy and sell stocks just like the millionaires. Some shy away from trading due to not completely understanding how the market works. One thing that must be verified should be the legitimacy of the company. All it will take is a telephone call to the company or doing some research on line. Deciding on a stockbroker is the first thing that must be done prior to selecting stocks. A broker that has years of experience will be the best choice. To make stock investments without the help of someone experienced would be an unwise choice. Buying shares is much easier than trying to make money selling some type of product or service. To buy shares on line will take the expertise of an advisor prior to purchase. Being able to understand the basic fundamental aspects of what it takes to buy stock shares can be confusing at first. When it comes to making the decision to buy stocks, there are certain things that must be considered like finding the ones that show signs of long term growth. Many individuals will start trading what is classified as the penny stock. The penny stocks can be purchased for less than one dollar. One of the most important factor is the financial health of the company. If the major news channels are broadcasting financial woes regarding a particular company, it normally means a substantial drop in the stock prices. Some individuals capitalize on the misfortunes of companies by buying shares at a low price in hopes that some type of recovery will take place in the near future. Deciding to buy stocks shares can be a hard decision to make. It may take months of studying the performance of certain stocks before an informed decision can be made regarding which ones to purchase. Due to the instability of major companies, many major stocks have decreased in price. Companies that were selling stocks for hundreds of dollars are now being sold for a dollar or two. It has become so easy to buy shares on line. The hardest choice to make will be what stocks to buy. If limited knowledge of the market exists, then the aid of a broker or brokerage firm may be needed. A commission will be payable to the brokerage firm. Trading on line stocks is very fast paced and is not for the faint at heart. It does not take much money to start day trading so the average person can participate. Being able to maintain self control and not give up when the stocks show signs of deceasing in value is not an easy task. Knowing when to sell is a decision that can be hard to make. Prior to taking the plunge when it comes to buying stocks, take the time to do some research regarding the trends of the market. Being prepared to lose money is one of the hardest obstacles that most will have to overcome.
good stocks to buy
http://explosive-stocks.blogspot.com/2010/03/good-stocks-to-buy.html
Are you looking for good stocks to buy? Have newsletter promises of the next hot stocks to buy if you pay them a large subscription gotten you curious to buy stocks, yet you don't want to pay for such a large fee?
Having a real broker is handy because you can have face to face consultations A personal broker can be expensive, can be worth the money. You want to know which one out there is a good stock to buy. Well, you get what you pay for. If you do not enjoy spending time on the computer or you are known to make mistakes on computers, perhaps you should pay the extra cost of a personal broker.
The process of online stock buying is quite simple for a novice and can help you know which stocks are good stocks to buy right NOW. The best time to use an online broker is when: You know (when you actually understand the market) enough to not need advice on good stocks to buy. You are certain which stocks you plan to buy. You need real time quotes for, for instance, day trading (buy and sell on a day to day or even minute to minute basis.) You need their research facilities for convenience.
Remember that an online broker is not your buddy. His or her purpose is to make money for their own pocket, and they will work to that end, whether you prosper or fail. Most online brokers have real time trading. That means that they can make a trade instantly. Some familiar ones are Fidelity Investments who sell IRAs and do online trading; Scottrade, who offers three levels of trading; TD Ameritrade who is more a long term planners than a day trader: andE*Trade who does trading in 7 markets and 6 local currencies: , the United States, Canada , the U.K., Germany, Hong Kong, France, and Japan. Commissions presently are in the range of $6.99 to $9.99. Also, there is often a minimum deposit for opening an account with an online broker. This can range from $500 - $2,000.
Always prescreen your stocks.
Determine how many stocks you can afford to buy. Know the likely loss potential for each transaction and act accordingly. Some buyers never let any one stock purchase cost more than 1% of the commissions. In other words, to buy stock abc that costs $1 to buy make certain to have $100 to invest. Compare each purchase with the whole portfolio. Then you can adjust the size of your investment.
One can make some money buying shares online and trading stocks with small sums of money. Buying penny stocks is as good a place to start as any. Good penny stocks to buy can cost less than $1 and can double in price. Remember, risks are much greater with penny stocks than with other stocks. They are either small undiscovered companies which will grow or fold due to management beyond your control, or they are out and out scams. Make them a small part of your portfolio. You must have the information needed to make a very well informed decision if you are buying penny stocks. Never let emotions enter the arena of stock buying or you will lose money and what seems like a good stock to by may turn out to be a real loser.
Are you looking for good stocks to buy? Have newsletter promises of the next hot stocks to buy if you pay them a large subscription gotten you curious to buy stocks, yet you don't want to pay for such a large fee?
Having a real broker is handy because you can have face to face consultations A personal broker can be expensive, can be worth the money. You want to know which one out there is a good stock to buy. Well, you get what you pay for. If you do not enjoy spending time on the computer or you are known to make mistakes on computers, perhaps you should pay the extra cost of a personal broker.
The process of online stock buying is quite simple for a novice and can help you know which stocks are good stocks to buy right NOW. The best time to use an online broker is when: You know (when you actually understand the market) enough to not need advice on good stocks to buy. You are certain which stocks you plan to buy. You need real time quotes for, for instance, day trading (buy and sell on a day to day or even minute to minute basis.) You need their research facilities for convenience.
Remember that an online broker is not your buddy. His or her purpose is to make money for their own pocket, and they will work to that end, whether you prosper or fail. Most online brokers have real time trading. That means that they can make a trade instantly. Some familiar ones are Fidelity Investments who sell IRAs and do online trading; Scottrade, who offers three levels of trading; TD Ameritrade who is more a long term planners than a day trader: andE*Trade who does trading in 7 markets and 6 local currencies: , the United States, Canada , the U.K., Germany, Hong Kong, France, and Japan. Commissions presently are in the range of $6.99 to $9.99. Also, there is often a minimum deposit for opening an account with an online broker. This can range from $500 - $2,000.
Always prescreen your stocks.
Determine how many stocks you can afford to buy. Know the likely loss potential for each transaction and act accordingly. Some buyers never let any one stock purchase cost more than 1% of the commissions. In other words, to buy stock abc that costs $1 to buy make certain to have $100 to invest. Compare each purchase with the whole portfolio. Then you can adjust the size of your investment.
One can make some money buying shares online and trading stocks with small sums of money. Buying penny stocks is as good a place to start as any. Good penny stocks to buy can cost less than $1 and can double in price. Remember, risks are much greater with penny stocks than with other stocks. They are either small undiscovered companies which will grow or fold due to management beyond your control, or they are out and out scams. Make them a small part of your portfolio. You must have the information needed to make a very well informed decision if you are buying penny stocks. Never let emotions enter the arena of stock buying or you will lose money and what seems like a good stock to by may turn out to be a real loser.
Choosing Stocks to Buy Now
Finding places to invest your money in today’s struggling economy can be difficult, and the tumultuous nature of the market doesn't make it any easier to decide what stocks to buy now. There are always inspirational stories of microcap, or penny stock investors striking it rich by holding a long position their holdings, or savvy options players who leveraged huge gains in the market, but these stories are the exception to the rule. They require constant and diligent maintenance and research that the average investor doesn’t have time to apply. To find the right financial stocks to buy now, start with a solid strategy that won’t be deviated from. The first step in this plan is to avoid overcomplicating your approach. Too much research and analysis can become a substitute for real action. Worse yet, a person can research a stock until they convince themselves it’s worth buying. The best stock to buy now has the signs of still being the best in the near or far future. To find companies that have this attribute, look for those paying strong dividends over the long term. Even in a negative return market, factoring in dividend returns can create a positive. This was true in 2004 for both the DOW Jones and the S & P 500. The attraction of dividends is their exponential rates of return compared with non-dividend paying companies. Companies with a long record of paying out to their stockholders are the priority to look into. Newer companies may seek to reduce dividend payments to expand the company. One of the best stocks to buy right now is Johnson & Johnson, who have been paying dividends as high as 3.3% for decades. The opposite is true of Whole Foods, who decided to cut dividends to put the money into growing the company. One of the best stocks to buy right now is Johnson & Johnson, who have been paying dividends as high as 3.3% for decades. The opposite is true of Whole Foods, who decided to cut dividends to put the money into growing the company. Johnson & Johnson has been paying out and raising their dividend since 1944. In general, a good stock to buy now has great cash flow so there aren’t any concerns about receiving dividend payments in the future. The next part of this simple strategy is to hold on to a dividend paying company’s stock indefinitely. After enough time passes, the dividend payments surpass the original amount invested. and this process can be sped up by reinvesting your dividend payments to buy more shares and receive larger payouts at the quarterly dividend payment. Other stocks to buy right now are Hansen Natural Corp, a beverages manufacturer and distrubutor, and Intuitive Surgical, a company that blew up as a microcap and now sells for over $300. Hot stocks to buy now may be a sell or a hold tomorrow. Keep the cashflow, the reputation, and the experience of the management team in mind when researching opportunities.
Best Stocks To Buy
Best Stocks to Buy In 2010
When it comes to buying stocks online it pays to know which is the best stocks to buy now and in the future. We are in 2010 and the stock market has improved significantly over the past couple of years. But, it pays to look back a couple of years to see how well certain companies has done this year. You can compare the quotes to find out if the company is worth investing in.
In order to know which is the best stocks to buy, you will need to find out which companies are earning high returns on investments. You will also need to keep up with the trends to decide which is the best stocks to buy now. The latest buy and sell signals should be considered.
Best stock to buy may be US Stocks in which Will the Bears surrender control. As of the first of 2010, US Stock Markets came to an abrupt end in its record setting for winning streaks. Dow Jones hit an average of 4%, which the industrial plummeted to its worth monthly loss in one year. What this means is that Dow Jones for now may not be one of the best stocks to buy.
Best stocks to buy now may be today’s hot picks which include THS and S & P 500. In 2008, S & P hit a negative return of -$38.49, but in 2009 the bank increased returns to 23.45%. THS was at the highest in with at 46.74% and dropped slightly in 2009 to 36.72%.
One of the best stocks to buy right now may be ONP (Orient Paper Incorporation). The company is based in China and manufacturers paper products and paper for China. The company’s trading history is steadily rising.
Buying stocks online is smart because you can keep up with the trends and shifts in the stock market. Right now one of the best stocks to buy is the Citigroup.
Some of the MSN stock advisors are suggesting that now is the time to invest in PeopleSupport. People Support is considered one of the best stocks to buy because the company has 18.5 million shares, with a market cap of 122 million giving them an % chg. YTD of around 144.3.
You may refer to others advice however who may tell that the best stocks to buy now is QuadraMed who has shares of 42 million, with a 129 market cap and 112.5 YTD.
Metallica Resources is at 84 shares, 315 million in market caps, and 101.6 YTD. The point here is if you are good in the stock market it pays to keep up with the signals, shifts, and trends that occur daily. Since stock business went fully electronic the changes occur often.
If you are new in the stock exchange we suggest that you take time to learn about the charts, systems, trends, sell, buy, and other details that focus on the stock exchange market. Don’t venture into stock exchange without learning buying stocks online and which is the best stocks to buy right now.
When it comes to buying stocks online it pays to know which is the best stocks to buy now and in the future. We are in 2010 and the stock market has improved significantly over the past couple of years. But, it pays to look back a couple of years to see how well certain companies has done this year. You can compare the quotes to find out if the company is worth investing in.
In order to know which is the best stocks to buy, you will need to find out which companies are earning high returns on investments. You will also need to keep up with the trends to decide which is the best stocks to buy now. The latest buy and sell signals should be considered.
Best stock to buy may be US Stocks in which Will the Bears surrender control. As of the first of 2010, US Stock Markets came to an abrupt end in its record setting for winning streaks. Dow Jones hit an average of 4%, which the industrial plummeted to its worth monthly loss in one year. What this means is that Dow Jones for now may not be one of the best stocks to buy.
Best stocks to buy now may be today’s hot picks which include THS and S & P 500. In 2008, S & P hit a negative return of -$38.49, but in 2009 the bank increased returns to 23.45%. THS was at the highest in with at 46.74% and dropped slightly in 2009 to 36.72%.
One of the best stocks to buy right now may be ONP (Orient Paper Incorporation). The company is based in China and manufacturers paper products and paper for China. The company’s trading history is steadily rising.
Buying stocks online is smart because you can keep up with the trends and shifts in the stock market. Right now one of the best stocks to buy is the Citigroup.
Some of the MSN stock advisors are suggesting that now is the time to invest in PeopleSupport. People Support is considered one of the best stocks to buy because the company has 18.5 million shares, with a market cap of 122 million giving them an % chg. YTD of around 144.3.
You may refer to others advice however who may tell that the best stocks to buy now is QuadraMed who has shares of 42 million, with a 129 market cap and 112.5 YTD.
Metallica Resources is at 84 shares, 315 million in market caps, and 101.6 YTD. The point here is if you are good in the stock market it pays to keep up with the signals, shifts, and trends that occur daily. Since stock business went fully electronic the changes occur often.
If you are new in the stock exchange we suggest that you take time to learn about the charts, systems, trends, sell, buy, and other details that focus on the stock exchange market. Don’t venture into stock exchange without learning buying stocks online and which is the best stocks to buy right now.
Best Investment For IRAs
Best Investment –IRA investments
IRAs are an effective and marvellous way to build a portfolio of best investment funds. However, before you rush out and start picking out IRAs you will need to assess your needs and find a plan that suits your personal circumstances.
1. You have to decide how much money you wish to invest in an IRA fund. There many places you can get advice locally, speak to a professionally trained adviser. Be prepared with a list of questions as you will pay a small fee for the information and you want to make sure that you obtain all the necessary information. If you are new to this game then search online and get knowledgeable before you make your appointment.
2. Once you have collated all the information you have to decide whether the advice offered is best for you. When choosing a provider for best investment rates check what type of restriction there on the policies. There are many best investment IRAs but you need to select them on the basis of low fees and high performing funds. Do not sign anything there and then, bring it home and read everything through thoroughly.
3. Lastly look carefully at the fees you have to pay to your IRA provider. Make a note of the fees for trading stocks, bonds and property to get the best investment funds. The last things you want is pay a huge amount of fees on the overall investment profits, because you want to have nice hefty sum of cash in your account at the end of the investment period.
Choosing the best investment IRA that will work for you totally depends on your age, and how many years until retirement and how much you can spare to invest. Make sure you have a solid plan of action and focus strongly on current market trends, looking at how you can manage the risk.
The ideal thing to do is to have a diversified portfolio so that if there is major loss then you will not loose all your money. Minimize the risk by going for investments in gold and property and bonds. Most people find that investing in things like gold, silver, copper and platinum are good because when the stock market plunges, precious metals tend to escalate upwards to protect your money.
Another best investment to discuss with your IRA advisor is buying CDS-CERTIFICATES OF DEPOSIT. CDS can earn some very high rates on your IRAs contributions and there is only a small risk involved. If you get into the best investment game at a much older age then think about investing in money market funds. Although compared with CDS the return is much lower, the only drawback you will experience is IRAs early claiming penalty. You can also spread your investments in mutual funds and protect your funds in the IRA account. All the money in the mutual funds is invested through a group so the financial load is spread. So if you want to be comfortable in your old age select the best investment funds through your financial advisor.
IRAs are an effective and marvellous way to build a portfolio of best investment funds. However, before you rush out and start picking out IRAs you will need to assess your needs and find a plan that suits your personal circumstances.
1. You have to decide how much money you wish to invest in an IRA fund. There many places you can get advice locally, speak to a professionally trained adviser. Be prepared with a list of questions as you will pay a small fee for the information and you want to make sure that you obtain all the necessary information. If you are new to this game then search online and get knowledgeable before you make your appointment.
2. Once you have collated all the information you have to decide whether the advice offered is best for you. When choosing a provider for best investment rates check what type of restriction there on the policies. There are many best investment IRAs but you need to select them on the basis of low fees and high performing funds. Do not sign anything there and then, bring it home and read everything through thoroughly.
3. Lastly look carefully at the fees you have to pay to your IRA provider. Make a note of the fees for trading stocks, bonds and property to get the best investment funds. The last things you want is pay a huge amount of fees on the overall investment profits, because you want to have nice hefty sum of cash in your account at the end of the investment period.
Choosing the best investment IRA that will work for you totally depends on your age, and how many years until retirement and how much you can spare to invest. Make sure you have a solid plan of action and focus strongly on current market trends, looking at how you can manage the risk.
The ideal thing to do is to have a diversified portfolio so that if there is major loss then you will not loose all your money. Minimize the risk by going for investments in gold and property and bonds. Most people find that investing in things like gold, silver, copper and platinum are good because when the stock market plunges, precious metals tend to escalate upwards to protect your money.
Another best investment to discuss with your IRA advisor is buying CDS-CERTIFICATES OF DEPOSIT. CDS can earn some very high rates on your IRAs contributions and there is only a small risk involved. If you get into the best investment game at a much older age then think about investing in money market funds. Although compared with CDS the return is much lower, the only drawback you will experience is IRAs early claiming penalty. You can also spread your investments in mutual funds and protect your funds in the IRA account. All the money in the mutual funds is invested through a group so the financial load is spread. So if you want to be comfortable in your old age select the best investment funds through your financial advisor.
accumulate cheap stocks in down markets
Many people confuse cheap stock with low priced stocks, this is not the same. In this article when I refer to cheap stocks, I mean undervalued stocks, or stocks that are cheap relative to various indicators of value, such as the P/E ratio. With that out of the way here is what you should do.Buy cheap stock and take steps to a good return on your money. Look for companies that may not be the most popular, although they are solid and well managed. Evaluate the business, cash flow and growth factors. Make sure to read the paper and online sources for information on businesses.
Run the numbers on the stock screen. Consider stocks fair value and cash flow situation. Most cheap financial stocks will increase in value if you are patient. With the current economy and accounting assumptions it can be difficult to select a cheap stock. Take a look at losses and write offs, borrowing cost and much more to predict the earning power.
Earning power is a hard thing to predict so buy cheap stock that has been researched in depth. This will help give a clearer picture of how the stock will do in the future. Analyze the short run and the long run projections for the stock. Price to earnings ratio will show the value of the stock. Affecting each shares value and determining how much you will make or lose.
With the current economy there are no get rich quick schemes out there. Although the market will turn around eventually, so be patient and you may be rewarded. Unemployment has had an adverse effect on the market. Along with other economic factors such as the housing market tanking in recent years has affected everyone.
Wait for the stock price to slip below the fair value. With the undervaluation of the stock, it gives a level of safety in the purchase. This will minimize the risk of purchasing the stock and still seek solid returns. Buy low and wait and watch for the value to rise.
Cheap stock trading online is easy with many sites offering free stock trades. Open an account and receive a certain number of free trades. Real time market, limit orders and scheduled investment trades are available. Online brokerage services are convenient and easy to use.
With tools like online trading common folk can sit at home and trade their stock. A computer is the tool that allows you to open an account and invest in the market all online. No need to have a broker to do it for you. Even those with a limited income can buy and trade cheap stock.
By buying shares online that represent a significant discount to value, it enables you to have a small piece of a business at a reasonable price. What the hope is that the future of the business is bright for your stock to increase in value. Economic conditions and of course the performance of the business play a part in the whole picture.
Hoping that the company makes a profit and pays its stockholders the profit or a dividend payment. Some businesses choose to reinvest the profit money back into the business to make it stronger. Both of these scenerios are good for the stockholder. Anytime a business makes a profit it is good.
Run the numbers on the stock screen. Consider stocks fair value and cash flow situation. Most cheap financial stocks will increase in value if you are patient. With the current economy and accounting assumptions it can be difficult to select a cheap stock. Take a look at losses and write offs, borrowing cost and much more to predict the earning power.
Earning power is a hard thing to predict so buy cheap stock that has been researched in depth. This will help give a clearer picture of how the stock will do in the future. Analyze the short run and the long run projections for the stock. Price to earnings ratio will show the value of the stock. Affecting each shares value and determining how much you will make or lose.
With the current economy there are no get rich quick schemes out there. Although the market will turn around eventually, so be patient and you may be rewarded. Unemployment has had an adverse effect on the market. Along with other economic factors such as the housing market tanking in recent years has affected everyone.
Wait for the stock price to slip below the fair value. With the undervaluation of the stock, it gives a level of safety in the purchase. This will minimize the risk of purchasing the stock and still seek solid returns. Buy low and wait and watch for the value to rise.
Cheap stock trading online is easy with many sites offering free stock trades. Open an account and receive a certain number of free trades. Real time market, limit orders and scheduled investment trades are available. Online brokerage services are convenient and easy to use.
With tools like online trading common folk can sit at home and trade their stock. A computer is the tool that allows you to open an account and invest in the market all online. No need to have a broker to do it for you. Even those with a limited income can buy and trade cheap stock.
By buying shares online that represent a significant discount to value, it enables you to have a small piece of a business at a reasonable price. What the hope is that the future of the business is bright for your stock to increase in value. Economic conditions and of course the performance of the business play a part in the whole picture.
Hoping that the company makes a profit and pays its stockholders the profit or a dividend payment. Some businesses choose to reinvest the profit money back into the business to make it stronger. Both of these scenerios are good for the stockholder. Anytime a business makes a profit it is good.
stock option software
With so many stock options software around, how would you know which is the best one to select?
First and foremost it will be determined by your budget. Are you willing to invest more money on a stock option trading software or a you happy with free trial software. Furthermore, your budget would also determine what kind of software you would avail of. Is it simply a stock option software or a stock option tracking software? They have different features that you may not find necessary and so it is best to select the one with the maximum options you could use.
There are stock option trading software that helps you manage your investments in your portfolio. Some of them are more focused towards the accounting part. You will be pleased to know that you no longer have to keep calculating inside your head how much you are going to make. Call options and Pull Options have to be considered carefully and thanks to the help of a stock option software a trader only needs to concentrate on the actual trading process.
Aside from these you need to know how much information you really need. Some stock options software are actually expensive because they have complex interface and graphs that you probably could do without. Thus it is suggested to use a trial version first. If you find yourself using it quickly without having to consult the help feature often, then you've probably met your match.
Also try to search for softwares that work well with what you have. If you are a Mac user then certain softwares are made for PC so make sure you are getting the correct version. The Microsoft Excel could easily be mixed with other stock option trading software, and together they could yield the best suggestions on which stocks to buy.
Another feature that you may find useful in a stock option trading software is its ability to predict the future value of your stock options. Thus you will know if it is worth buying or selling it. It also evaluates the risks involved with different stocks and helps you avoid making costly mistakes in purchasing them. It could even forewarn you as the best time to make the purchase or sell your stock options.
Employee stock option software are also convenient for employees who were granted with stock options by their companies. Not all employees are familiar with stock trading particularly with stock options which is even riskier. That is why they need all the help they could get and this software is your best bet.
With so many things to consider surely you are probably perplexed by now as to how many you should be making from different stocks more so with how much you are actually making currently. Luckily a stock option tracking software makes necessary reports on your stock options current developments. You could even digest the reports by industry or whichever criteria that you want.
Some people try to save up by buying only a single stock option software, but most of the time, these gives out generic information that you would probably figure out by yourself in the long run. In choosing stock options software make sure to do some actual trading first. Then make a list of all those information you wish you knew before making decisions. That will tell you which stock option trading software you should get.
First and foremost it will be determined by your budget. Are you willing to invest more money on a stock option trading software or a you happy with free trial software. Furthermore, your budget would also determine what kind of software you would avail of. Is it simply a stock option software or a stock option tracking software? They have different features that you may not find necessary and so it is best to select the one with the maximum options you could use.
There are stock option trading software that helps you manage your investments in your portfolio. Some of them are more focused towards the accounting part. You will be pleased to know that you no longer have to keep calculating inside your head how much you are going to make. Call options and Pull Options have to be considered carefully and thanks to the help of a stock option software a trader only needs to concentrate on the actual trading process.
Aside from these you need to know how much information you really need. Some stock options software are actually expensive because they have complex interface and graphs that you probably could do without. Thus it is suggested to use a trial version first. If you find yourself using it quickly without having to consult the help feature often, then you've probably met your match.
Also try to search for softwares that work well with what you have. If you are a Mac user then certain softwares are made for PC so make sure you are getting the correct version. The Microsoft Excel could easily be mixed with other stock option trading software, and together they could yield the best suggestions on which stocks to buy.
Another feature that you may find useful in a stock option trading software is its ability to predict the future value of your stock options. Thus you will know if it is worth buying or selling it. It also evaluates the risks involved with different stocks and helps you avoid making costly mistakes in purchasing them. It could even forewarn you as the best time to make the purchase or sell your stock options.
Employee stock option software are also convenient for employees who were granted with stock options by their companies. Not all employees are familiar with stock trading particularly with stock options which is even riskier. That is why they need all the help they could get and this software is your best bet.
With so many things to consider surely you are probably perplexed by now as to how many you should be making from different stocks more so with how much you are actually making currently. Luckily a stock option tracking software makes necessary reports on your stock options current developments. You could even digest the reports by industry or whichever criteria that you want.
Some people try to save up by buying only a single stock option software, but most of the time, these gives out generic information that you would probably figure out by yourself in the long run. In choosing stock options software make sure to do some actual trading first. Then make a list of all those information you wish you knew before making decisions. That will tell you which stock option trading software you should get.
buying shares online
When you are stock trading, buying shares online can be both a risky and lucrative business, if you know how to utilize the market to your advantage. Trading stocks requires a broker which up until a few years ago required you to know someone in the business who would take care of your needs and advise you on certain trades. In the digital age, you can now do all of your stock trading online, with a broker that is available any time. Buying shares online has never been easy with an online stock broker, but choosing the right brokerage for you can be something of a task.
When looking at the many different brokerages and trying to decide which service you should use, you should first know how to buy shares online. Many brokerages have a small walkthrough that will guide you through the process before you get started, so you completely understand the process. Understanding this process and the interface used is extremely important, because without it, you'll be at a loss for purchasing stocks online. When you buy and sell shares online, no matter what brokerage you decide on, you'll have to pay fees. Some brokerages offer you the first ten or so trades for free, but after that, they'll get either a set amount, or a percentage of the trade, depending on which brokerage you decide on.
With a brokerage, you can buy stock shares online and hang on to them for as long as you deem necessary without worrying about paying fees or other costs. In fact, the only time you do pay is when you decide to buy or sell. Because online stock trading has become so popular, it's really opened up the world of the stock market to small business owners and individuals alike. Previous market contenders who were unable to get into the stock market trade now have options available to them, making them viable traders. Online brokerages handle over 30 million trades a year, so now is the best time to hop on board the online stock buying wagon and experience the ease of use yourself.
Brokerages are available to guide you through the process, so if you have any questions about the buying or selling process using their website, you can speak in person to an individual who will answer all of your questions. This is a very rare trait these days, and with this expertise, you'll quickly learn how to manipulate the market in your favor.
If you're still interested in trading stocks online and you want to know more before signing up for a brokerage, there are many online websites that will teach you the ropes without you having to be a member of any brokerage. These websites offer mentors for people who are looking to get into the stock market exchange without wearing themselves thin before they are even in the market. This is often the best way to get yourself acquainted with online trading, as you can watch your mentors trades and see how the process is done before you are set loose on your own.
When looking at the many different brokerages and trying to decide which service you should use, you should first know how to buy shares online. Many brokerages have a small walkthrough that will guide you through the process before you get started, so you completely understand the process. Understanding this process and the interface used is extremely important, because without it, you'll be at a loss for purchasing stocks online. When you buy and sell shares online, no matter what brokerage you decide on, you'll have to pay fees. Some brokerages offer you the first ten or so trades for free, but after that, they'll get either a set amount, or a percentage of the trade, depending on which brokerage you decide on.
With a brokerage, you can buy stock shares online and hang on to them for as long as you deem necessary without worrying about paying fees or other costs. In fact, the only time you do pay is when you decide to buy or sell. Because online stock trading has become so popular, it's really opened up the world of the stock market to small business owners and individuals alike. Previous market contenders who were unable to get into the stock market trade now have options available to them, making them viable traders. Online brokerages handle over 30 million trades a year, so now is the best time to hop on board the online stock buying wagon and experience the ease of use yourself.
Brokerages are available to guide you through the process, so if you have any questions about the buying or selling process using their website, you can speak in person to an individual who will answer all of your questions. This is a very rare trait these days, and with this expertise, you'll quickly learn how to manipulate the market in your favor.
If you're still interested in trading stocks online and you want to know more before signing up for a brokerage, there are many online websites that will teach you the ropes without you having to be a member of any brokerage. These websites offer mentors for people who are looking to get into the stock market exchange without wearing themselves thin before they are even in the market. This is often the best way to get yourself acquainted with online trading, as you can watch your mentors trades and see how the process is done before you are set loose on your own.
Stock Market Software Programs
If you plan to get into the stock market exchange it is best that you choose a good stock market software program so that you can keep up with the forecasts in price trends.
Stock market investment software designed to help you forecast the price trends in Forex and the stock market. Some of the stock market trading software is complex since the programs may have a set of forecasting algorithms, which combine common and technical factors, e.g. growth rates, earnings, price, book ratios, and dividend yields.
Such software for stock market will sketch up on Estep, or T-Model, Dividend Discount, and generate a predictable rate of returns for universal stocks. These are the best stock market software programs, since the price trend lines up with the current price and projects a pessimistic price trend. If the arrows or lines point down it means it is a negative price trend.
Some of the best stock market software analyzes the securities as well as the broader market trends. These are the universal software programs that comprise of more than 1500 stocks, in addition to over 2500 mutual funds. It includes about 40 market exchange traded funds, as well as a broad selection of chief market indexes. The software is capable of forecasting the interest rates as well as an using proprietary yield curves.
Another feature that makes these types of programs the best stock market software is that you can use the program to predict which direction your portfolio is heading.
If you are investing in Forex and just starting out, you may be interested in trying some of the Forex charting programs. The programs have available tools which may include FX Net Dania Charts, or the FX Power. Some have FXTREK Desktop tools, or Market Scopes Charting. The charts are easy to use and designed for beginners. You can use these tools to discover ways to use limited measurement instruments, such as indicators that point to price, shifts in the stock market and so forth. Forex provides charts that are standard and user-friendly.
Some of the stock market software has the limited studies of scientific and indicators. The data that appears on the charts go back 10 years or longer to provide you with Fibonacci facts from real-life investigative studies.
Desktop software include charts that offer deliver quality combined with sophisticated Forex chart applications for active traders. These charts are used to analyze stock markets with extreme precaution and designed to allow you to focus on the currency markets. The charts can deliver all-inclusive suite of studies, which focuses on customized charts.
These are the best stock market software for Forex investors because the technology includes a Window structured system that provides you with reliability and faster processing speed. You can use the FX Desktops provided to review a collection of charts in a single window pane.
Some of the stock market software with charts have integrated attributes and features that help you to keep up with the Market Scope. There is a collection of indicators to help you focus the trends, price, currency exchange, market shifts, and so forth.
Stock market investment software designed to help you forecast the price trends in Forex and the stock market. Some of the stock market trading software is complex since the programs may have a set of forecasting algorithms, which combine common and technical factors, e.g. growth rates, earnings, price, book ratios, and dividend yields.
Such software for stock market will sketch up on Estep, or T-Model, Dividend Discount, and generate a predictable rate of returns for universal stocks. These are the best stock market software programs, since the price trend lines up with the current price and projects a pessimistic price trend. If the arrows or lines point down it means it is a negative price trend.
Some of the best stock market software analyzes the securities as well as the broader market trends. These are the universal software programs that comprise of more than 1500 stocks, in addition to over 2500 mutual funds. It includes about 40 market exchange traded funds, as well as a broad selection of chief market indexes. The software is capable of forecasting the interest rates as well as an using proprietary yield curves.
Another feature that makes these types of programs the best stock market software is that you can use the program to predict which direction your portfolio is heading.
If you are investing in Forex and just starting out, you may be interested in trying some of the Forex charting programs. The programs have available tools which may include FX Net Dania Charts, or the FX Power. Some have FXTREK Desktop tools, or Market Scopes Charting. The charts are easy to use and designed for beginners. You can use these tools to discover ways to use limited measurement instruments, such as indicators that point to price, shifts in the stock market and so forth. Forex provides charts that are standard and user-friendly.
Some of the stock market software has the limited studies of scientific and indicators. The data that appears on the charts go back 10 years or longer to provide you with Fibonacci facts from real-life investigative studies.
Desktop software include charts that offer deliver quality combined with sophisticated Forex chart applications for active traders. These charts are used to analyze stock markets with extreme precaution and designed to allow you to focus on the currency markets. The charts can deliver all-inclusive suite of studies, which focuses on customized charts.
These are the best stock market software for Forex investors because the technology includes a Window structured system that provides you with reliability and faster processing speed. You can use the FX Desktops provided to review a collection of charts in a single window pane.
Some of the stock market software with charts have integrated attributes and features that help you to keep up with the Market Scope. There is a collection of indicators to help you focus the trends, price, currency exchange, market shifts, and so forth.
Bull Flag Screen Update
One way to find these type of stocks is:
-Use a stock screener to find stocks that have done well recently. This depeneds on your time frame, but an example would be to take the top 1000 performing stocks in the past 3 months or so. Usually the better performing, the more likely the bull flag breakout will lead to big gains.
-Then of those stocks screen out all of those which aren't within 10% of their 52 wk high.
-From that list you're looking for stocks in a short amount of time that have traded sideways or downward. You might do this by screening out all of those with more than 5% price gain (or even 3% or 2%), in the past 3 weeks and also screen out those that have gone down more than 15% in the top 2 weeks, so you're left with those in the middle Of course, you certainly could do a longer period of time than 3 weeks, just know that you should be biased to the downside at this stage, as bull flags are more likely to flag downward, and doing so is usually pretty healthy.
Now you have your list of stocks.
I like to anaylize the sector from there, only taking the top sectors, and I might even do that before selecting the top 500 in the screen. (for example the top hundred of stocks in oil, metals, and ags, right now might be a good selection).
But regardless, you need to watch this list for breakouts. A stock should break out of the flag. Theerer are two potential buypoints. Buypoint one is just above the trendline of the consolidation channel. The 2nd is just above the 52 week high.
You should picck stocks that you like, that have moved on volume, and that have good earnings, and set stop buy orders at either or both of these buypoints for as many of these patterns as you want....
You should also set a stop below the bottom of the consolidation channel. The tighter the channel, and closer it is to the 52 week high, the better risk/reward because of these stops.
You can have mutiple bull flag screens for different time periods, and perhaps you want those that also have good fundimentals. I like to try to find stocks that are consolidating near there high with earnings comming up as those usually are setting up very nicely, and setting a stop buy order on the breakout can leave very good results.
(image has been lost) <-- Notice the bull flag before it broke out. THis is when gold was around 500 in early 06. Now golds approaching 1000. <--Sometimes a stock will flag down, and then meet support at the Moving Average. If it bounces then it will go up and hit the trendline resistance and then bounce down to support again. The support and resistance will squeeze together, and that's when the value of the stock (or commodity) will make it's move. When to sell?
Generally if you look at a stocks movement BEFORE the consolidation you can take half the gain from the start of the rally until the consolidation period. Add that gain to the bottom of the consolidation, and that's a pretty decent limit sell point. You can take some of your shares and sell them before hand, some at that point, and then some after if you would like.
Stock screen will look like
% price change past 6 months = TOP 1000 AND
52 week high (less than or equal to) 12% AND
% price change past 1 month >-20% AND
% price change past 1 month <3% id=" xxxx" id="yyy" months =" TOP">-20% AND
% price change past 1 month <3%
PEG= Bottom 10
P/S= bottom 3
Adding things like PEG and P/S may lead to bigger gains, and may be better for longer term patterns.
update: Because my example image of gold in 2006 is gone, I decided to add a bit of information. WeeklyTA explains the bullflag in his post Common Breakout Patterns.
The book Encyclopedia of Chart Patterns by Bulkowski provides some information about bull flags that you can't find elsewhere.
Perhaps more important than identifying bull flags is knowing how to trade them. The best flags are the tall ones, there's even a special pattern for bull flags called "high and tight bull flags" which is talked about in IBD founder William O'Neil's book How To Make Money In Stocks. Bulkowski also mentions information about high and tight flags. This information is already shared at stocktradinginvestments with the following posts on high and tight flags.
High And Tight Flag Trading System Introduction - This trading system examines the use of high and tight flags and talks about identifying them.
Flag Trading System Part 1/3 - Now that the basics of the trading system are explained this goes into the process of actually using the system.
Flag Trading System Part 2 - The series continues explaining how and when to buy and sell and how to use stops and trailing stops, limit sell orders, and more.
high tight flags - This shows a brief example of how the flag trading system will identify stocks.
It appears that Flag Trading System Part 3 has not yet been developed, but I'm eager to learn more about the series as it should conclude
High And Tight Flag results - Additional information by Bulkowski himself showing you the research results on his high and tight flag case study.
As you can see clearly a high and tight bull flag is superior to a regular bull flag, so keep that in mind when looking for bull flags.
If you trade bull flags it's a good idea to set a stop just below the recent consolidation low or if you really want to be picky you can set it at the breakout point that you buy it, and if it crosses below, you can either buy it again when it crosses above the buypoint again or else move onto another bull flag.
Bull flags are more powerful when they have strong earning surprises behind them such as those featured at Zacks.
If you combine good strong earnings, strong earnings growth and fundamentals, earning surprises with recently strong price action followed by a consolodation and a breakout again, you will be able to get a stock that has the potential to have big gains. Of course past results aren't always an indication of future results, so use caution when trading bull flags or high and tight flags, or any stocks for that matter.
Tuesday, February 2, 2010
Options trading 101: How to trade stock options
Stock options are very different than regular shares of stocks, so options trading is also going to require a different understanding and different strategy. If you want to buy a stock you will be entitled to hold however many shares you purchase, and those shares are redeamable for anyone who wants to buy it for as long as those shares and the company with it are still around and trading on the stock exchange. However, if you look to buy call stock options, you are basically getting a contract that is limited in how long it's good for and it may only entitle you the right to trade the option contract itself only for as long as the stock option contract is still valid and there is a buyer willing to take on the risks for you to sell it.
This can get confusing. You are actually buying a device that's related to the stock, but trades independently. However, the option contract MAY entitle you to 100 shares of the stock at the given price.
Stock options are the right but not the obligation to own shares of the underlying stock at a fixed price. In existance are also "index options" or even exchange traded funds options, but these function relatively the same way. So if you were to buy a stock in the SPY an etf for the S&P 500 index, you would buy 100 at the current price, say $130 per share for $13,000. What if however, you thought the market was going to move upwards in a short period of time? You could pay $185 to control the movement of the 100 shares. That's not a typo, however your chances of losing all of that $185 is great.
So if your ETF went from $130 to $120 and you owned the stock, you would lose $1000. If it stayed the same you'd break even, if it went to $140 you'd gain $1000.
If instead you owned the option, you'd lose everything if it was at $120. In fact, if it was at $130 and expired you'd lose everything. However, if it went up to $140, your options would be worth $10 per share. A contract for one option contract is worth 100 shares in almost all cases. So that means that your stock would be worth $1000. Note I did not say you would gain $1000. The reason is because this $185 comes out of your cost. If it were to go up overnight, there would still be plenty of time for it to go up more so people might pay you enough for you to make close to $1000. However your upside is reduced significantly. Your cost is significantly less though. There's a trade off. You give up your overall catestrophic loss total as your loss can never be more than the $185 you spend, while maintaining a similar upside. However the probability of you losing your entire $185 is high and if in 1 month you want to own it longer you will have to buy another contract, or buy one that has more time to begin with and just sell it before expiration.
So you're thinking, wow, this is a great way to get rich, I'll just buy $13000 in options instead of stock, and then I'll have close to $130,000 if I hit it big and the stock/ETF goes up from $130 to $140!
Whoa, slow down cowboy! (or cowgirl)... Although your gains are multiplied, you are taking extremly more risk by doing this.
If you want to become accustom to buying options, you will want to buy options with a LOT of time value on them that are deep in the money because they behave more like stocks. What I mean is they have a lower chance of losing everything, and you can own them longer if you have to, and if you sell them early they maintain a lot of their initial value. On the contrary, out of the money contracts with little time value are more like lotto tickets because your chances of hitting it big are less, and your chance of losing it all are great. They may have better return in the long run than lotto tickets, but if you went out and put all your money on a lotto ticket, you better be prepared to lose it all.
A generally sound strategy is to buy stock options with 3 more months on the contract than you plan to hold it, and sell it before then. This is because people generally won't buy options close to expiration. Meanwhile, people that own options tend to try to panic and sell towards the end when there's not enough buyers. So what happens is, People buy contracts with 1-3 month on it. In order to sell you need a buyer. There are plenty of buyers who will buy your option so there is a lot of demand, so there are a lot of dreamers thinking the stock will continue to go up and that they have plenty of time to sell. However, the closer you get to expiration the more people are waking up saying "there's not much time left!" And all those who own options that are expiring are going to want to sell it because they don't want to be forced to buy 100 shares at th given price otherwise they wouldn't own the option. True they can borrow money buy it and then sell it and some brokerage houses will still redeam the options for even value but the mentality remains the same. Picture it like Christmas shopping... There are plenty of buyers in at the last second, but stores don't want to get caught with too much inventory, or else they will have to mark down items significantly afterwards. After the demand drys up, there are no more buyers, and those looking to sell are in trouble. If you wait until the last minute it will be a hectic frenzy, and if there's any major popular items and sales, they will probably be gone. Avoid the herd mentality... Get in and out early. If you plan months in advance you will generally be glad you did, as there will be a lot of dreamers looking for the high percentage that take on too much risk.
Additionally when you are options trading, start very, very small. Absolutely minute and miniscule. Option trading can be very dangerous because they are derrivatives. Gasoline is less stable than oil because it was derived and refined from oil. Fumes of gas are derrived from gasoline and are even more dangerous. If you light a match near oil, you may be okay, gas, it's dangerous, but it's always the fumes of gasoline that catch fire first.
Put options as opposed to call options allow you to bet against stocks similar to shorting stocks. If you understand how to short stocks this will make more sense. You borrow shares of stock and sell them promising to buy them back, ideally at a lower price. Sell high, buy low. If that's the case, then put options are to shorting stocks what call options are to buying stocks. You have the right to sell stock at a certain price. So if you buy a put option at a strike price of $100 and it is currently $110, you need it to fall below $100 before it expires, or else it has no "intrinsic value". If it stays the same it loses value over time. If it drops to $90 your stock options are worth $10 per share or $1000 per contract(a contract is for 100 shares) plus whatever time value or "extrinsic value" is left on it. Extrinsic value is the potential value... what people pay for the dream of hitting it big. Intrinsic is what it can be directly converted to right now. A call stock option costing $3 for a strike price of $100 when the stock is $102 has intrinsic value of $2 and extrinsic value of $1. In reverse a put option costing $3 for a strike price of $100 when the stock is $98 has an intrinsic value of $2 and extrinsic value of $1. The extrinsic value is what makes options so different, and the key strategy should be to minimize the damage from the loss of extrinsic value while still gaining the benefit of the intrinsic value going up significantly leading to large percentage gains with lower expense.
You can perform "covered calls" which are selling calls against stock you own... This allows you to PROFIT from the extrinsic value decay, however in the process you are renting out your stock. So if a stock goes up while you are selling a covered call, you do not gain from the price appreciation past the strike price. You get the cash immediately and can use it, but if you still have a call option sold after expiration and the stock price is above the strike price, your stock gets "called" away at the strike price. So if you have a $104 stock and you sell a strike price call of $105 for $2 per share and it goes up to $110, you MUST sell it for $105 even though at the open market it's worth $105. However, if it stays at $105 or lower, you keep $2 in your pocket, and can choose to sell another covered call on a monthly basis if you like. The idea is that you are trying to profit from the optomism of call buyers and collect income regularly. You may occasionally get your stock called away and have to buy again if you want your income back... It's tricky because you have to actually know what a stock is worth. If you think it should be valued at $105 with a EPS of $3 and no earnings growth or decay, it should be worth $105 this year, $108 next year, then it would be a good idea to write a covered call for $105 or $110. This way if people do bid it up to $110 or higher, you no longer should be concerned because you planned to sell it at that price anyways. If however the stock drops to $80, you could buy more. If you buy it at $105 with a $3 earnings per share appreciation, you will expect to gain roughly 3% per year just owning the stock as the earnings will add to the company, the company will improve and the value will improve and the shareholders will be more willing to pay more. However, if you regularly yield $2 per share every 2 months for selling the covered call 6 times per year, that's $12 plus the $3 or $15 per year per share or almost 15% If you are able to sell at $110 you lock in a nearly 5% gain which is more than you planned on anyways. That is the idea behind covered calls, lock in a selling price and cap your potential upside, but get paid for it from optomists.
I have a lot more to add and clear up but this was an article that I had to completely rewrite since after I lost this blog and had to try to restore it. The explination needs improvement as I had spent a lot more time figuring out how best to explain it before, but ideally it will improve over time.
This can get confusing. You are actually buying a device that's related to the stock, but trades independently. However, the option contract MAY entitle you to 100 shares of the stock at the given price.
Stock options are the right but not the obligation to own shares of the underlying stock at a fixed price. In existance are also "index options" or even exchange traded funds options, but these function relatively the same way. So if you were to buy a stock in the SPY an etf for the S&P 500 index, you would buy 100 at the current price, say $130 per share for $13,000. What if however, you thought the market was going to move upwards in a short period of time? You could pay $185 to control the movement of the 100 shares. That's not a typo, however your chances of losing all of that $185 is great.
So if your ETF went from $130 to $120 and you owned the stock, you would lose $1000. If it stayed the same you'd break even, if it went to $140 you'd gain $1000.
If instead you owned the option, you'd lose everything if it was at $120. In fact, if it was at $130 and expired you'd lose everything. However, if it went up to $140, your options would be worth $10 per share. A contract for one option contract is worth 100 shares in almost all cases. So that means that your stock would be worth $1000. Note I did not say you would gain $1000. The reason is because this $185 comes out of your cost. If it were to go up overnight, there would still be plenty of time for it to go up more so people might pay you enough for you to make close to $1000. However your upside is reduced significantly. Your cost is significantly less though. There's a trade off. You give up your overall catestrophic loss total as your loss can never be more than the $185 you spend, while maintaining a similar upside. However the probability of you losing your entire $185 is high and if in 1 month you want to own it longer you will have to buy another contract, or buy one that has more time to begin with and just sell it before expiration.
So you're thinking, wow, this is a great way to get rich, I'll just buy $13000 in options instead of stock, and then I'll have close to $130,000 if I hit it big and the stock/ETF goes up from $130 to $140!
Whoa, slow down cowboy! (or cowgirl)... Although your gains are multiplied, you are taking extremly more risk by doing this.
If you want to become accustom to buying options, you will want to buy options with a LOT of time value on them that are deep in the money because they behave more like stocks. What I mean is they have a lower chance of losing everything, and you can own them longer if you have to, and if you sell them early they maintain a lot of their initial value. On the contrary, out of the money contracts with little time value are more like lotto tickets because your chances of hitting it big are less, and your chance of losing it all are great. They may have better return in the long run than lotto tickets, but if you went out and put all your money on a lotto ticket, you better be prepared to lose it all.
A generally sound strategy is to buy stock options with 3 more months on the contract than you plan to hold it, and sell it before then. This is because people generally won't buy options close to expiration. Meanwhile, people that own options tend to try to panic and sell towards the end when there's not enough buyers. So what happens is, People buy contracts with 1-3 month on it. In order to sell you need a buyer. There are plenty of buyers who will buy your option so there is a lot of demand, so there are a lot of dreamers thinking the stock will continue to go up and that they have plenty of time to sell. However, the closer you get to expiration the more people are waking up saying "there's not much time left!" And all those who own options that are expiring are going to want to sell it because they don't want to be forced to buy 100 shares at th given price otherwise they wouldn't own the option. True they can borrow money buy it and then sell it and some brokerage houses will still redeam the options for even value but the mentality remains the same. Picture it like Christmas shopping... There are plenty of buyers in at the last second, but stores don't want to get caught with too much inventory, or else they will have to mark down items significantly afterwards. After the demand drys up, there are no more buyers, and those looking to sell are in trouble. If you wait until the last minute it will be a hectic frenzy, and if there's any major popular items and sales, they will probably be gone. Avoid the herd mentality... Get in and out early. If you plan months in advance you will generally be glad you did, as there will be a lot of dreamers looking for the high percentage that take on too much risk.
Additionally when you are options trading, start very, very small. Absolutely minute and miniscule. Option trading can be very dangerous because they are derrivatives. Gasoline is less stable than oil because it was derived and refined from oil. Fumes of gas are derrived from gasoline and are even more dangerous. If you light a match near oil, you may be okay, gas, it's dangerous, but it's always the fumes of gasoline that catch fire first.
Put options as opposed to call options allow you to bet against stocks similar to shorting stocks. If you understand how to short stocks this will make more sense. You borrow shares of stock and sell them promising to buy them back, ideally at a lower price. Sell high, buy low. If that's the case, then put options are to shorting stocks what call options are to buying stocks. You have the right to sell stock at a certain price. So if you buy a put option at a strike price of $100 and it is currently $110, you need it to fall below $100 before it expires, or else it has no "intrinsic value". If it stays the same it loses value over time. If it drops to $90 your stock options are worth $10 per share or $1000 per contract(a contract is for 100 shares) plus whatever time value or "extrinsic value" is left on it. Extrinsic value is the potential value... what people pay for the dream of hitting it big. Intrinsic is what it can be directly converted to right now. A call stock option costing $3 for a strike price of $100 when the stock is $102 has intrinsic value of $2 and extrinsic value of $1. In reverse a put option costing $3 for a strike price of $100 when the stock is $98 has an intrinsic value of $2 and extrinsic value of $1. The extrinsic value is what makes options so different, and the key strategy should be to minimize the damage from the loss of extrinsic value while still gaining the benefit of the intrinsic value going up significantly leading to large percentage gains with lower expense.
You can perform "covered calls" which are selling calls against stock you own... This allows you to PROFIT from the extrinsic value decay, however in the process you are renting out your stock. So if a stock goes up while you are selling a covered call, you do not gain from the price appreciation past the strike price. You get the cash immediately and can use it, but if you still have a call option sold after expiration and the stock price is above the strike price, your stock gets "called" away at the strike price. So if you have a $104 stock and you sell a strike price call of $105 for $2 per share and it goes up to $110, you MUST sell it for $105 even though at the open market it's worth $105. However, if it stays at $105 or lower, you keep $2 in your pocket, and can choose to sell another covered call on a monthly basis if you like. The idea is that you are trying to profit from the optomism of call buyers and collect income regularly. You may occasionally get your stock called away and have to buy again if you want your income back... It's tricky because you have to actually know what a stock is worth. If you think it should be valued at $105 with a EPS of $3 and no earnings growth or decay, it should be worth $105 this year, $108 next year, then it would be a good idea to write a covered call for $105 or $110. This way if people do bid it up to $110 or higher, you no longer should be concerned because you planned to sell it at that price anyways. If however the stock drops to $80, you could buy more. If you buy it at $105 with a $3 earnings per share appreciation, you will expect to gain roughly 3% per year just owning the stock as the earnings will add to the company, the company will improve and the value will improve and the shareholders will be more willing to pay more. However, if you regularly yield $2 per share every 2 months for selling the covered call 6 times per year, that's $12 plus the $3 or $15 per year per share or almost 15% If you are able to sell at $110 you lock in a nearly 5% gain which is more than you planned on anyways. That is the idea behind covered calls, lock in a selling price and cap your potential upside, but get paid for it from optomists.
I have a lot more to add and clear up but this was an article that I had to completely rewrite since after I lost this blog and had to try to restore it. The explination needs improvement as I had spent a lot more time figuring out how best to explain it before, but ideally it will improve over time.
Trading Options
As in any trading strategy, when you are trading options there are many important things to keep in mind.
1)exit strategy /protection from large losses
2) position sizing
3)money management
4)leverage
5)methodology
If you want to trade options successfully, you have to have something that works for you. The beginners only focus on 1 method and it's usually #5. Or worse, the beginners methodology is to ask around until they get a hot stock option tip
The exit strategy is important. When put together with good money management, it can make a great overall strategy. By limiting the losses and using other methods to protect yourself from large losses such as proper position size and having the right amount of cash available, you restrict the size of your loss. Your methodology will then only require a small win percentage and upside in order to have a profitable overall system.
Options are very unique though. In the money options function more like stocks and you can actually note the price of the underlying stock. If it drops, your option will drop and you can sell it similar to an exit strategy with a stock. However, out of the money options are different because they are inexpensive, and the difference between the ask and the bid can cause a devastating loss just to buy and sell with a slight movement. Additionally, there is the time value to consider. When you buy a stock option you need to understand the holding period in advance and decide WHEN you will sell given the time, as WELL as the price.
Generally a resonable strategy is to buy a deep in the money stock option with 3 more months than your holding period. So you would perhaps take a method where you have an 8 week holding period (2 months). If that was your plan, you would make sure to buy a stock option that had at LEAST 5 months on the contract. You also will have the possibility that you sell it well before that if the stock drops 8% or so. Additionally, if the stock is up 20% in 8 weeks it's a winner and it has proved itself to be worth holding on to. So you could sell the stock option and replace it with stock by executing your option, or you could roll over your stock option by selling your stock option and buying another option with 5 months or more on the contract so you add at least another 2 more months to the contract. This is very similar to the IBD CANSLIM method of investing only with in the money stock options. This is a very good one to use if you are transfering from a stock buying methodology to an option buying one.
As you become more comfortable with the strategy, you can begin to buy closer and closer to at the money options, or even try buying out of the money option. But the main point you will need to consider before doing this is understanding the risks.
Position sizing is how each individual position size corresponds to the amount of cash you have available. Theoretically you could have a very small position size such as 1%, and still be in danger if they are all call options and the overall market tanks if you do not have a large amount of cash available on the sideline. So position sizing is very closly linked to money management.
Money management encompasses exit strategy, position sizing, overall cash position, win/loss rate as well as the win payout to the loss payout, to form an overall profitable strategy that maximizes your long term growth potential without putting your bankroll at a high risk of ruin. The absolute optimal amount to invest to maximize a positive return is the "kelly criterion". However, be warned, this makes several assumptions that is not true in the stock market and the biggest one is that your investments or bets are independent. If investors move their money out of the stock market, all stocks will go down, and performance will generally be less for all investments. Because of this, you will have to figure out a safe amount to invest based on your entire average of your portfolio risk. This can get really complicated if you don't already have a good understanding of it already.
The Kelly Criterion is a formula that determines the most you can risk without sacrificing your long term growth potential. For example, if you had a 100% chance of winning you could risk everything and you should because there is no chance of you losing. But what if your chances of winning are 80% and a win doubles your money. For the individual bet, if you bet everything you have, you are maximizing your value for an individual bet, but this is greatly erroneous because if you lose everything you have, there is no chance you can recover. Eventually that will happen. You will lose 1/5 times and win the other 4. . If you bet 80% this means that if you start with 100 and lose you're down to 20% or 20. You will then bet 16 and win and get to 36 then 28.8 and you win and get to 64.8, then you bet 51.84 and you get to 116.64. Then you will be likely to lose again in the next couple times. Although this is profitable, when you lose again, your losses will be so large, that it will take more work recovering than if you bet less. If you lose twice in a row, you probably won't even get back to even before you lose again. This is bad money management and it actually doesn't produce the ideal results in the long run anyways.
You generally do not want your investment going up too much as you win, or down in size too much as you lose, and you don't want to have too high of a risk of ruin, so a wise decision would be to take 1/4th of the kelly criterion and consider it a flat rate and keep it that way without adjusting it unless the investment size becomes so large that you are investing 1/2 the kelly criterion. The ideal kelly criterion for the above example would be to bet 60%. You can test this by seeing how much you would have after losing once, then winning 4 times in a row.
However, the odds are not known in stock markets. Instead you have odds that vary. Overtime you may be able to conclusively say with 90% confidence that a particular strategy will beat the market over the next 50 years, but you might only be 90% confident that the strategy will win 55-65% of the time, and it could easily be on the low end. Just because you have data that suggests that you will win 60% of the time that has been studied over a long period, doesn't mean it's enough data to use with the kelly criterion. You have to take the low end of the range. If you are a stats major, you can figure this out, but if not, make sure you estimate on the low end of the percentage you will produce a win as markets change and you can't be sure that the past is a measure of future success, you can only be reasonable sure that it will generally fall into that range. Even so, there are studies that suggest there are "black swan events" or rare events that completely shape everything and that are understanding of what's likely may be wrong.
This is why I personally trade high tight flags with options or without, as they have shown to produce a "win" a very high percentage of the time in multiple studies. If it's wrong about hitting it's price target 90% of the time and it only hits it 60%, it can still be a profitable strategy if when you hit the target you win more than you lose. In fact, you can even lose more often than you win, but if you win big and limit your losses you can still be profitable.
If you properly manage the "time decay" that occurs with options, you can put your win ratio even higher. The reason is, an option is a contract for 100 shares that only cost the fraction of what buying 100 shares would. If the stock goes to zero, you are going to lose less owning 1 contract than you will with 100 options. However, if the gain happens overnight, you lose very little time value, and your gain in dollar amount is very close to the same. You lose less when you lose, and make more when you win. If you lose a dollar in the stock, you might lose 60 cents on the dollar by owning the option. If you gain a dollar in the stock, you might still gain 95 cents on the dollar. So if rather than owning 100 shares, you own a single contract, your risk reward is better. If you own the exact dollar amount you would control/own a lot more shares and have a lot more upside, however, you would be leveraged probably too much so and your downside would be significantly more. You will have a greater reward to your risk if you sell the option early. The reason is options decay exponentially. This means that the "extrinsic value" or value in terms of potential decays very little initially, and then begins to lose value at a much faster rate. If you sell the option early you avoid the large part of the decay, and the reward you get is so much greater than the risk that it can be profitable, assuming you have a strategy that is profitable already.
Once you understand all the above, you can consider how leveraged you want to be. If you had a regular strategy that involved buying stock, you can consider using options to add leverage and increase your return on your risk. If you already plan on having options, you can add the position size. You can consider adding even more leverage if you want to buy out of the money options, but they require agreater gain to be profitable and the chances of you using your entire investment are much larger, however you can produce monstrous gains when you win. This is more of a "lotto ticket" strategy because it's losing your investment a few times before producing a win. Once you determine how you are going to leverage, you will then have to go back and run through the first 3 and make sure your strategy is still adequete given the leverage.
Once you have all of this in mind, you can determine your methodology. Your stock selection strategy... Your option selection strategy. So for example you wanted to trade high tight flags. You would take a free screener like Zacks. You would then find stocks that trade options that have gone up 60% in the last 12 weeks. Depending on how many results, you may want to add solid earnings growth, and other things like that. Then you want to manually look at all of your results for a stock that has begun consolidation, or wait until you notice consolidation start to form. Then the high tight flag begins and it's when it breaks out that you can buy the stock option. You may buy multiple positions for multiple high tight flags as long as you keep your cash position large and you don't control too many more shares than you would have, never exceed the kelly criterion. If your win rate is estimated to be 90% assume it to be 75%. If you win 64% in a bull market and 40%in a bear market on average, assume there to be outliers that produce massive games that offset it and assume the market will trade against you and turn into a bear market and assume gaining 30 when you win. If you plan to have a 8% loss, assume a 16% loss as occasionally stocks will drop straight through the stop loss. If you are then told to invest 60% on a single bet, realize that your investments are somewhat dependent and assume you should never bet more than 30% of your whole portfolio and kee 70% cash. Then make 5 investments with that 30% just to be safe since the bets are somewhat dependent, and use in the money options to improve your return on your risk. You will still make plenty to keep your wealth growing, and still be able to get an adequete return. There's no sense in gambling when trading options. Understand now and every day, you are as inexperienced as you ever will be for the rest of your life, so it pays to be extra safe now, and you can always gradually increase the agression as your understanding and experience grows. Then if you go just a little bit too far, you can take it closer until you find that sweet spot where you are protecting your money yet still producing quality returns.
1)exit strategy /protection from large losses
2) position sizing
3)money management
4)leverage
5)methodology
If you want to trade options successfully, you have to have something that works for you. The beginners only focus on 1 method and it's usually #5. Or worse, the beginners methodology is to ask around until they get a hot stock option tip
The exit strategy is important. When put together with good money management, it can make a great overall strategy. By limiting the losses and using other methods to protect yourself from large losses such as proper position size and having the right amount of cash available, you restrict the size of your loss. Your methodology will then only require a small win percentage and upside in order to have a profitable overall system.
Options are very unique though. In the money options function more like stocks and you can actually note the price of the underlying stock. If it drops, your option will drop and you can sell it similar to an exit strategy with a stock. However, out of the money options are different because they are inexpensive, and the difference between the ask and the bid can cause a devastating loss just to buy and sell with a slight movement. Additionally, there is the time value to consider. When you buy a stock option you need to understand the holding period in advance and decide WHEN you will sell given the time, as WELL as the price.
Generally a resonable strategy is to buy a deep in the money stock option with 3 more months than your holding period. So you would perhaps take a method where you have an 8 week holding period (2 months). If that was your plan, you would make sure to buy a stock option that had at LEAST 5 months on the contract. You also will have the possibility that you sell it well before that if the stock drops 8% or so. Additionally, if the stock is up 20% in 8 weeks it's a winner and it has proved itself to be worth holding on to. So you could sell the stock option and replace it with stock by executing your option, or you could roll over your stock option by selling your stock option and buying another option with 5 months or more on the contract so you add at least another 2 more months to the contract. This is very similar to the IBD CANSLIM method of investing only with in the money stock options. This is a very good one to use if you are transfering from a stock buying methodology to an option buying one.
As you become more comfortable with the strategy, you can begin to buy closer and closer to at the money options, or even try buying out of the money option. But the main point you will need to consider before doing this is understanding the risks.
Position sizing is how each individual position size corresponds to the amount of cash you have available. Theoretically you could have a very small position size such as 1%, and still be in danger if they are all call options and the overall market tanks if you do not have a large amount of cash available on the sideline. So position sizing is very closly linked to money management.
Money management encompasses exit strategy, position sizing, overall cash position, win/loss rate as well as the win payout to the loss payout, to form an overall profitable strategy that maximizes your long term growth potential without putting your bankroll at a high risk of ruin. The absolute optimal amount to invest to maximize a positive return is the "kelly criterion". However, be warned, this makes several assumptions that is not true in the stock market and the biggest one is that your investments or bets are independent. If investors move their money out of the stock market, all stocks will go down, and performance will generally be less for all investments. Because of this, you will have to figure out a safe amount to invest based on your entire average of your portfolio risk. This can get really complicated if you don't already have a good understanding of it already.
The Kelly Criterion is a formula that determines the most you can risk without sacrificing your long term growth potential. For example, if you had a 100% chance of winning you could risk everything and you should because there is no chance of you losing. But what if your chances of winning are 80% and a win doubles your money. For the individual bet, if you bet everything you have, you are maximizing your value for an individual bet, but this is greatly erroneous because if you lose everything you have, there is no chance you can recover. Eventually that will happen. You will lose 1/5 times and win the other 4. . If you bet 80% this means that if you start with 100 and lose you're down to 20% or 20. You will then bet 16 and win and get to 36 then 28.8 and you win and get to 64.8, then you bet 51.84 and you get to 116.64. Then you will be likely to lose again in the next couple times. Although this is profitable, when you lose again, your losses will be so large, that it will take more work recovering than if you bet less. If you lose twice in a row, you probably won't even get back to even before you lose again. This is bad money management and it actually doesn't produce the ideal results in the long run anyways.
You generally do not want your investment going up too much as you win, or down in size too much as you lose, and you don't want to have too high of a risk of ruin, so a wise decision would be to take 1/4th of the kelly criterion and consider it a flat rate and keep it that way without adjusting it unless the investment size becomes so large that you are investing 1/2 the kelly criterion. The ideal kelly criterion for the above example would be to bet 60%. You can test this by seeing how much you would have after losing once, then winning 4 times in a row.
However, the odds are not known in stock markets. Instead you have odds that vary. Overtime you may be able to conclusively say with 90% confidence that a particular strategy will beat the market over the next 50 years, but you might only be 90% confident that the strategy will win 55-65% of the time, and it could easily be on the low end. Just because you have data that suggests that you will win 60% of the time that has been studied over a long period, doesn't mean it's enough data to use with the kelly criterion. You have to take the low end of the range. If you are a stats major, you can figure this out, but if not, make sure you estimate on the low end of the percentage you will produce a win as markets change and you can't be sure that the past is a measure of future success, you can only be reasonable sure that it will generally fall into that range. Even so, there are studies that suggest there are "black swan events" or rare events that completely shape everything and that are understanding of what's likely may be wrong.
This is why I personally trade high tight flags with options or without, as they have shown to produce a "win" a very high percentage of the time in multiple studies. If it's wrong about hitting it's price target 90% of the time and it only hits it 60%, it can still be a profitable strategy if when you hit the target you win more than you lose. In fact, you can even lose more often than you win, but if you win big and limit your losses you can still be profitable.
If you properly manage the "time decay" that occurs with options, you can put your win ratio even higher. The reason is, an option is a contract for 100 shares that only cost the fraction of what buying 100 shares would. If the stock goes to zero, you are going to lose less owning 1 contract than you will with 100 options. However, if the gain happens overnight, you lose very little time value, and your gain in dollar amount is very close to the same. You lose less when you lose, and make more when you win. If you lose a dollar in the stock, you might lose 60 cents on the dollar by owning the option. If you gain a dollar in the stock, you might still gain 95 cents on the dollar. So if rather than owning 100 shares, you own a single contract, your risk reward is better. If you own the exact dollar amount you would control/own a lot more shares and have a lot more upside, however, you would be leveraged probably too much so and your downside would be significantly more. You will have a greater reward to your risk if you sell the option early. The reason is options decay exponentially. This means that the "extrinsic value" or value in terms of potential decays very little initially, and then begins to lose value at a much faster rate. If you sell the option early you avoid the large part of the decay, and the reward you get is so much greater than the risk that it can be profitable, assuming you have a strategy that is profitable already.
Once you understand all the above, you can consider how leveraged you want to be. If you had a regular strategy that involved buying stock, you can consider using options to add leverage and increase your return on your risk. If you already plan on having options, you can add the position size. You can consider adding even more leverage if you want to buy out of the money options, but they require agreater gain to be profitable and the chances of you using your entire investment are much larger, however you can produce monstrous gains when you win. This is more of a "lotto ticket" strategy because it's losing your investment a few times before producing a win. Once you determine how you are going to leverage, you will then have to go back and run through the first 3 and make sure your strategy is still adequete given the leverage.
Once you have all of this in mind, you can determine your methodology. Your stock selection strategy... Your option selection strategy. So for example you wanted to trade high tight flags. You would take a free screener like Zacks. You would then find stocks that trade options that have gone up 60% in the last 12 weeks. Depending on how many results, you may want to add solid earnings growth, and other things like that. Then you want to manually look at all of your results for a stock that has begun consolidation, or wait until you notice consolidation start to form. Then the high tight flag begins and it's when it breaks out that you can buy the stock option. You may buy multiple positions for multiple high tight flags as long as you keep your cash position large and you don't control too many more shares than you would have, never exceed the kelly criterion. If your win rate is estimated to be 90% assume it to be 75%. If you win 64% in a bull market and 40%in a bear market on average, assume there to be outliers that produce massive games that offset it and assume the market will trade against you and turn into a bear market and assume gaining 30 when you win. If you plan to have a 8% loss, assume a 16% loss as occasionally stocks will drop straight through the stop loss. If you are then told to invest 60% on a single bet, realize that your investments are somewhat dependent and assume you should never bet more than 30% of your whole portfolio and kee 70% cash. Then make 5 investments with that 30% just to be safe since the bets are somewhat dependent, and use in the money options to improve your return on your risk. You will still make plenty to keep your wealth growing, and still be able to get an adequete return. There's no sense in gambling when trading options. Understand now and every day, you are as inexperienced as you ever will be for the rest of your life, so it pays to be extra safe now, and you can always gradually increase the agression as your understanding and experience grows. Then if you go just a little bit too far, you can take it closer until you find that sweet spot where you are protecting your money yet still producing quality returns.
Important Stock Tips For Beginners
When it comes to stock market tips, there are all sorts of people offering you the hot tip of what to buy. However, this teaches you to be gulible and victem to the prey of people who look to exploit inexperienced investors. It's important to avoid a hot stock market tip if all it is is pumping up a stock. Certainly there may be a winner from time to time, but if you really want to become a winning investor, you have to find your own method.
The best advice anyone can give is for you to seek education, learn for yourself, read lots of books, and run the numbers and case studies yourself and see which works for you.
I have a friend that is the most patient man in the world. He would have been a perfect long term investor. But he got convinced that he could make money quickly and that making money quickly even if it was small amounts was the better route. It was so alluring to him that he invested in some training program. Another relative of his who fit that swing trading style perfectly, had success with that system. However my friend joined this system and didn't want to put stop losses. The system taught him to buy the dips when a stock was oversold, and set a stop for money management. He got caught up in the concept that this program taught which was, the more oversold it is, the better purchase it is. He thought, why would I want to sell a stock that's even cheaper? He had the classic value investor mentality, the problem was he wasn't finding value stocks. So instead he ended up spending all of his money on new stock tips and services and started swing trading. He couldn't find any stock to buy that was a good value with this method because this method was technical trading only. So he ended up losing money with this system when a few stocks traded horrendously downward, then bounced but not back to where they were. My friend was patient, but the business had been losing money and it wasn't a good choice for him.
To make a long story not any longer than it already is, he finally discovered value investing, which fit his style and he now makes about 14% per year. Now perhaps he can refine his skills and make more, but he's struggling to get back to where he was because he had such devastating loss trading a style that he's not meant to trade in.
Me personally, I'm a numbers guy. I had a similar problem following my friend into value investing because he had success. I then tried swing trading and lost a lot trading leveraged etfs and inverse ETFs. I like to know the odds of a win, the deviation, how much is safe to bet, what my risk of ruin is, what my win ratio is and all sorts of things like that. So I've finally found a style that works for me. I come from a background of playing poker, knowing money management and odds, so I always thought the transition would be easy. But in order to do treat investing similar to what I'm familiar with, I need concrete numbers. Unfortunately there isn't much information telling you how likely a stock is to win, and it isn't set in stone, unlike poker where there are always 52 cards in a deck and you always know how many cards will be dealt. There's data suggesting that Warren Buffett has made a lot value investing because he finds strong earnings, but how can you put measurements on a "long term competative advantage". You can estimate the return, but it's hard to determine the risk of a company coming along and replicating the success. Buffett is great, but he's just not for me, I can't sit on a stock for 10 years while worried about funding and other companies taking over and I don't know enough about business to do that. I need to measure risk vs reward within a single action.
That begs the question... if a stock pattern makes something that is bullish, is it bullish because when it does produce a "win" it goes up 1000% and it only needs to win once every 10 times and that's if it loses 100% when you're wrong, or once out of 100 times if you have a 10% stop loss? How do you know this? Or is it bullish because it wins 80% of the time but only will go up 5% before going back down again? These are things a number guy needs to know. I'm not intuitive I have no idea what the volume is telling me exactly.
The first step was to identify a book that would teach me plenty of information on chart patterns. It had been backtested to see what the average move upwards was, what the average win ratio was and other useful information. The book was Encyclopedia of Chart Patterns by Thomas N. Bulkowski. He also has a book about candlestick patterns, but candlestick trading isn't my cup of tea because the holding period is too short... I'd rather not spend so much buying and selling and losing fees... I want the system to work for me so I can sit back and let it work. So I read his book, I ran through the numbers, and gave myself a hypothetical investments. I wanted to see based on 1 full "kelly" of risk which gave me the best return with a 7% stop loss(using the kelly criterion). For more information on using this in investing consider this article titled "How much do you make per dollar risked per day?".
So I gained the insight needed to make intelligent investments. I now have a trading system where I trade stocks using high tight flags. Once I identified that I wanted to trade high tight flags I looked at some methods using high tight flags. I needed to read a few more books and one of them was William J O'Neil's "how to make money in stocks - in good times and in bad". That gave me a lot of solid rules but I also needed to make sure I didn't fall into compulsive decisions based on having the wrong mentality. I needed to know I was vulnerable to making mistakes so I read Alexander Edler's "Trading For a Living". That pretty much rounded out my style, but a few other books can still probably help me improve.
My most recent trade involved buying HDY at $3.2. It's now trading over twice that in less than a month over $7. However, with the 25% stoploss in place, if it were to all go south from here, I would still lock in a 82.3% gain assuming it didn't drop below the stop order overnight and sell below it, which can occasionally happen. The other stock I own is up enough where even if it traded below it's 20% trailing stop I would still have a nearly 4% gain so that means there's a very slim chance I will lose in either trade and most likely I stand to make a lot of money. I certainly can't promise you those kinds of gains, and I went through a lot of ups and downs before I found a style that works for me... and it's a constant process. There is still more stock market education that I need to get. However, if you're looking for a stock tip, ignore the noise, decide what style works for you and gain stock market information until you are satisfied and can put it into a system or methodology that works for you.
The best advice anyone can give is for you to seek education, learn for yourself, read lots of books, and run the numbers and case studies yourself and see which works for you.
I have a friend that is the most patient man in the world. He would have been a perfect long term investor. But he got convinced that he could make money quickly and that making money quickly even if it was small amounts was the better route. It was so alluring to him that he invested in some training program. Another relative of his who fit that swing trading style perfectly, had success with that system. However my friend joined this system and didn't want to put stop losses. The system taught him to buy the dips when a stock was oversold, and set a stop for money management. He got caught up in the concept that this program taught which was, the more oversold it is, the better purchase it is. He thought, why would I want to sell a stock that's even cheaper? He had the classic value investor mentality, the problem was he wasn't finding value stocks. So instead he ended up spending all of his money on new stock tips and services and started swing trading. He couldn't find any stock to buy that was a good value with this method because this method was technical trading only. So he ended up losing money with this system when a few stocks traded horrendously downward, then bounced but not back to where they were. My friend was patient, but the business had been losing money and it wasn't a good choice for him.
To make a long story not any longer than it already is, he finally discovered value investing, which fit his style and he now makes about 14% per year. Now perhaps he can refine his skills and make more, but he's struggling to get back to where he was because he had such devastating loss trading a style that he's not meant to trade in.
Me personally, I'm a numbers guy. I had a similar problem following my friend into value investing because he had success. I then tried swing trading and lost a lot trading leveraged etfs and inverse ETFs. I like to know the odds of a win, the deviation, how much is safe to bet, what my risk of ruin is, what my win ratio is and all sorts of things like that. So I've finally found a style that works for me. I come from a background of playing poker, knowing money management and odds, so I always thought the transition would be easy. But in order to do treat investing similar to what I'm familiar with, I need concrete numbers. Unfortunately there isn't much information telling you how likely a stock is to win, and it isn't set in stone, unlike poker where there are always 52 cards in a deck and you always know how many cards will be dealt. There's data suggesting that Warren Buffett has made a lot value investing because he finds strong earnings, but how can you put measurements on a "long term competative advantage". You can estimate the return, but it's hard to determine the risk of a company coming along and replicating the success. Buffett is great, but he's just not for me, I can't sit on a stock for 10 years while worried about funding and other companies taking over and I don't know enough about business to do that. I need to measure risk vs reward within a single action.
That begs the question... if a stock pattern makes something that is bullish, is it bullish because when it does produce a "win" it goes up 1000% and it only needs to win once every 10 times and that's if it loses 100% when you're wrong, or once out of 100 times if you have a 10% stop loss? How do you know this? Or is it bullish because it wins 80% of the time but only will go up 5% before going back down again? These are things a number guy needs to know. I'm not intuitive I have no idea what the volume is telling me exactly.
The first step was to identify a book that would teach me plenty of information on chart patterns. It had been backtested to see what the average move upwards was, what the average win ratio was and other useful information. The book was Encyclopedia of Chart Patterns by Thomas N. Bulkowski. He also has a book about candlestick patterns, but candlestick trading isn't my cup of tea because the holding period is too short... I'd rather not spend so much buying and selling and losing fees... I want the system to work for me so I can sit back and let it work. So I read his book, I ran through the numbers, and gave myself a hypothetical investments. I wanted to see based on 1 full "kelly" of risk which gave me the best return with a 7% stop loss(using the kelly criterion). For more information on using this in investing consider this article titled "How much do you make per dollar risked per day?".
So I gained the insight needed to make intelligent investments. I now have a trading system where I trade stocks using high tight flags. Once I identified that I wanted to trade high tight flags I looked at some methods using high tight flags. I needed to read a few more books and one of them was William J O'Neil's "how to make money in stocks - in good times and in bad". That gave me a lot of solid rules but I also needed to make sure I didn't fall into compulsive decisions based on having the wrong mentality. I needed to know I was vulnerable to making mistakes so I read Alexander Edler's "Trading For a Living". That pretty much rounded out my style, but a few other books can still probably help me improve.
My most recent trade involved buying HDY at $3.2. It's now trading over twice that in less than a month over $7. However, with the 25% stoploss in place, if it were to all go south from here, I would still lock in a 82.3% gain assuming it didn't drop below the stop order overnight and sell below it, which can occasionally happen. The other stock I own is up enough where even if it traded below it's 20% trailing stop I would still have a nearly 4% gain so that means there's a very slim chance I will lose in either trade and most likely I stand to make a lot of money. I certainly can't promise you those kinds of gains, and I went through a lot of ups and downs before I found a style that works for me... and it's a constant process. There is still more stock market education that I need to get. However, if you're looking for a stock tip, ignore the noise, decide what style works for you and gain stock market information until you are satisfied and can put it into a system or methodology that works for you.
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