Thread: What is Stock Trading.

What Are Bollinger Bands?


Bollinger bands are an integral part of just about every charting system We have ever seen but many traders are unfamiliar with how to use them. The bands are plotted at a standard deviation (statistical term for measuring volatility) around a moving average. Typically the standard deviation used is 2.
A simple moving average in the middle. Most charting software defaults to a 20 period moving average.
An upper band calculated around a simple moving average plus 2 standard deviations.
A lower band calculated around a simple moving average minus 2 standard deviations.
For our examples we will use the most common setting of a 20 period simple moving average. This will give us 3 bands, the middle band of a 20 period simple moving average and the upper and lower bands calculated around the middle band with standard deviation of 2. The closing price is most commonly used to calculate the moving average.
The Squeeze

The squeeze (tightening) is a period of low volatility and often happens before a big move. It can also help identify potential breakout areas

Reversal

In conjunction with other indicators you can identify potential reversal points.

Trending Following

Although Bollinger bands will not tell you when the trend has started if you combine it with certain indicators they will confirm the trend.

Our Use Of Bollinger Bands

As we mentioned earlier Bollinger bands are not really meant to be used as a signal generating indicator but in conjunction with another indictors can be very useful. We like to use Bollinger bands and RSI together to generate possible buy and sell signals or to confirm overbought or oversold areas. When the RSI reads below 30 and price is touching or pushing through the lower band then we know we are oversold and We will either consider buying the market or close existing short positions.

Best Regards
Mark,

Commodities Are The Best Place
To Be For The Next Decade

Why invest in commodities? Two and a half billion people are going to live like Americans in the next 20 years and prices go up over time, that’s the nature of inflation.
We are in the middle of a global economic crisis and commodities are on sale. Buy commodities now while they are still cheap. When we finally emerge from this global economic crisis -- prices will explode higher. I’m talking about another long-term bull market in commodities. Let me explain…
Inflation Will Push Commodities Prices Higher
Federal Reserve Chairman Ben Bernanke is an inflationist, which is an advocate of the policy of deliberate inflation achieved by increasing the supply of available currency and credit. They call him helicopter Ben because he once quoted a statement made by Milton Friedman, about using a "helicopter drop" of money into the economy to fight deflation.
Bernanke is a student of the causes of the Great Depression, and he has written extensively on this subject. Bernanke knows that deflation is quite negative for an economy and should be avoided at all costs. We have recently seen deflation as prices for real estate and commodities dropped during this recession. But, Ben Bernanke’s Fed and other central banks around the world have fired up the printing presses to combat deflation. They have been dumping new currency into the economy to reverse deflation and stimulate the economy. It’s working! One measure of inflation- the Consumer Price Index (CPI) has recently turned positive. Deflation is out—Inflation is starting.
The problem is, inflation could really skyrocket, especially when we finally emerge from this recession. Inflation eats away at your purchasing power and takes away your wealth.
One of the best ways to protect against inflation is to invest in commodities.
In the 1970s, when inflation in the U.S. was high and the economy was in a deep recession, commodity prices soared.

You want to own tangible assets like metals, energy, agriculture, and livestock as these commodities hold their value in inflationary times

Best Regards

Mark,.

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Exploding Population and Living Standards will Push Commodity Prices Higher
We have already seen a surge in demand for commodities from developing countries, like India and China. Plus, global commodity supplies are low; the inventories for food are the lowest they have been in 50 years. Rising income levels in emerging countries and the spread of western ideologies are having an effect on food consumption. We are seeing greater consumer demand for certain foods like meat and poultry.

The Earth's population is estimated to be about 6.77 billion, and the world's population is expected to reach 9 billion by the year 2040. The world’s masses are already demanding more vegetables, fruits, meats and dairy products. Imagine what the demand for agricultural products will be in 10 to 20 years.
Growing global demand from population growth and a rising standard of living will push commodity prices much higher.

Best Regards
Mark

The Rules of Day Trading

Note: These Rules Are Only For Day Trading, Not For Long Term or Position trading.
A trading plan is essential for success. It is utterly impossible to succeed at trading without a concrete plan. The following are suggestions, some general, some specific, that I think will help traders achieve their goals.
GENERAL POINTS
• Homework:
The study of specific scripts and their relationship to the overall market is essential. It is suggested that the trader work at least one hour outside of market hours on familiarization with scripts that could be traded the next day. As time goes on, the trader will have greater understanding of the widely traded scripts, and will be able to better judge information for potential opportunities. Weekends require at least 2-3 hours of study to setup for the following week. The trader should be prepared to spend a minimum of 10 hours a week outside market hours on this planning and study.
• Schedule:
A standard schedule is essential. The trader should arrive at the trading center 45 minutes before the market opens (or more) and plan on being there all day. Before the market opens: The trader should have a list of potential trading scripts from his homework from the prior evening.

He should look at these as to how they traded intraday the day before, and draw conclusions as to whether or not he will follow them when the market opens. The trader should have his attention on the market, and on nothing else, be rested, and be ready to attack the market. If there is some outside influence that could take attention off the market, the trader should cease trading until the situation is addressed and handled, and he can trade without external influences that could have a detrimental effect.
• Taking heat:
This is the term used for watching a trade go the wrong way. It is the number one reason why traders lose money. Losses are inevitable. Nobody makes money every day. The key to winning overall is to limit the losses and offset them by winning trades.

The trader should never take more than a set limit of heat. In our personal experience, it is extremely difficult to set a number limit on how much heat, such as one-half a point, etc.
• Maximum Shares per Trade
Traders with little experience get wiped out by trading large amounts of shares. Until the trader is making money consistently, i.e. 10 trading days in a row with no losing days, the number of shares should be limited
• Mistakes
Traders make mistakes. The most common mistake is to sell when one wants to buy, and vice versa. The computer can go down, the feed to the exchange can be interrupted. There are a lot of things that can go wrong. The trader must assume full responsibility for any mistake that occurs. Open positions should be exited immediately (almost always at a loss) when a mistake occurs.
• Number of Trades Per Day
Trading too much in one day is the third reason why traders lose money consistently. There is absolutely no reason to trade more than 5 trades per day. The maximum number of trades should be limited to 5 per day.
• Maximum Positions at One Time:
The trader should try and limit himself to one open position at a time. Two positions is acceptable, but three is not. This is more of a general rule

Holding overnight is usually done to try and avoid a loss. Holding overnight for an expected gain is too risky for the trader.

keep in mind this is for day traders All rules are made to be broken. All rules can be safely broken under certain circumstances. But in my experience, breaking more than one rule is a grave mistake, and reduces the possibility of success to less than 25%. It should not be done.
• Trading Regimen
Every trader has a regimen; a style or set of rules that he follows to choose trades. For example, most day traders use technical analysis as part of their personal regimen to form conclusions.

The personal regimen would include the specifics of what indicators are used and why. These regimens are constantly being refined and polished, due to the fact that the market changes all the time, and what worked 6 months ago may not work now. The trader must have a personal regimen, a specific set of rules or guidelines that he follows.

This must be in writing. These guidelines must be his own, in other words, he must not use another trader screaming or some computer program, or anything else, to make his FINAL decisions.

He must make his final decisions himself, and he can't do it without a personal regimen.

The personal trading regimen helps the trader refine his skills and learn what works and what does not. He can change his regimen at any time, of course, but he must have something to change.


Best Regards
Mark,

Successful Trading Strategies

Success Leaves Clues
There are certain 'Business Rules' that successful investors and traders adhere to. If you were able to model these business rules then maybe it's possible for you to also achieve similar results. You would need to understand and appreciate the beliefs, attitudes and behavior, as well as the timing and sequencing of the strategies that successful traders implement.
• Trading provides one of the last great frontiers of opportunity in our economy. It is one of the very few ways in which an individual can start with a relatively small bankroll and actually become a multimillionaire.
• Of course, only a handful of individuals succeed in turning this feat, but at least the opportunity exists.
A rigid stop-loss rule is an essential ingredient to the trading approach of many successful traders.
• If We wanted to become a successful trader, We would seek information and advice from the most successful traders We could find. If we wanted to become a failure, we would seek advice from men who had never succeeded. If we wanted to succeed in all things, we would look around us for those who are succeeding and do as they have done.
• Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don't stay with your winners, you are not going to be able to pay for the losers.
• In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader.
One other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.
• Whenever We enter a position, we have a predetermined stop. That is the only way we can sleep. we know where we are getting out before we get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. We never think about other people who may be using the same stop, because the market shouldn't go there if we are right.
• If you personalize losses, you can't trade. When things go bad, traders shouldn't stick their head in the sand and just hope it gets better. You should always have a worst-case point. The only choice should be to get out quicker. The worst mistake a trader can make is to miss a major profit opportunity. 95 percent of profits come from only 5 percent of the trades.
• Probably our best technique is not picking up the phone to close out a winning trade. Show us the charts, and we'll tell you the news. Have an opinion on what the market should do but don't decide what the market will do. Be happy with a percentage of the move.
• We spend our trading trying to make Ourselves as happy and relaxed as we can be. If we have positions going against us, we get right out; if they are going for us, we keep them.


Best Regards
Mark,

We am always thinking about losing money as opposed to making money

• The most important rule of trading is to play great defense, not great offense. Every day we assume every position we have is wrong. We know where our stop risk points are going to be. We do that so we can define our maximum possible draw down. Hopefully, we spend the rest of the day enjoying positions that are going in our direction. If they are going against us, then we have a game plan for getting out.
• Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead.
• We know that to be successful, we have to be frightened. Don't focus on making money; focus on protecting what you have.
• The traits of a successful trader: The most important is discipline – Everyone says that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win. If you can't take a small loss, sooner or later you will take the mother of all losses.
• There are old traders and there are bold traders, but there are very few old, bold traders.
• If you argue with the market, you will lose. It is incredible how rich you can get by not
• We have two basic rules about winning in trading as well as in life: 1. If you don't bet, you can't win. 2. If you lose all your chips, you can't bet.

Frankly, We don't see markets. We see risks, rewards, and money

• The markets are always changing, and the successful trader needs to adapt to these changes.

The secret for winning in the stock market does not include being right all the time

• Some people say, "I can't sell that stock because I'd be taking a loss." If the stock is below the price you paid for it, selling doesn't give you a loss; you already have it.
• Letting losses run is the most serious mistake made by most investors.
• The whole secret to winning in the stock market is to lose the least amount possible when you're not right.
• Before taking a position always know the amount you are willing to lose.


Best Regards
Mark,

You can't make money if you're not willing to lose.

• To be a money master, you must first be a self-master.
• Investors are the big gamblers. They make a bet, stay with it, and if it goes the wrong way, they lose it all.
• The goal of a successful trader is to make the best trades. Money is secondary. If this surprises you, think how good professionals in any field operate. Good teachers, doctors, lawyers, farmers and others make money - but they do not count it while they work. If they do, the quality of their work suffers.
• Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It's not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.
• It's very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you're doing if you're a successful trader.
• The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science. Don't think about what the market's going to do; you have absolutely no control over that. Think about what you're going to do if it gets there.
•
• The single most important element to being successful in the markets is having a plan. First, a plan forces discipline, which is an essential ingredient to successful trading. Second, a plan gives you a benchmark against which you can measure your performance.


Best Regards
Anad,

Reason To Lose the Money In Stock Market

Here are some of the more common reasons:
1: "NO EXIT STRATEGY" The level of greed determines how much loss a person will incur in the stock market.

2) Following the crowd - Some investors just follow blindly because they are unsure of what to do. So they buy stocks based on half-truths and rumors and end up losing a lot of money.

3) Making investments based on emotions - This is a big mistake. Some investors simply do not know when to cut their losses. They let their emotions get the better of them. As a result, they pour more money into the stock market when they should have cut losses and moved on. This is tantamount to gambling, and should be avoided at all cost.

4) Incomplete due diligence - Some investors are just plain lazy. Even with detailed prospectus and documentation lying in front of them, they just refuse to pick them up and digest the information.

5) Fear. When investor is afraid of losing money in the stock market, he may eventually lose it. It takes a man to first see money with his mind before he can see it with his eyes.
6) Ignorance. Ignorance is a killer and to kill ignorance about the stock market, investor need to educate himself by attending financial seminars, reading books and other materials about capital market.
Regards,
Mark,

Single stock futures are futures contracts on individual stocks. There are currently over 80 well-known stock futures such as IBM, eBay, and Philip Morris. These futures products provide investors with a cost-effective vehicle for participating in U.S. equities markets.

A stock futures contract is an agreement to deliver shares of a specific stock at a designated date in the future, called the expiration date. Most stock futures contracts are not held until expiration because traders typically offset their position - selling if the trader is long or buying if the trader is short.

The price of an equity futures typically tracks the price of the underlying instrument nearly tick for tick, so trading strategies followed in the stock market are generally transferable to the stock futures market. Single stock futures may therefore be used with a broad range of trading strategies and for a variety of portfolio management needs.

When a stock future is traded, both the buyer and seller put up a good faith deposit called margin. The margin requirement for security futures is generally 20% of the underlying value of the securities, although this requirement may be lower if the investor also holds certain offsetting positions in cash equities, stock options, or other security futures in the same securities account.
Advantages of Single Stock Futures
• With margin requirements of 20%, single stock futures provide a highly capital efficient way to participate in equities.
• No uptick is required to establish a short position.
• Short sellers may benefit from eliminating the costs and inefficiencies associated with the stock loan process.
Vivek.