How to trade!

How to Trade - Book Review - John Murphy, Intermarket Analysis

The majority of literature that discusses asset allocation linking multiple markets has a heavy dose of macro and microeconomics. Typically, macro-micro relationships require applying econometric models to comprehend the structural linkages between the two intertwined fields of economics. John Murphy removes the hard statistical methods while retaining the economic logic with chart-based reasoning.

John Murphy was the technical analyst for CNBC-TV for seven years and a professional analyst for over 25 years. His career includes time at Merrill Lynch as a Director of Commodity Technical Analysis. John has his own consulting firm, JJM Technical Advisors. He is also president of MurphyMorris, Inc., which was created to produce educational software products and online services for investors.

There are adequate reader reviews on Amazon and Google Book Search, to help you decide if you will get the book. For those who have just started or are about to read the book, I've summarized the core concepts in the larger and essential chapters to help you get through them quicker.

The number on the right of the title of the chapter is the number of pages contained within that chapter. It is not the page number. The percentages represent how much each chapter makes up of the 246 pages in total, excluding appendices.

1. A Review of the 1980s. 16, 6.50%.

2. 1990 and the First Persian Gulf War. 16, 6.50%.

3. The Stealth Bear Market of 1994. 18, 7.32%.

4. The 1997 Asian Currency Crisis and Deflation. 14, 5.69%.

5. 1999 Intermarket Trends Leading to Market Top. 16, 6.50%.

6. Review of Intermarket Principles. 16, 6.50%.

7. The NASDAQ Bubble Bursts in 2000. 18, 7.32%.

8. Intermarket Picture in Spring 2003. 16, 6.50%.

9. Falling Dollar During 2002 Boosts Commodities. 14, 5.69%.

10. Shifting from Paper to Hard Assets. 14, 5.69%.

11. Futures Markets and Asset Allocation. 20, 8.13%.

12. Intermarket Analysis and the Business Cycle. 20, 8.13%.

13. The Impact of the Business Cycle on Market Sectors. 18, 7.32%.

14. Diversifying with Real Estate. 18, 7.32%.

15. Thinking Globally. 12, 4.88%.

Focus on chapters 3, 7 and 11-14, which makes up about 46% of the book. Especially chapters 11-14 are relevant for practical trading purposes. Unlike my prior book reviews, where I've summarized the key points for each focus chapter, I will summarize the key points across chapters 3, 7 and 11-14. This is to recognize the connectivity of intermarket relationships across the 4 main asset classes of Stocks (Equities), Bonds, Currencies and Commodities. The context of the summary is to be viewed from a retail option trader's perspective.

Here are the Key Directional Intermarket Relationships in brief.

The U.S. Dollar (USD)

• USD turns up as Bonds rise under normal conditions but Bonds fall during deflationary periods. USD turns down as Bonds fall but Bonds rise during deflationary periods.
• USD turns up as Commodities fall. USD turns down as Commodities rise.
• USD turns up as Stocks rise but Stocks fall during deflationary periods. USD turns down as Stocks fall but Stocks rise during deflationary periods.

The USD remains the most liquid of all major traded currencies and maintains its position as the primary global reserve currency, despite growing sentiment for an alternative basket of currencies to replace it.

Bonds

• Bonds turn up as the USD falls but the USD rises during deflationary periods. Bonds turn down as the USD rises but the USD falls during deflationary periods.
• Bonds turn up as Commodities fall. Bonds turn down as Commodities rise.
• Bonds turn up as Stocks rise. Bonds lead Stocks and Stocks lag behind Bonds. Bonds turn down as Stocks fall. Again, Bonds lead Stocks and Stocks lag behind Bonds.

Commodities

• Commodities turn up as the USD falls. Commodities turn down as the USD rises.
• Commodities turn up as Bonds fall. Commodities turn down as Bonds rise.
• Commodities turn up as Stocks fall. Commodities turn down as Stocks rise.

Stocks

• Stocks turn up as the USD rises. Stocks turn down as the USD falls.
• Stocks turn up as Bonds rise. Stocks turn down as Bonds fall. Again, Bonds lead Stocks and Stocks lag behind Bonds.
• Stocks turn up as Commodities fall. Stocks turn down as Commodities rise.

Specific to Equities, as you trade the options on Sector Indexes of the S&P 500, please be aware of the correlation versus non-correlation with other equity and non-equity traded products. I am stating in brief, the more commonly known relationships that are repeatedly elaborated on in the book:

• Changes in Energy (XLE) especially Oil (OIH, OSX) impacts Semiconductors (SMH, SOX).
• Utilities (XLU, UTH, UTY) are negatively correlated with Semiconductors (SMH, SOX).
• With broad-based Equity Indexes, the highest correlation is between Dow Jones and S&P 500.
• Canada benefits from rallies in oil being the ninth largest producer of crude oil globally. While Japan, a major net oil importer suffers. The tickers for this inter-play would be FXC/XDC (Canadian Dollar), FXY/XDN (Japanese Yen) and OIH/OSX (Oil).
• Gold (XAU, GLD) behaves like the Australian Dollar (FXA, XDA). Australia is the third largest producer of gold globally.
• Top three currencies that have the tightest correlations with commodities are the Australian Dollar, the Canadian Dollar and the New Zealand Dollar.
• Gold/Silver (XAU, GLD) has very little correlation with other Indices.
A deeper understanding of these inter-plays can help you construct effective pairs trading methods.

In conclusion, from a retail option trader's viewpoint, always remember that it is volatility that you are trading. To trade the volatilities across multiple asset classes, use an optionable Index representing that particular asset class. Remember, Implied Volatility can be added to or reduced from your portfolio, as not all Asset Classes or Sectors or Individual Companies or Countries move up/down in value ALL at the same time; and/or, ALL at the same rate.

This is not a criticism of the book but a personal observation. It does not address the use of Relative Strength as a mechanism to cycle in or cycle out of an asset class, as one asset class weakens or strengthens against another asset class. I have written about Relative Strength in another article, entitled "Stock Option Trading - Fundamental Flaw in Fundamental Analysis and Stock Picking". Please read it as a supplement to this article.

Thanks for reading my article,
Clinton Lee.
Founder, Home Options Trading: a uniquely retail-focused option-centric trading firm.

Please see Consistent Results (http://www.homeoptionstrading.com/consistent_results/), displaying the Model Portfolio's Performance YTD, updated each month-end. The portfolio models a typical self-directed retail option trader's account up to USD $50,000. Here's the stats in summary:
Return: Profit/Start of Year Cash Balance = up +75.62%.
Win/Loss Probability = 90.48%. 9 Wins per 1 Loss. Average Win/Average Loss = $3.09 Won per $1 Loss. Performance Ratio = (Win/Loss Probability) x (Average Win/Average Loss) = 90.48% x $3.09 = 2.80. Positive Expectancy = $1,051 per trade.

Preview an original 55 hour video-based course for online options trading from home, at http://www.homeoptionstrading.com/original_curriculum.html
Purchase the curriculum and receive a $800 options basic course as a Bonus!

Clinton's career spans 16 years of treasury, finance and banking across Hewlett Packard, JP Morgan Chase, Citibank; and, is currently a Corporate Director for Regional Business Development with ABN Amro (acquired by RBS) in Asia. Despite the years in the finance/banking industry, it did not help him directly grasp online options trading from home.

Article Source: http://EzineArticles.com/?expert=Clinton_Lee

The best stock option trading software

The Best Day Trading Software - How to Find the Best Software That Will Make You a Lot of Money

Day trading software is one of the best ways of stock trading; it is a fully automated system that makes use of twenty three professional stock trading tips and twenty three price patterns to assess which stock is likely to go high and is worth investing in. The software is quite complex in its application - it can literally watch thousands of stocks at once - but easy to use. Those who are new to stock trading should undertake the video training offered by the software developer if they want to get the best out of their investment.

The most basic description of this Day Trading Software is that it is a means of analyzing stocks and what they are doing. Contrary to most people's expectations, the Day Trader does not go for large stock, but for small penny stocks that will bring you a good return of several hundred dollars each day without a great deal of risk. Basically the software views thousands of stocks at a time and uses professional stock trading methods to analyze what it sees. The Robot also matches stock with any one of twenty three different pricing techniques and if the stock forms one of those techniques then it will be watched to see whether it is going to rocket, if that happens the Robot will notify you with a bleep.

The technical stock analysis that the trading software makes is not limited to the software, it is a process that is used by professional stock traders all of the time to see which stock will give them the best return. The process of technical analysis is used by share traders, option traders and mutual fund managers, as well as the trading software. If you are just starting out with the Day Trading Robot then you won't get the software but you will get a tip on the market every day.

One of the great features about the Day Trading Robot is that the software has the ability to monitor and change its approach when dealing with stocks by checking what it has predicted against the outcomes of the tip.

People who use the software and undertake the training that is offered by the developer say that once they have learned about the twenty three pricing patterns and how to identify when a stock is forming one, make themselves a lot of money every day. These techniques will allow you to identify a lot more lucrative stock trades with very little risk attached to the investment. One thing that new traders learn from the software, is that it is often more lucrative in the long term to identify small penny stocks, than it is the big ones.

You will find Day Trader Software if you go over to Ivan's site where he will tell you how to get the software and the training videos. You may also get other training materials that will help in your stock trading career.

Tackle the issues surround stock trading by letting a professional software find the next big penny stocks for you. You don't have to sit back and wait for others to take away riches; you can use the Day Trading Robot to handle all of the risks. This is the most accurate stock picking robot in history and it is completely risk free for 60 days.

Article Source: http://EzineArticles.com/?expert=Peter_Skotnicky

Use stock option trading softwarethe right way!

Invest Smartly With Investment Software Programs

Stock investors can benefit greatly with a variety of investment software programs for stock trading. If you're currently stock trading and investing in the capital and mutual funds marketplaces, an investment software will make tracking, streamlining, buying, and selling of your portfolio much easier.

If you're a very serious stock trader, then you have to get one of these programs to make your life easier and more productive. Information is the most important piece of investing. Analysis of all incoming information regarding stock prices and quotes is also important to make you money. This analysis determines what you will buy, sell, trade, or keep. This is where money is made in the market.

Having all the information organized in a digestible and easy to comprehend way will save you a tremendous amount of of time when decision-making is crucial. Investment software programs couldn't be any more helpful. A quality analysis program for investing can help you located and uncover many hot stocks and obscured ones worth buying for the day. It will also uncover niche stocks that you've never looked into before. The result is more money made at the end of the day.

Different types of investing software exists for your picking. The basic software programs will help you spot trends on a chart and analyze the risk and reward using real-time charts and graphs in pictorial and bar form. A stock's performances on the floor will be recorded and sketched onto these graphs for analysis.

This shows the companies progress over time so you can decide if they're worth buying or selling. Customization is also available as a savvy option for traders. Consider picking up a program today to bolster your trading and investment results for long term success.

If you want to find out more about our investment software recommendations, check out our stock investing software articles.

Zhi Huang is a freelance writer, internet marketer, and fitness enthusiast.

Article Source: http://EzineArticles.com/?expert=Zhi_Q_Huang

Currency trading stock market trading tradingguideonline

A Quick Introduction to Currency Trading

There are three different types of currency trading; forex, foreign exchange and fx. These types of currency trading involve exchanging one currency for another. The aim is to make profit when the exchange rates change. The exchange rates constantly change due to world events and changes in the stock exchange, so there is always money to be made on a daily basis.

A good example of this is if someone exchanges US dollars for British pounds. If you exchanged $100 right now, you'd likely get £65. Then if you wait a few days for the exchange rate to change in your favor, you could potentially exchange that £65 for $102. So, you would have made a $2 profit, or 2% of your investment.

Experienced currency traders do this sort of thing, day in, day out, hoping that they boost their bank balances through a number of small trades. Usually, the experienced traders will trade on margins so they can control the large amounts with only a small investment on their part. From the above example, you would only have to hold about $10 in your brokerage account to make the purchase. Even though you are $90 short as the amount is $100. Your broker will usually cover the rest of the money, if they can assume that the market is not going to change by more than 10% in a short period of time.

It's likely that you've only just recently found out about forex trading, and that's because it only became an available option to the public when the Internet was invented. Forex trading has been going on for 30 years or so, but before the Internet only banks and other rich institutions traded. But these days, regular people like you and me can trade thanks to the power of the Internet. The banks are still the major players in the game though. Around $4 trillion dollars changes hands every day in currency trading, but only a small part of that belongs to us, regular individuals.

You can make a currency trade at almost any time of the day or night, due to foreign exchange being a worldwide market. For example, in Australia they open up the market first every single day, and when that market closes for the day, the New York one opens up. So for 5 days a week foreign exchange is truly a 24 hour market.

Many new traders believe that they are limited to dealing in their own currency, but that's not the case at all. If your local economy is in an unpredictable state, you can choose to trade different currencies that are more stable. Sometimes dealing with currencies that are unstable can be very rewarding, but it's also very risky. So stick to the stable currencies that are not volatile.

You can get started as a trader today with just a few hundred dollars, there are brokers out there that will allow you to do this by providing you with special software that allows you to make trades on your account.

You should know that foreign exchange is a high liquidity market, meaning that the money you invest will not be tied up for long periods of time unlike other stock investments. That's one of the main attractions of trading currencies.

If you have the funds and you're ready to start trading currency you need to possess a few tools that are vital to succeeding with forex. You need good money management skills, self discipline and a profitable system that you need to follow. A decent forex robot to apply your profitable system could be beneficial to you too! Once you possess these skills, and you have the money to invest you can be come quite a successful currency trader.

To learn more about making life changing cash by Forex Trading including tips on Forex Robots visit http://secretsofforexttradingrobots.weebly.com/

Article Source: http://EzineArticles.com/?expert=Jay_Robert_Edwards

Stock option trading software - Find The Best

How to Find a Powerful Money Making Day Software Stock Trading Software

Day software stock trading has been putting newbie traders on the same level as those who have been doing it for years for quite some time now. How it works is that it's a stock picker which analyzes and dissects real time market data and finds stocks which are set to go on profitable trends using mathematical algorithms so that you can trade accordingly and get in and out of profitable trends at peak times. Here is how to find the best day software stock trading software.

A very easy way to separate the worthy programs from the shams just trying to hop on the success of those which do work is to make sure that the publisher of the day software stock trading program which you are looking at offers a full money back guarantee. Besides being a sign of good faith and one that the publisher stands behind their product, this is also an opportunity to try the program first hand and follow its picks' performances in the market, in fact many publishers encourage it.

Another very important aspect to make sure that the day software stock trading option which you are looking at has is that it focuses on penny stocks exclusively. Some programs are designed to only generate penny stock picks, and this is ideal as penny stocks are not only lower risk investments in general, but they also offer a great deal of more profit potential than normal stocks.

For example, the first penny stock pick which I received from the day software stock trading program which I use was valued at 15 cents a share. I bought a thousand or so shares of this stock with my online trading account and logged out. Not even two days later I logged back in to have my jaw drop when I saw that that 15 cent stock had more than doubled up to 31 cents a share. It continued to climb for a bit before dropping quickly again. I had heard of fluctuations and bursts like this but had never witnessed one that I was invested in with my own eyes. But that is just to give you an idea of the kinds of picks which you can receive with a competent day software stock trading system program.

When in doubt, user reviews are also typically good places to refer to when looking for the best day software stock trading program from those who have used them. Click on the link in this paragraph to find my review site and begin realizing your financial independence immediately.

Article Source: http://EzineArticles.com/?expert=Jonathan_Langley

Forex Trading - WARNING!

Beware of the Risk in Forex Trading - Never Risk the Money You Can't Afford to Loss

I know as well as you know that there is a lot of money to be made in forex trading. Here, profitability in forex trading is expressed in a number of ways. In the forex area, you do not have to have a lot of stupendous wealth to trade the market. This is because unlike most financial markets, this global market allows you to start trading with relatively low capital.

Another unique thing about forex market is that any sort of movement whether upward or downward is an opportunity to trade the market. It doesn't matter whether a currency is crashing or soaring, there is always room for speculation, since you always have the option of buying or selling the currency of your choice. Unlike the stock market, you are not limited to speculations on rising stocks, and a falling market is just as good for business as a rising market.

However, having stated the above, it is pertinent to always have it in mind that as profitable as the forex market is, it still carries all the risks involved with financial trading. You should always be aware of this.

Though trading forex is an exciting business, you should remember always that the market is always on the move and every tiny shift in currency rates can mean profits and losses of hundreds and even thousands of dollars. I belief you should know that this trade is always done in currency pairs, since this trade involves the simultaneous buying of a currency and selling of another currency, you should therefore know that this currency pair rates are usually volatile and constantly changing. One way to profit from this is by buying a pair, then selling it at a higher rate. The second is by selling the pair, then buying it at a lower rate.

In addition, try to study the trend of the market, and this is based on the idea that what happened in the past, gives traders an idea of what will happen in the future. Your ability to identify when a pair is in a trend and when it isn't will help you to increase your chances of making profit consistently in the forex market.

The point I am making here is that if you can identify a trend, you can estimate what direction the rate of a currency pair is going. You should therefore exploit the direction of the trend you identify by placing a trade in that direction. For example, if it is in an uptrend mode meaning that the rate is increasing, buying the currency pair will give you a better probability for profit. However, if it is a downtrend, meaning that the rate is decreasing, selling the currency pair will give you a better chance of making money.

The simplest way to identify a trend is through the distinct patterns that the price forms. These can tell you if the market is moving in an uptrend or downtrend. Needless to say here that any mistake will result in great loses to the trader.

Tommy James is a University Lecturer, Researcher and Erudite Public Speaker.

For more advice on how to trade successfully like a professional in forex using the right strategies visit http://robotforexstrategies.blogspot.com - http://fxrobotreports.blogspot.com

Article Source: http://EzineArticles.com/?expert=Tommy_James_Johnson

How to invest in stocks

Stock Trading - How to Invest Safely and Stress-Free

Not All Investments are Risky: Even in the Current Economy

The stock market might be the last place that people would like to put their money right now, considering the economic weather right now. Prices are sky high, bailouts of major institutions are in the works and the common man is beyond worried. The hand wringing and ominous clouds of doom have started for many, and they are considering stashing their remaining cash under the mattress until things take a turn for the better.

That being said, there are investments that are not as risky as others, and they actually can be well worth the effort of finding them. If you are new to the stock market or even if you have traded before, it is wise to keep a few things in mind for your own financial protection. Educate yourself before undertaking any investment plan, even the least risky options do carry risks, none are zero risk. Know what your tolerance and loss cap are before proceeding. Speak to your financial planner about your budget and your projected profits for the coming fiscal year. Know what you can risk and be comfortable with losing that amount so there are no horrible surprises down the road.

Working with a broker can make your trading activity easier- they can guide you to a block of stocks that are giving fair returns for a minimum investment, which is exactly what you want to start with. Nobody dives into the stock market and makes a killing on their first trade, what you want to aim for is slow and steady, consistent performance. Stocks that blow up all of a sudden also have the potential to tank just as fast.

Brokers can also guide you to the right trade analysis software so that you can track your own stocks. Once you become proficient at tracking these trades, you can start selecting some of your own. Use the profits from positive performance stocks to re-invest, and do not use any of your own ready cash to further extend yourself in the market. Start pulling some of these profits back out of the market and putting into interest bearing accounts, while using the rest to invest in more diversified stocks and other financial products. A diversified portfolio is an absolute must, if one of your stocks trends downward, you will still have others to keep your head above water for the time being.

Do not work with a stock broker that pressures you into stocks or other tools that sound risky, no matter how unqualified you think that you are. If you just heard mention of trouble with a stock or a company and that is what you are being pushed to buy, that is a serious problem. Do not get tied into thinking that you have to work with just this broker. If the partnership is not working out for you, move on and find someone else to handle your investments.

You can find lower risk investments by reading the financial pages and logging on to financial websites. If you can understand the charts and analysis, you will have a leg up. Education is key to solid investing; so do not accept the words of a broker as law. Know a little bit about the types of trades that you would like to see made on your behalf and what kind of companies that you would like to invest in. There are some that will be solid performers no matter what the economy looks like, and there are those that are folding left and right. Keep your head up and do not be afraid to put your foot down if you feel uncomfortable with a recommendation.

The Long (Term) and Short (Term) of It

Between the two, short term trading is by far, the more risky option. Long term trading requires more careful consideration and movement, and therefore gives the trader time to reconsider or to find out more information before proceeding. Short term trading usually is quick moving and you must realize that very few people ever have more than very fleeting success in the short term trading market. Knowing this, if you still choose to proceed, do so cautiously. Be vigilant that you remain under your loss cap and know your limits at all times.

Short term trading requires that you know quite a bit of knowledge up front. You must know the stock that you are looking to trade inside and out- its trends, its volume, and its volatility. You must know what this stock has been doing prior to the present, and what it is most likely to do in the near future. If you are at all unsure about any of the aspects of the stock, then do your research before even thinking about investing at this point. Losing all of your money on one ill-planned investment block is not going to help anybody in the long run.

Look at the stock's trend. How is the stock behaving from day to day? While most short term traders will be satisfied with tracking a stock for one or two days, the more cautious trader will wait until they have compiled at least a week or two's worth of information so that they can see what the average trend looks like.

Volatility is the actual movement of the stock market; are there many moves in either direction? Is the market heading up in a large surge or plummeting downward? Or has the market flattened out and turned stagnant? Knowing this information is vital, because it could indicate whether there is a system wide trend beginning or if a positive or negative trend affects only one or two isolated stocks.

Volume simply refers to the number of buyers or sellers of a particular stock and can be indicated by the other information in most cases. Volume can be affected by small traders selling of one or two blocks of stock or larger traders selling larger amounts of their own stocks. Either way, the volume of trading will indicate whether it is a hot seller's market or a more cool, buyer's market.

Volume, volatility and trend are important aspects for choosing your short-term investment stocks, but it is important to be equally informed about the next step in the trading process. You know how to choose hopefully the right stock, now do you know how to proceed with the actual trading of it?

Within short term trading, there are several types of trading that goes on. Of them, there are some that are more common and some that are less used for the short term. Before you even begin to trade, no matter what type of trading that you choose to do, you should have an exit strategy in case your selections start heading south. Do not remain in a bad situation if there is a chance to exit, do so. If you pull out before you lose all of your money, you could always reinvest in a different stock, something you could not do if you do go belly up.

Trend trading is not often done as short term trading. It takes a long time to calculate and chart the trends of a stock and the short-term trader just does not wait around for this information. Of course, there are some moments when the short-term trader will use "trend" as a factor for choosing a stock, but that is not the most common.

Counter trend trading does lend itself most easily to short term trading. You must have some quick cash available to jump on the sudden reversals of trends in certain markets. Once these counter trends are spotted, they become fast moving, hot commodities and if you are lucky enough to jump on it fast enough, you can turn a quick profit.

Breakout trading is another short term trading strategy that requires careful market watching. The trader that uses this strategy will buy a stock as soon as it starts to move up after a period of either little or lateral movement. The opposite of a breakout trend is a "breakdown" where a similarly stagnant stock suddenly takes a turn toward the negative.

Buying stocks that had been strong when they are temporarily weak or vice versa is called "pullback trading" and can be viewed as trading that not only takes advantage of these stock's situation, but also as a method of returning a stock back to its previous levels.

Knowing all of the stock information (volume, trend and volatility) and the short term trading types (trend, counter trend, breakout and pullback) is not enough for success in the short-term market. You must understand that you still need to have solid business savvy and some good fortune. You still must stay below your financial limits, never exceed your own personal loss cap even if you are guaranteed a "sure thing". Financial experts rarely agree on anything but they do on this key fact: the most important thing to consider for short term trading success is discipline. If you have no self-discipline, find another outlet, short term trading is simply not for you.

On the other hand, long term trading takes all of the above traits and one other as well. For the long-term trader, patience can be the key to their ultimate success. Knowing which stocks are going to have a cooling off period followed by a huge upswing can be vital to their moves. They wait like a chess player for the moves to unfold before them before they pounce, snagging stocks that will double or triple in value in the fullness of time. Being able to accurately predict what these long-range trends can be will make you a very wealthy long-term trader, indeed.

Another often overlooked factor to give long term the advantage over short term trading is the actual costs of trades and losses per year. Say you are working with a broker who is (for simplicity) making a nice round, ten percent commission on every trade that you make. If you lose money on that particular trade, you are out not only that amount, but also the ten percent commission, every time. For the short-term trader who makes many trades, that can really add up quickly. The long-term trader will still pay commission, but they will pay far less in commission costs throughout the course of the year because they make far less trades within the course of the year. It is simple and straightforward, but somehow the short-term trader fails to see it. Plainly stated, the short-termer is paying to lose his money. Does that sound financially responsible to you?

Understand that the stock market is changing every day and that trading stocks can be very risky, as well as having the potential to be very rewarding and very interesting. Do not allow yourself to get caught up in the go, go world and do something you are not ready to do, nor financially capable of handling. The money that you invest in the market can be gone in the click of a computer mouse, and the number of businesses that are failing at this moment is frightening. Remain well under you limit and never risk anything you could not bear to lose.

In the end, you are the person that you have to face in the mirror everyday. Do you want to look yourself in the eye and know that you have blown your life's savings on a stock that failed to perform because you did not do the necessary legwork before hand? Of course not. Look before you leap- do your research and know what the trends are for the stock you are buying and what the indicators say for its future. It cannot be said often enough, educate yourself, track the stocks and never risk more than you can afford to lose.

Article Source: http://EzineArticles.com/?expert=Joe_Gallagher

How to trade options - DITM

How to Trade DITM Options and Buy Stock at Half the Price

Trading DITM options (Deep-in-the-Money) is one of the best swing trading strategies around. By exploiting the high Delta of an option contract, you can effectively trade stocks for only half the risk that you would incur with normal swing trading. If you can buy the rights to the same amount of stock for half the price, but still make the same profit, you effectively double your return on investment.

This a great strategy for those who are still a bit scared of buying options, but love the challenge of swing trading stocks, and want to gain some leverage on a trade as well as reducing overall risk and cost of investment. The reason that it can be such a rewarding strategy is that it not only doubles the leverage on a stock trade, but the effect of time decay on the value of the option is minimised. Swing trades usually have a duration of three to ten days, and if you trade a DITM option for this short period, time decay will not significantly affect the price of the option.

How do you trade DITM Options?

First: Pick your Stock. You can either use one of your favourite stocks, or you can run a scan for "ready-to-roll" stocks that are perfect for DITM options. I find that Stockfetcher is the best free resource for finding these stocks, and I have some scans set up for this purpose.

Second: Technical Analysis. You will need to perform the following steps in order to identify a good swing trade that is suitable for a DITM Option trade:

• Trend analysis. Establish the trend of both the Market and your stock. Don't try and buy calls in a falling market!
• Swing Analysis. Find stocks that have dipped to the bottom of the trend band. These are stocks that are trading between the 10ma and 30ema.
• Swing Confirmation. Confirm the swing with Candlestick Patterns. Check the RSI and VIX to make sure that a swing reversal is not imminent.

Third: Choose your Option and buy it!

• Pull up an options table which shows the DELTA of the option. Your broker software should have this feature. Either that or use an Options Calculator, for which you will need to know the volatility of the options. Pick an option that has a DELTA that is at or close to 100.
• Option Value. Don't buy overvalued options! You will watch your trade value bleed away. You will need to use software for this - I strongly recommend Volcone Analyser Pro for this (the only bit of this method that is not free!).

Fourth: Set your Stop Loss and Profit Target IMMEDIATELY!

Remember, this is not gambling! Your swing analysis, and confirmed by a look at support and resistance levels, will help you do this.

• Stop Loss - If you normally set a stop loss of 4% for your stock, then set a stop loss of about 8-10% for your option.
• Profit Target - set a profit target based on the swing of the underlying stock. Either simply add the dollar value of your anticipated profit to the option price, or use the Option Calculator to work it out. Or use a trailing stop - whatever is your favourite method. Sell the option as soon as you hit your profit target - don't wait until expiration, otherwise you will lose 100% of your investment! Plan to exit the trade within 10 days or so - if it hasn't moved by then, the swing analysis dynamics would have changed, and your trade is at risk.

Trading DITM Options is a really great way of swing trading stock for roughly half the risk, or double the return on investment. If you would like to see the detail of exactly how I carry out these steps, you can find them at this page: How to trade DITM Options You will have free access to all the scans, technical analysis, candlestick patterns, software and trading procedures that you might need.

Article Source: http://EzineArticles.com/?expert=Rob_Forbes

Option trading training - stock picking

Stock Option Trading - Fundamental Flaw in Fundamental Analysis and Stock Picking

Clinging on to Fundamental Analysis and stock picking software, only keeps you stuck in trading equities. Trading this way, compounds concentration risk in one asset class and fails to adequately diversify risks across Equities, Bonds, Currencies and Commodities. There's much more to stock option trading, than stock itself.

I cite Benjamin F. King's study, quoted repeatedly since 1966, because it remains valid and has yet to be disproved to the point of dismissing its logic.

Market and Industry Factors, Journal of Business, January 1966: " Of a stock's move ...

• 31% can be attributed to the general stock market,
• 13% to industry influence,
• 36% to influence of other groupings, and the remaining
• 20% is peculiar to the one stock."

There must be a more compelling reason for you to trade stock other than just for the movement, if only 20% is unique to the underlying equity in question. Consider this, in context of the Fundamental Analysis or stock picking software that you bought on a per $1 basis. For each $1 dollar you spend, you "outsourced" the analysis at a cost of 80 cents, only to receive back 20 cents worth of work. Shouldn't the 80:20 rule of "outsourcing" be the other way round? The problem is that you are still stuck with 80% of the work, to analyze price movement! Plus, the more you use FA techniques/stock picking software, the more trading capital is stuck in equities alone.

Now, you can say "special" research papers help you pick stocks. Let's have a look at some of the more common fundamental metrics in these research subscriptions:

1. Dividend Yield: the problem is in the variability of yields as firms are in different stages of their business development. A Mature company that dominates in a well established sub-segment/sector is going to being able to afford a different dividend yield; versus, a Young company in a growth-oriented field; versus, a Small firm in a growing area that may not be able to afford a dividend payout. Bear in mind there is nothing special about firms that pay a dividend.

A company that gives away a portion of it's retained earnings - which is what a dividend is - effectively gives away part of its valuation, which means it is not worth as much as a company that does need to give investors candy to commit capital to it. So, a dividend paying stock has to be far superior to a non-dividend paying stock for reasons other than the dividend. If it is not, there's no point looking for dividend paying products to trade, there are plenty of non-dividend paying Indexes to trade.

2. Price/Book Ratio: the problem is this metric varies across industries and from company to company, as the asset base and capital structures of companies change over time. It lacks cross sector applicability and accounting complexity arises from a firm's capital structure as it changes due to acquisitions/divestments/CAPEX for new product lines; or, product line cut-backs, as recently seen in the restructuring of major US car companies.

3. Price/Cash Flow Ratio (the cousin of the P/E): accounting laws on depreciation vary across Asia, Europe and US. As accounting rules are driven by tax codes, which change considerably across regions despite adoption of global accounting standards, there is a lack of uniformity in homogenizing a fundamental ratio that will fit as a common benchmark across geographies.

These metrics fail to help you compare say a Dell parented in the US to an Acer parented in Taiwan; but, is listed as an ADR in the US, even though both are competitors in the same sector as computer manufacturers.

Furthermore, the current dislocated cost of capital in credit markets, impairs the ability of corporations to optimize the operating cost of their balance sheets. In essence, corporations are left with the working capital cash flows remaining on their balance sheets, as testament to their financial strength. Do not waste your money on Fundamental Analysis software or research paper subscriptions.

As there is a fundamental flaw in fundamental analysis and stock picking, how do you select trades? Trade the options of a broad-based Equity Index to replace single stock exposure. To replace Fundamental Analysis, use the Relative Strength measure based on Point & Figure methods.

What is Relative Strength? It is nothing more than taking one price as the Numerator, divided by another price as the Denominator, then multiplied by 100. RS = (Price 1 / Price 2) x 100. Typically, RS calculations use daily closing prices. Though simple in its mathematical construction, RS is ingeniously powerful when it is applied not only within a sector; but, across sectors and between asset classes.

Let's start of within a sector. For example, if you choose 2 semiconductor stocks trading at different prices, how do you know if one stock is outperforming the other in the same sector, when the 2 stocks have price changes at different rates; plus, the sector's price itself is also changing?

SOX = Semiconductor Sector Index, trades up from 452.24 to 467.81.

Numerator1: Price1 = BRCM 33.15 RS1 = 7.33 Price2 = 33.80 RS2 = 7.23
Numerator2: Price1 = TSM 9.91 RS1 = 2.19 Price2 = 13.43 RS2 = 2.87
Common Denominator: SOX Price 1 = 452.24 Price 2 = 467.81
BRCM's RS1 = (33.15/452.24) x 100 = 7.33. BRCM's RS2 = (33.80/467.81) x 100 = 7.23.

TSM's RS1 = (9.91/452.24) x 100 = 2.19. TSM's RS2 = (13.43/467.81) x 100 = 2.87.

BRCM's price rises from 33.15 to 33.80 and TSM's price also rises from 9.91 to 13.43. Simply because BRCM is a larger stock, does that mean it benefits from the SOX trading up? No, the RS reading (RS1 compared to RS2) shows BRCM's RS reading dropped (7.33 down to 7.23) against TSM's RS reading, which increased (2.19 to 2.87). RS confirms TSM as the outperformer rising in price strength versus BRCM's weakened price. RS is constructed on pure price rules. Using an Index as the denominator, acts as a much more durable benchmark and is structurally more reliable, compared to any "magical" TA indicator; or, combination of income statements, balance sheets and cash flow statements touted in stock picking programmes.

You can replace BRCM or TSM with Indexes or ETFs. Using Indexes with Relative Strength enables a common denominator to compare Equities against Bonds, Commodities and Currencies, to crossover into asset classes other than stocks to trade. It's not that Relative Strength is infallible. But compared to the fundamental metrics cited above, Relative Strength fails the least. Break the mould on what you learnt about stock option trading.

Is there an example of an optionable and consistently profitable portfolio that trades using Relative Strength across multiple asset classes? Yes. Follow the link below, entitled "Consistent Results" to see a retail online option trading portfolio that excludes the use of single stocks and Fundamental Analysis, using broad based equity Indices, Commodity ETFs and Currency ETFs. There is no need to trade FX directly. Just trade the options of Currency ETFs.

Thanks for reading my article,
Clinton Lee.
Founder, Home Options Trading: a uniquely retail-focused option-centric trading firm.

Please see Consistent Results (http://www.homeoptionstrading.com/consistent_results), displaying the Model Portfolio's Performance YTD, updated each month-end. The portfolio models a typical self-directed retail option trader's account up to USD $50,000. Here's the stats in summary:
Return: Profit/Start of Year Cash Balance = up +75.62%.
Win/Loss Probability = 90.48%. 9 Wins per 1 Loss. Average Win/Average Loss = $3.09 Won per $1 Loss. Performance Ratio = (Win/Loss Probability) x (Average Win/Average Loss) = 90.48% x $3.09 = 2.80. Positive Expectancy = $1,051 per trade.
Preview an original 55 hour video-based course for online options trading from home, at http://www.homeoptionstrading.com/original_curriculum.html
Purchase the curriculum and receive a $800 options basic course as a Bonus!

Clinton's career spans 16 years of treasury, finance and banking across Hewlett Packard, JP Morgan Chase, Citibank; and, last held the role of a Corporate Director for Regional Business Development with ABN Amro (acquired by RBS) in Asia. Despite the years in the finance/banking industry, it did not help him directly grasp online options trading from home.

Article Source: http://EzineArticles.com/?expert=Clinton_Lee

Why do investors go online!

Smart Investors Go Online - How to Profit in the Crisis

The current financial crisis is set to be on a par with some of the biggest crashes of the 20th century, and all outlooks for the future look pretty gloomy. But there are still great opportunities out there for financial-minded people to make good money using the wide range of online trading websites that are taking the stockbroking industry by storm.

Historically, recessions have always been a period when the least efficient parts of the economic system are pruned. Only the strongest and most adaptable survive. Well, this applies to investors as much as businesses.

Traditionally individual investors have been asked to pay through the nose for stockbrokers. It's not uncommon to pay an annual fee as well as a significant cut of your profits on your investment straight to fund managers and stockbrokers. That can turn a healthy return into a mediocre one - particularly when you consider management fees. The problem becomes even more acute when you factor in the credit crunch and the falling rates of profit. Investors today are struggling to earn the kinds of profits they were just a few years ago by traditional means.

But times, they are a changing. As the digital age matures, we've got access to instant real time information, high speed internet and sophisticated trading software. Which means you can trim the fat off the deal and cut out the middleman. Online share dealing services allow you to manage your own portfolio at minimal cost.

An added benefit is that when you switch to online trading you can take a long term view of your investments. It's a far smarter approach than only looking at the short term quick wins.

Alongside the rise in the use of online stock brokers, the volatile markets are also leading to a huge rise in financial spread betting. This involves betting on a rise or fall in share prices and doesn't involve stock purchase at all. It is risky, but if you know what you're doing it can yield excellent returns. A variant of financial betting is CFD trading, or Contracts for Difference. These involve an agreement between two parties to pay out on the difference between an opening and closing share price. Both are an increasingly appealing option to actual share ownership for many investors. What's more, both are simple to do online, with the popularity of online spread betting and CFDs skyrocketing in recent years.

The moral of the story? Just as the biggest companies and conglomerates are having to shape up, reduce costs and prove their versatility during the economic downturn, so must the individual investor. If you want to increase your chances of survival and making a profit while others fall by the wayside, switching to online investing is probably the strongest weapon in your armoury.

Find out more about share dealing and financial spread betting online.

Article Source: http://EzineArticles.com/?expert=Tom_Hawkins

Option trading training - Binary options!

Option Trading Tutorial - Intro to Binary Options Trading

Any option trading tutorial would be incomplete if it didn't mention a simplistic form of options trading called binary options trading. Not too many investors know about this form of investment but it is a very hot market right now for people not willing to be stuck with long holding period investments such as stocks, bonds, mutual funds, traditional option contracts and futures. You may look on the web for another option trading tutorial if you want to know about the more common form of contracts trading. This option trading tutorial will focus only on binary option trading.

Binary contracts are, like the name implies, bi-polar. Either you choose the "up" side of the switch, or the "down" side. You might think of it similar to any two-sided choice - yes or no, true or false, heads or tails, on or off. In this case the binary switch refers to up or down movements in a stock, currency, or index.

How it works is that you, or I, or any investor with a binary options trading account picks one of the available securities to trade (not all securities are traded... only the highest volume securities are traded this way) and selects how much to invest. Once the amount to invest is selected the investor must choose which direction the security will go, up (choosing "call") or down (choosing "put"). The trading software computes the payouts (also fixed based on the contract) and if satisfied with the contact, the investor submits the order.

The really fascinating part about this sort of transaction is that it does not matter how much the stock moves... the only thing that matters is the direction. The payout at the end of the contract is the same whether the security jumps a nickel or twenty dollars. If the binary option trading contract is for a 75% payout on an up movement of a security on a $100 investment and the stock is up even just one cent at the expiration of the option, the investor receives $175 ($100 invested plus $75 profit). Options expire typically hourly so a successful trader can execute many contracts every day.

So in summing up this binary option trading tutorial:

• Contracts have fixed expiration (hourly) - and can't be sold prior (although it is simple enough to simply make another contract with the same expiration)
• Trades require the investor to choose only how much to invest, which security, and which direction

This concludes our introductory binary option trading tutorial. Another option trading tutorial demonstrates how to start binary options trading with only $100, with links to other tutorials and a demonstration video.

Take a look at the demonstration video or learn more about the differences between binary options trading and standard options today. Barry Livingstone

Article Source: http://EzineArticles.com/?expert=Barry_Livingstone

How to Trade Options - discipline!

How to Trade Options - 12 Tenets of Daily Trade Discipline

Whoever told you trading is "easy", is likely inexperienced and lazy; or has become experienced but remains lazy, looking to dupe an even more inexperienced and lazier person. You need more than "Believe and Achieve" mantras.

Sustaining profitable trading results requires cultivating daily trade discipline. Like any other demanding profession, online options trading from home is no different. Choose one tenet to practice each month. There are 12, so you have a year to build your skill progressively.

1. Become a price puritan. The ONLY reason for price to exist and change is because of Supply and Demand. Where there are more buyers with reasons to buy than sellers with reasons to sell, price must rise. If there are more sellers with reasons to sell than buyers have reasons to buy, price must fall. If buyers and sellers have equal reasons or none to engage each other, price remains unchanged. Pure price trading techniques are true to this inescapable economic law.

2. Dilute concentration risk. S&P 500 accounts for slightly over 3/4 of the market capitalization in the entire universe of mutual funds. The top 100 stocks in the S&P500 (with minimal changes in inclusion/exclusion) accounts for ~43% of what mutual funds use in constructing their funds, i.e. the overwhelming majority of mutual funds gravitate to the same stocks in their holdings. As the top 100 stocks are large-cap oriented, two thirds of these funds are into large caps with only one third of these funds choosing to include only small and/or mid caps exclusively. Large caps tend to have weaker relative strength compared to small and mid caps. You were sold "Sector Diversification" - printed on the marketing prospectus. But you are actually intensifying exposure to weaker relative strength, given the cap-weighted concentration, even if the large caps you have holdings in, are distributed across sectors.

3. Being "trendy" but missing the Trend - the style junkie. Fund managers typically stay within their style. An equity fund is not going to become a fixed income fund. Their company's charter is pre-defined in the type of fund house they operate as. A large growth fund remains a large growth fund, even when large growth funds under perform, while small and mid-cap funds are outperforming in relative terms. It's not the fund manager's fault, you funded the fund with your money to manage. This also partly explains why the high turnover of fund managers can affect the fund's performance, as the fund manager wants to change styles but is constrained. Diversify outside what the news tells you is "Trendy". Replace reliance on funds with the use of optionable Indexes/ETFs.

4. Limit the Fundamentals - the Paper Poker Game. The psyche of investors behind Supply and Demand is expressed in price, beyond fundamentals alone. Investors sold off fundamentally sound stocks, after the unfortunate 9-11 incident and it was repeated with the financial pandemic of 2008, going into 2009. Benjamin F. King: Market and Industry Factors; Journal of Business, January 1966: " Of a stock's move ... 20% is peculiar to the one stock." A Fundamental Analyst fusses with paper (Balance Sheet, Income Statement & Cash Flow Statement), only to explain 20% of price behavior. As valid as all the FA work is, would you gamble against the house armed with only 20% of the odds with paperwork done by Analysts?

5. Divorce the underlying. You may think you are intimate (be it "love" or "lust") with the traded product. So, you go looking for patterns, setups, indicators that simply do not exist. Love is indeed blind. It's more sensible to understand the cyclical/seasonal behavior of the asset class the underlying is in; and, how the underlying behaves near support/resistance levels with changes in supply/demand. You really do not know the underlying. Marrying one underlying imposes opportunity costs of not trading other more valid candidates. The stock isn't going to "love" you back.

6. Define losses first, before profits. Manage risk ABOVE and BEFORE profits AND as finite. However well planned a trade is, it may never reach its profit target. Some choose to use a 1% absolute loss rule of the original trading capital, to define the absolute risk per trade. E.g. if your trading capital is USD $50'000, 1% is equal to USD $500 maximum loss per trade to incur; versus, accepting a 50% loss on the P/L of that specific position.

7. Doubling down accelerates losses. Doubling down only accelerates the average cost towards the losses - known as - "catching a falling knife". The break even will keep moving away, as you chase the price. Trade for profit. Do not trade for break even with odds against you. Only add to a winner, if the entry criteria and Reward to Risk Ratio repeats the setup of the original winning trade. Limit adjustments - ever tried to "adjust" the sharpness of a knife?

8. Keep the learning real and thematically consistent. Counter the fixation with "magic" tricks of "technical analysis wizards" by learning from trades you have lived through. Price signals tend to be the strongest. Add depth to your insights into the dimensions of price. Set aside 1%-2% of your portfolio for continual self-education. With whatever you learn, if you struggle to relate it to some field or function in the trading platform, unlearn it if you cannot relate what is taught to what you can price in the platform. You will have to drop the "L" plates from "L"-earn, to earn.

9. Ditch the software crutches. Software is not a substitute for critical thinking. Break down the logic in the software (how, what and why). Black box software cultivates an addiction for repeatedly mindless subscriptions. Break the habit, trust your logic to reason - you have profitable trades that you thought through yourself. As you "outsource" the administrative tasks associated with trading (e.g. record keeping of trades), do not outsource your brain.

10. Plan trades with business discipline. Most plans cover Entries, Exits, Stops and Profit Targets. Still, no one enters a business with a few bullet points. Your trading plan must address the very defining reason of "Why trade?" What is your motivation (each day, month and quarter)? E.g. build up the children's education fund, pay for household expenses or self-directed retirement? How robust do you want your home business to be? It's reflected in the construction of your portfolio and trade plan.

11. Unrealistic expectations. Build wealth slowly and consistently. Forget dream chasing home runs. Trading is a life endeavor. The markets will outlive all of us.

12. Scrooge - cheap is not smart. Volatility dominates price-performance. Do not make option decisions simply on cost alone. Options are not fairly priced on bid-ask alone. Options perform based on what you pay for them. E.g. buying High(er) Deltas may not be the cheapest but may give the required directional bias. Rethink for a set amount of Theta decay, what that buys you. Like in real life, bargain shopping can lead to more junk than you've got room to store. Don't end up with an inventory of junk Calls and Puts in your portfolio. Get savvy, seek value.

As you exercise stricter daily trade discipline, you should see these characteristics of a more stable portfolio performance:

• Profits should step up gradually, depending on the size of your account. If it's in the tens of thousands, the profits should step up consistently like a ladder from the low hundreds, to the higher hundreds; then, move up from the higher hundreds into the thousands. If your account is above $100K, profits should step up from the high hundreds into the thousands.
• Profits that jump from the low hundreds into the thousands signal an over-reliance on gap plays, which fail to help you step up consistently profitable results.

Thanks for reading my article,
Clinton Lee. Founder, Home Options Trading: a uniquely retail-focused option-centric trading firm.

Please see Consistent Results (http://www.homeoptionstrading.com/consistent_results/), displaying the Model Portfolio's Performance YTD, updated each month-end. The portfolio models a typical self-directed retail option trader's account up to USD $50,000. Here's the stats in summary:
Return: Profit/Start of Year Cash Balance = up +75.62%.
Win/Loss Probability = 90.48%. 9 Wins per 1 Loss. Average Win/Average Loss = $3.09 Won per $1 Loss. Performance Ratio = (Win/Loss Probability) x (Average Win/Average Loss) = 90.48% x $3.09 = 2.80. Positive Expectancy = $1,051 per trade.
Preview an original 55 hour video-based course for online options trading from home, at http://www.homeoptionstrading.com/original_curriculum.html
Purchase the curriculum and receive a $800 options basic course as a Bonus!

Clinton's career spans 16 years of treasury, finance and banking across Hewlett Packard, JP Morgan Chase, Citibank; and, last held the role of a Corporate Director for Regional Business Development with ABN Amro (acquired by RBS) in Asia. Despite the years in the finance/banking industry, it did not help him directly grasp online options trading from home.

Article Source: http://EzineArticles.com/?expert=Clinton_Lee

Online stock option trading articles

Stock Option Trading - Candlesticks & OHLC Bars Lose Their Patterns on a Distribution Curve

Time-based charts (namely Candlesticks, OHLC Bars and Heikin-Ashi) fail to truly depict price. This article will help you realize that time-based pattern recognition is an unreliable method for stock option trading.

Some retail training firms like to popularize the myth that, "Everyone looks at these patterns in the charts". They are partly right. Though, their use of the term "Everyone" applies to retail off-the-floor traders who collectively only make up ~ 15% at most, in some cases even less, of the total traded volume on exchanges, depending on which exchange it is.

Which raises the question: What are the eyes of those on the floor moving 80+% of traded volume looking at? Some of you have visited the exchanges organized through your broker. If you've picked up the paper scattered on the floor, all you'll find is quick math notation: addition, subtraction, division and multiplication. Nothing more. No drawings of a Tri-Star Doji, Dumpling Tops or Frypan Bottoms. It makes sense, because all that is in front of floor traders are screens with price data and price alone. With truck loads of calls and puts to hedge, floor traders could care less how many times during the day, price touched the tail of a dragon fly doji. They've already pre-planned to get more of; or, offload their inventory of calls/puts at a specific strike, for a given price.

As a retail option trader, trading less than 10 contracts per trade, you are not exempt from tuning your eyes to focus only on price. How do you simulate the observation of price alone from off-the-floor, if you remove the use of Candlesticks, OHLC Bars and Heikin-Ashi charts? Use Point & Figure charts instead.

Why is it valid to only use Point & Figure charting for trading options? It is the only method that plots just one type of data - price alone without time - price is the only data element needed on a distribution curve. The same distribution curve used in the Bjerksund-Stensland, Black-Scholes or Binomial pricing models in your options trading platform.

What about other charting methods like Candlesticks and OHLC Bars? Let's take the Doji, a well known candlestick, as an example. The Doji is characterized by it's Open and Close at the same price, the High is a different price from the Low. Remember with a Distribution Curve, it records Price on the Horizontal axis and Frequency on the Vertical axis. To map the doji onto the relevant axis of the distribution curve, it needs to be flipped on to its side, for the doji's price points to line up against the vertical axis.

So, a price that Closes at the same price it Opened, is recorded as 2 price points with twice the frequency of the High and Low. With a distribution curve, you cannot leave the lines joining the dots of the doji on the graph. All that is mapped is 4 dots representing the doji's price points. Take away the lines joining the dots. Question: Where's the doji? Not relevant anymore. Same logic applies to any candlestick (spinning top, hammer, etc.). Candlesticks lose their characteristics, once they are mapped onto a distribution curve. The implication is the same for the OHLC method used to count fractals in Elliot Waves and wave counts once price is mapped in its dispersion mode, the waves lose their characteristics.

To visualize this problem with time-based charts, follow the link at the end of this article, entitled Candlesticks/OHLC Charts Lose their Patterns on a Distribution Curve.

Is it necessary to reconcile a charting method with the distribution curve? Yes, 68% is equal to one Standard Deviation (σ). -/+1σ sets the parameters for the probabilities, which you construct an option spread around to test if the strikes will be touched or not touched, from the date a spread is filled till its expiry date.

Bear in mind, changing the time frames in time-based charts be it Candlesticks, Heikin-Ashi, OHLC from minute/hour/day/week to reconcile conflicting patterns in one time-frame against another, does nothing to help you work out the Theta as decay in a debit spread; or, the positive Theta as premium sold in a Credit spread. The only unit of time required to feed into a Theoretical pricing model is the expiration date, in turn affecting the probabilities per day for the number of days that passes. As the units of time in time-based charts have no value in Theoretically pricing an option, it makes no sense to use them.

So, what are time-based charts (Candlesticks, OHLC Bars and Heikin-Ashi) useful for? They are useful, for trading the underlying itself. When you trade the underlying itself, aside from dealing with +/- Delta (directional risk), all the other Greeks (Gamma, Theta and Vega) are equal to zero. Time-based charts are relevant for trading deep ITM options as a surrogate to the product for purely directional trading of the underlying itself.

Do bear in mind with options, the deeper the ITM you go, the wider the Bid-Ask spread becomes compared to the narrower Bid-Ask spread differences in the ATM or OTM strikes. Have you got enough capital in the account to keep trading at the ITM strikes only? This is why many retail traders with account sizes below USD $25K look for increasing lower priced products, for e.g. $20 and below, as they search for ITM strikes that are affordable for them to trade using Candlestick/OHLC/Heikin-Ashi charts.

By virtue of being lower priced, these products often suffer illiquid open interest at their strikes, making you chase price for an uncompetitive fill, only to result in poor price-profit performance. The other extreme is to over spend on ITM strikes of a higher priced product, for example $100 and above, as you found a trade candidate using some "special" pattern scanning software, only to breach the money management rule of 2%-5% per trade, in filling the order.

Is there an example of a portfolio with consistent wins and limited losses that applies Point & Figure methods without the use of Candlesticks/OHLC/Heikin Ashi? Yes. Follow the link below, entitled "Consistent Results" for a model retail option trader's portfolio that only uses Point & Figure techniques. Other than stock option trading, the portfolio includes option trades from non-equity asset classes.

Light is needed to see; but, trading enlightenment will not come from a candlestick. And counting fractals within waves only serves to oscillate your pupils.

- - - - - - - - - - - - - - - - - - - - - -

Thanks for reading my article,
Clinton Lee. Founder, Home Options Trading: a uniquely retail-focused option-centric trading firm.

See what is meant by Candlesticks/OHLC Charts Lose their Patterns on a Distribution Curve at http://www.homeoptionstrading.com/point_figure/candlesticks.html

Please see Consistent Results (http://www.homeoptionstrading.com/consistent_results/), displaying the Model Portfolio's Performance YTD, updated each month-end. The portfolio models a typical self-directed retail option trader's account up to USD $50,000. Here's the stats in summary:

Return: Profit/Start of Year Cash Balance = 75.62%.
Win/Loss Probability = 90.48%. 9 Wins per 1 Loss. Average Win/Average Loss = $3.09 Won per $1 Loss. Performance Ratio = (Win/Loss Probability) x (Average Win/Average Loss) = 90.48% x $3.09 = 2.80. Positive Expectancy = $1,051 per trade.

Clinton's career spans 16 years of treasury, finance and banking across Hewlett Packard, JP Morgan Chase, Citibank; and, last held the role of a Corporate Director for Regional Business Development with ABN Amro (acquired by RBS) in Asia. Despite the years in the finance/banking industry, it did not help him directly grasp online options trading from home.

Article Source: http://EzineArticles.com/?expert=Clinton_Lee

stock option trading software review

The Best Stock Software Review

Stock software can put an inexperienced trader on the same level as one who has been doing it for a lifetime, hence its popularity. But with the popularity of these legitimate programs, a number of faulty publishers have released faulty programs and with seemingly every program out there today all promising to make you rich, it's hard to separate the good from the bad. Here is a review of arguably the best stock software option currently on the market.

Day Trading Robot wins the title currently for the best stock software option for a number of reasons. Perhaps best of all is it boasts easily the highest winning rate of any program which I've tried as it deals primarily in low risk but high profit potential penny stocks.

Take my personal experience. On my very first trade which Day Trading Robot delivered to me I more than doubled my investment. I received the tip on Sunday night for a 15 cent priced stock per share. I bought about one thousand shares from my online trade account, then logged out. I checked back in near 2 days later and found that it had shot up to 31 cents practically overnight. About another day later that stock leveled off at 48 before beginning to drop at which point I went short on it. Ultimately I made about $500 on a $200 investment, I only wish I had dropped more at the start but since then I've grown more confident and it's only gotten better.

One of the best aspects about this stock software is that you don't need to know a thing about the stock market to take advantage of it and make a buck. As all of the real time market analysis and combing is done for you, all you've got to do is enact the recommended trades simply using an online trading account. And every pick is based entirely on market data so you don't have to worry about guesswork, human errors, or emotions factoring into your campaign and costing you money.

If you're not convinced or are still understandably skeptical about the ability of the best stock software to deliver you the key to your financial independence and dominate and unravel the secrets of the stock/day trading market, you can learn more or even give it a complete risk free try by clicking the link in this paragraph.

You don't even have to risk a cent of your own money to see these stocks pay out. You can simply follow along with this stock software's picks and watch them quickly gain value overnight just like clockwork. Just try not to smile when your friends or relatives start asking you where you picked up the extra money.

Article Source: http://EzineArticles.com/?expert=Jonathan_Langley

The Secret of Forex Millionaires

Virtual Private Server Hosting For Automated Currency Trading - The Secret of Forex Millionaires

Are you a forex trader that is interested in trading automatically and don't want to have anything to do with Metatrader4 up and down? There is a good news here for you, not for only you but for all traders that want their trading on autopilot. If you are the type of currency trader that wants to be trading every time without missing any opportunity and at the same wouldn't want to run MT4 platform on your computer, the best option is the service of virtual private server (VPS).

Another name for VPS is Virtual Dedicated Server. Taking up the service is like having your own personal server. It has the features of both shared hosting and dedicated hosting. If you have experienced shared hosting before, users share the same hardware in Virtual Private Server like it too.

And in addition to this, every user will have access to the root of the server, do their own thing and install applications without causing any problem to other users. There are several other uses for VPS.

It can be used to see how the web pages would look like before going live online, try and test applications and software without having to reboot the whole server. These good advantages of virtual server are being tapped by smart online forex traders.

If you are like sharp and smart currency trader who would to trade profitably as many as possible and wish to avoid having anything to do or installing Metatrader4 platform then the service of virtual private dedicated server is for you.

VPS enables you to trade to any extent without having business with your personal computer. It is like investing in stock and be expecting good returns without lifting a finger.

What you just need to be doing once in a while is to login to your account, check what expert advisor or automated software you are using has done so far, manage and trade through your broker.

You can as well upload new forex robot or any expert that support Metatrader4 platform. Forex virtual dedicated server supports clients using Linux, Windows and the rest.

Wouldn't you like to trade forex without having course to deal with MT4 headaches by using virtual dedicated private server? This is one of the secrets of forex millionaire but they won't tell you.

For more information and eye-opening facts. Please visit this automated forex software trading site.

Article Source: http://EzineArticles.com/?expert=Victor_Branch

Online Stock Trading Software - stock picking

Online Stock Trading Software

Trading stocks is a popular way to make money and there are some fantastic programs to help make this even easier. It gives investors the freedom and the opportunity to make more money than they may have dreamed of in the past. There are two types of online stock trading software;

Stock picking software - This analyzes the market for the best shares to buy and sell.

Trading software - This allows you to actually buy and sell stocks with a computer and a Internet connection (usually combined with a brokerage account).

When you start to investigate online stock software you will find that there are many options available. This is why it is a good idea to take some time to complete research to find the option that's right for you. Many of these trading programs will include different features and functions, so take a look and decide what function you are really looking for.

Online trading programs will usually offer a free trial so you can test the features of the software. You can take advantage of these trials to try a variety of stock trading software. Check that it includes all the features you will want/use, and make sure that the software is easy to use and is bug free! Lastly, you should always ensure that the software supplier is willing to help out whenever you come across any problems or questions.

Choosing online stock trading software can be an extremely important decision. It is one of the gateways to your success as a trader, so make sure you choose software with a proven track record to see the best results.

Find the BEST online stock trading software at the authors stocks website by clicking here.

Article Source: http://EzineArticles.com/?expert=John_Gibbons