1 0 Tag Archives: stock trading
post icon

Long Term Trend Trading

There are several different methods of investing in stocks and trading in stocks. One popular tactic is trend trading of stocks. Many people use this kind of stock trading, for example investors who see trends as beneficial sources of profit.

The trader should select one stock or a group of several stocks to focus on, just like he would with any other investment strategy. Factors to take into account include market movement and trading volume. After the trader selects a stock, he should analyze its price movements. To qualify as a trending stock, it must be moving in one direction continuously over a set period of time. This depends on the period of time. Short term trend traders can use days or weeks, but for long term trend trading, months or years are better.

The most significant thing in trend trading is that the price movement should display a momentum in a particular direction. The direction of price movements may be upwards or downwards but it should be consecutive or continuous. Using this method, you expect the price of a stock, which has gone up in the last two days, to continue to go up in the next few days. Similarly, if the price was going downwards, it should continue to go down in its momentum.

Once you have figured out the trending direction of your stock, you should buy it at its prevailing price and hold it for as long as the trend continues in its first direction. Once the trend reverses and the stock moves in the other direction, sell it as soon as you can; do not hold it any longer. If you continue to hold it after it reverses its direction, you may lose not only your gains, but your overall investment as well.

Another important principle in trend trading is to stick to your time frame. For instance, if you have bought a stock that is trending up on a monthly basis, you should only check its monthly performance by tracking monthly closing prices. Any fall in price within a month should be ignored. The price may fluctuate weekly but you should stick to the monthly trend. If you have bought a stock that is trending up over the previous weeks, you should ignore the daily ups and downs and monitor only the weekly closing price.

This is not true that only short-term traders indulge in trend trading. Even for those who have been investing in stocks for a longer time frame of months or years too can apply this method of stock trading to their advantage. It doesn’t matter whether you are investing for short term or long term, it is certainly one of the attractive tools available to you. But, this method requires that you monitor the market on a continual basis to take advantage of it. It is not for those people who invest and forget.

Go to the article »
05. Jan, 2011
post icon

Financial Spread Betting Compared To Share Dealing

You are into financial spread betting due to the various advantages it provides over conventional stock trading. It is therefore in your interest to ensure that you look at all possible opportunities to reduce costs so that every transaction you make gives you the best return possible. Considering that the number of trades is generally more frequent in this type of trading, even small savings can mean a lot over time.

You must therefore choose a company which allows you tight spread. Wider spreads would erode your profits. Realizing that they are losing customers, some margined trading companies have cut down on their spread and the hope is that customers would get such news from other companies on other instruments as well.

It is worth nothing here that a small spread does not necessarily mean a trade that is cheaper. You have to consider slippage, the chances of a re-quote and other complaints. Similarly, the margin amount that you have to pay with different spread betting companies would be different and you could negotiate for something that is convenient to you. Some companies increase the margins depending on the market volatility and that is not something you can always keep up to. Hence compare financial spread betting companies based on their policy on margins.

Yet another factor is that of stop losses. The stop loss functionality would ensure that you do not lose more money due to a trade going wrong. However not all spread betting companies offer this facility for free and do charge a fee. This could be in the form of a percentage or a flat sum. Some companies offer this facility only for major markets. Policies on this do differ and that is one more reason why you should get it clarified before signing on with a company.

Though spread betting has been seen as an absolute gambling instrument, it need not be so. It is just another form of trading and people who hold positions over a period of a few days cannot be considered mere speculators as they often tend to hedge their positions adequately. It is mainly the intra-day scalpers who can be put in the bracket of speculators and even a one or two point movement on a stock can be beneficial for them.

Last but not the least, even after comparing the various offers of companies, you must sign the agreement only after checking for any fine print.

Go to the article »
04. Jan, 2011