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

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

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

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

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

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

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

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

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

Technorati Tags: day trading, finance, forex, investment, money, options, stocks, trader, trading

While there are many different types of investments that one can make, there are really only three specific investment styles, and those three styles tie in with your risk tolerance, these are conservative, moderate, and aggressive.

Naturally, if you find that you have a lowish tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, and are relativily young, you will most likely be a moderate or aggressive investor. At the same time, your financial ambitions will also determine what style of investing you use.

If you are saving for retirement in your early twenties, you should use a conservative or moderate style of investing, but if you are trying to get together the funds to buy a home in the next year or two, you would want to use an aggressive style. Being an active stock market trader would be considered an aggressive style for most people.

Conservative investors want to make sure that they maintain their initial capital and make very modest gains per year, they want to sleep well at night. In other words, if they invest $4000 they want to be sure that they will get their initial $4000 back. This type of investor usually invests in blue chip stocks and bonds and short term money market accounts. But remember trading stocks, even if they are blue chips can still be very risky as we have seen in the 2008/9 bear market.

An interest earning savings account is a very common approach for conservative investors.
A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest up to 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take bigger risks that other investors won’t take. They invest higher amounts of cash in riskier ventures in the hopes of achieving larger returns – either over time or in a short amount of time. Aggressive investors often have all or most of their investment monies tied up in the stock market.

Again, determining what style of investing you will employ will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should always carefully research the investment and never invest without having all of the facts.

If you think you are an aggressive investor and intend to trade stocks activily, make sure that you learn how to trade before making your 1st stock purchase.

A767321456

Technorati Tags: how to trade, investment, investor, stock market trader, stocks, trading, trading stocks

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

For example the DOW 30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).

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

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

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

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

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

 A675645879

Technorati Tags: call, finance, invest, investment, money, options, put, stock market, stocks, trader, trading

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

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

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

* Only use 3-5 simple technical analysis indicators

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

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

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

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

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

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

Top Dog Trading Review

A875645387

Technorati Tags: bonds, day trading, investment, money, options, stock market, stocks, technical analysis, trader

Reviewing: UMOO Financial Entertainment

UMOO is an enjoyable way to trade the financial markets especially if you are looking for entertainment as opposed to investing. Contestants choose to compete in matches versus other traders or the financial market on UMOO for cash prizes. There are contests that are no cost to play and those where a a funded account is required. Games requiring a deposit have greater prizes. The game could be as brief as ten minutes or as long as a market period. There are matches with stocks, forex, and commodities. All games use real-time market pricing and no software installation is necessary.

Get started with UMOO now!

There are two varieties of games available on UMOO: Trading Tournaments and PIX games. In a Trading Tournament traders begin by selecting a competition of interest to them. The tournaments are arranged in reference to three popular indexes: the S&P 500, the Dow Jones Industrials, and the Straits Times index of Singapore. The Trading Tournaments necessitate traders to pick stocks from the index and endeavour to produce the maximum percentage return they can with a pool of virtual money. In an S&P 500 contest for example contestants assemble a portfolio of stocks in the S&P 500. Once the contest has started contestants may adjust their portfolio to maximize their chances. All games are day trades because none carry over into the following trading session. During the competition participants can check their portfolios to review how they are performing and compare their effectiveness versus the “benchmark”.

Open a UMOO account now!

The “benchmark” tells the player whether they are “in the money” or “out of the money”. “In the money” is defined as if the tournament ended at that moment they would receive a reward and “out of the money” means they would not. The “benchmark” also details the number of prizes being awarded in the tournament. One critical detail however is that contestants cannot win rewards in the free tournaments without at least having a deposit with UMOO. Contests that are not without a cost require “fees”. These “fees” are typically a portion of what rewards can be won such as a five dollar tournament will usually have a ten to twenty dollar reward.

The alternative kind of match is called a PIX game. PIX contests are just ten to thirty minutes in length and necessitate the trader to pick the one, two, or three best performing tickers from a brief list. For example, in a Forex PIX game the contestant may be required to choose the best performing currency from a choice of three. UMOO may list GBP/USD, NZD/USD, and AUD/USD with a beginning time and ending time. The user can win if they pick the currency pair with the maximum return during those ten minutes. In a PIX contest players compete exclusively against the market as opposed to a tournament where they compete against other players. All PIX games have fees and the risk reward ratio is in the range of 2 to 1.

Open a UMOO account now!

Bottom Line: If you are seeking fun with trading financial tickers and fixed risk UMOO can be fun and financially rewarding.

Technorati Tags: commodities, dow jones, financial, forex, S&P 500, stocks, Straits Times, trading, UMOO, virtual

I am going to tell you a stock trading secret that is so powerful, it will save you thousands of dollars. This secret has saved me thousands of dollars and now I’m breaking my silence to show you how to do the same.

Institutional traders use dirty tactics in the stock market that are so bad, they should be illegal.

After reading this article, these dirty tricks might make you angry. It may make you fly off the handle.

It may even make you want to close this page and forget you saw it.

But you need to know what they are doing.

Because after you are done reading this article, you will have new insight into how to spot and avoid false breakouts.

Let us talk about what support and resistance lines REALLY are, and then I’ll talk about false breakouts.

Learning the how and why resistance lines and support lines form will help protect you against false breakouts.

When traders buy and sell a stock, they commit emotion to the trade. Their emotions can keep a market trend going, or send it into a reversal.

When stocks fall, a few traders will exit their position and take profits, a few traders will exit their position for a loss, and a few traders will stay in their position and hold on.

A chart is really nothing more than the result of emotions coming from the crowd of people in that particular stock.

Emotions Are Why Support And Resistance Lines Form

If a trader is still holding on to the stock when the price claws back to his cost basis, he’s likely going to sell. With many bad memories of how he was trapped in the stock, all he cares about now is exiting the stock as soon as he can. This emotion and subsequent selling action will bring a rally to a temporary stop. Painful thoughts and memories like this are the reason why you see support and resistance lines in the first place.

Let us say that a stock tanks from about down to about where it stays for several weeks. The more time that passes that the level holds, the more that think support is at . Suddenly, after a couple of weeks of trading at , the stock falls down to . Seasoned traders will let their losers go quickly and will exit the position somewhere between and . Amateur traders will hold on and sit through the entire painful decline. A few rookie traders will exit at . The newbie traders who did not capitulate at will be the first to run for the exit if the stock can climb back up to . They would love the chance to get out of this stock at break even. Their selling will temporarily stop a rally and form a resistance level.

Support and Resistance Lines Should Be Called Regret Lines

Traders who come across a stock that has spiked up feel as if they have missed the train. If a stock drops back or fills the gap, the traders who regret missing the first move will buy in anticipation of another such move. This regret then satisfaction when the stock pulls back causes support levels to form.

Take your stock chart and draw resistance and support lines at recent tops and bottoms. You can anticipate a trend to slow in these areas and you can use them to either enter a position or to profit take.

Most Headfakes or False Breakouts Are Created By Institutional Activity

When the market rises about resistance and pulls in new buyers and then suddenly reverses and falls back below that resistance, this is called a false breakout.

A false downside breakout happens when a stock falls below support.

All stocks are fair game but especially any stock that has a high percentage of institutional ownership.

False breakouts provide institutional traders with most of their best trading opportunities which is why institutional traders most often are the ones who cause these patterns to form in charts.

All limit orders are displayed on the screens of Institutional traders. They know how many more buy orders are above a resistance level.

Institutional traders have a secret practice they call running the stops. A false breakout occurs when the institutions organize a hunting expedition to run stops.

For example, when a stock is slightly below its resistance at $30, the buy limit orders come flowing in near $28.50. The institutions calculate the liquidity ratio which measures how much the stock will go up if all buy limit orders are executed at $28.50. They calculate that the stock will run to $31 if all the buy limit orders at $28.50 are executed. They short the stock at $30 to push it down to $28.50. At $28.50 they cover their short position and go long as the wave of buy orders are automatically executed pushing the stock up to $31. If greedy traders start piling in, the institutional trader will stay long the trade. As soon as the buy orders start drying up, they sell short and the price falls back below $30. That’s when your chart shows a false upside breakout.

False breakouts will knock you out of a trade. Beginners tend to make a single stab at a position and stay out if they are stopped out. Professionals, on the other hand, will attempt several entries before nailing down the trade they want.

For more free stock trading tips, tricks, and secrets go to stock trading help and if you are tired of losing money in the stock market see the excellent article at investing

Technorati Tags: business and finance, finance, investing, stock market, stock trading, stocks

Every rally in the securities market arrives at a level wherever adequate bulls consider it and pronounce I have attained a lot of profit, and I could attain yet more profit, only I would prefer to take my profits off the table. When this happens, charts will top out when not enough new bulls are coming in to offset their profit taking.

Bulls who just bought in are mad as they came in too late. They feel trapped. Their profits are melting away and turning into losses. Should they hold on or sell for a loss? If enough bulls decide the stock has overshot to the downside, theyll step in and buy. The rally will resume to the upside as more bulls rush in to buy on weakness. As prices approach the level of their old top, you can expect sell orders to hit the market.

Many battle scared traders who got caught in the previous decline take a blood oath to get out if the market gives them a second chance.

A reflection of this position happens in the securities market at market bottoms. A stock falls to a new low at which enough shorts start taking profits by covering their positions which causes the market to rally. Once that rally stalls out and prices start sinking again, all eyes are on the previous low-will it hold? If bears (fear) are stronger than bulls (greed), prices will fall below the previous low and the downward move will keep on going. If bears are weaker than bulls, the decline will stop near the old low, creating a double bottom. Your other technical indicators will help you figure out which of the two possibilities is more likely to occur.

Any time you catch a stock ascend to its former top, the primary wonder in your head had better be will it climb to a new high or form a double top and decline. Technical indicators like the RSI, MACD, and volume are very helpful in answering this question.

When a stock rises to its previous peak, a double top is most likely to form when the volume, MACD, RSI, and stochastics are falling.

When a stock falls to its previous low, a double bottom is most likely to form when the volume, MACD, RSI, and stochastics are rising.

For more helpful advice from master stock traders go to stock market trading tips and for  great technical analysis and free stock picks visit stock market picks 

Technorati Tags: business and finance, education, finance, investing, resources, stock market, stock trading, stocks

Visit: http://www.bestdaytradingstocks.com

A trader who employs this type of strategy must be very disciplined in cutting losses quickly. For example, of a stock is trading within a decent uptrend, and then sells off to below its rising moving average, a trader will try to pick a bottom with the idea that the stock will at least return to that moving average.

The key is the entry price. This keeps his potential loss relatively small, while the reversion to the mean could mean a relatively significant move. This is the type of risk and reward setup an experienced trader will look for.

However, the danger is that if the trader goes short and holds the position overnight, the stock could gap through his stop loss, and hand the trader a sizable loss. For this type of strategy, many daytraders choose to exit their position at the close to avoid this type of occurrence.

No matter what type of strategy the daytrader employs for entering and exiting positions, the long term key to success of the trader will be the proper use of risk management, and strong discipline. In order to have confidence in your strategy, it is important to conduct significant trading strategy research. Having confidence in the strategy you select through sound research should result in an ability to have the discipline to stick with the strategy through periods when it is not performing well.

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Don’t forget to learn about mutual funds in retirement plans. For 401k Plan advice, 401k asset allocation, 401k investment advice and a 401k investment strategy. It is important to your retirement account to be educated about 401k allocation and a 401k strategy.

Technorati Tags: 401k asset allocation, day trading, stocks

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

For example the DOW 30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).

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

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

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

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

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

 A675645879

Technorati Tags: call, finance, invest, investment, money, options, put, stock market, stocks, trader, trading

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

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

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

* Only use 3-5 simple technical analysis indicators

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

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

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

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

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

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

Top Dog Trading Review

A875645387

Technorati Tags: bonds, day trading, investment, money, options, stock market, stocks, technical analysis, trader