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How To Use A Stock Market Graph System

You can easily learn how to use a stock market graph to determine in which direction a particular financial market is likely to move. But if you seek regular, profitable trades (and who doesn’t?) it’s quite evident that graphs alone are not enough.

We know that higher highs and higher lows mean a bull market. But how do we know from the chart that the trend will continue? We can calculate the resistance level, but these can be and often are broken. What if it has already been breached and the chart shows no sign of the upward movement ending?

Are you going to invest your money on the basis that the bull market will continue? Or stand by and risk missing out on easy profits? Perhaps you’re a swing trader and decide to go short. At this point you’re probably going to turn to fundamentals (unless you are a die-hard technical analyst) for further guidance.

So what I’m saying is that there’s a problem with using charts and graphs alone, even allowing for all the indicators that go with them. Because what ought to happen seldom actually happens, or at best happens but at a different time from that indicated by your graph.

However, provided you use your charts and graphs strictly to supplement other stock market trading systems that are based on market information, or fundamental analysis, then your chances of success in any given trade increase dramatically.

Take the commodities market. If you know that production of aluminium, for example, has recently been reduced, and you also learn that a number of government-backed projects consuming large amounts of aluminium have been or are about to be announced, then it is fairly safe to say that the price of aluminium will be going up sharply in the near future as production facilities have to be re-opened and further investments made.

Going long in aluminium or the stock of a major aluminium producer in such a case gives you an excellent chance of profits. But in order to maximise those profits it is prudent to consult your graphs, or charts. It may be that aluminium is still near a 50 day high and hasn’t yet reacted fully to the news of production cut-backs. This is how you can use a stock market graph system to cover yourself against defective trades, or alternatively give you more confidence that your trade is a good one.

In summary, information is king, but in the financial markets it pays to check it against what your charts are telling you to ensure that not only have you taken the correct position but that also your timing is not too soon or too late. That’s what the most successful traders tend to do. And now you can follow one of them and trade your way to riches.

Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan

Discount Online Trading – Making A Success Of It

Discount online trading has become so popular that it almost dwarfs everything else on the financial markets. It has brought the concept of trading on the stock market to the masses.

And that’s actually the problem. We all know how it happened – computer technology, the internet, automation, and so on. But when you cause complex and potentially risky activities to fall within the grasp of the masses then the outcome is usually far from happy.

So instead of having a new class of successful, wealthy stock market traders and investors, using all the information available via the internet to make mostly successful trades with minimal brokerage fees, we have a new generation of online financial traders who are at best struggling to make any decent profits. Why should this be?

It’s not that there is insufficient information. The internet is awash with it, though regrettably much of it is misleading and sales oriented. The problem lies in finding reliable information and genuine help. Both of these commodities, generally speaking, were available before the internet and discount trading came along. The full service accounts that are still available (at a price) at most stock brokers, online and offline, provided help and advice for newcomers and old hands alike. The chances of successful trading were therefore much higher.

Now the average new trader finds himself alone and often confused, in a business that uses unfamiliar terms and practices, and in markets the behaviour of which seem strange and often illogical. To make things worse, he is often using more of his available capital than he should on each trade, and is finding that trading online can be addictive, risky and close to pure gambling.

In order to succeed in online trading whilst using discounted services you must disassociate yourself from the “herd mentality”. Most new traders see the opportunity presented to them not as a business but as the chance to get-rich-quick (or get-out-of-debt-quick). They’re encouraged in this attitude by the mass of sales pages selling information and software to do with trading the financial markets, especially forex, the graveyard of many hopes of online riches.

You, however, must see it strictly as a business with which to make regular profits. You won’t succeed with every trade you make, but you can take steps to ensure that you succeed in more than half and that every profitable trade more than wipes out the losses of several losing trades.

Investing in your online trading education is essential. But you have to discriminate in the type of information you act on. Learn where the most reliable information is. Experiment with demo accounts, where you can practise trading without risking real money. Take advantage of the discounted fees of your broker by investing in a reliable stock trading package such as Sharescope.

Finally, find a mentor – someone who actually trades the markets himself, rather than just sells information on how other people can do it. He will have been where you are and taken the hard knocks already. He can short-circuit the learning process for you, and you may even be able to simply copy his trades to start off with. The internet and your computer put the world at your fingertips, so make use of that power to succeed in your online trading career.

Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan

Investing Through Online Trading

If you’re changing your investing strategy to online financial trading then you’re far from alone. But it’s an unfortunate fact that a great many people who do this will not make money.

Let’s have a look at a few simple guidelines that can give you an unfair advantage and greatly increase your chances of success.

1. Only invest money you can afford to lose.

All investments carry an element of risk, no matter how careful you are, how clued up on the markets, and how experienced and knowledgeable you are. It’s always possible that an investment will go bad and lose you the money you have invested in it.

Money management is supremely important. “Don’t have all your eggs in one basket”. And never put money into your online trading that you should have put aside for paying essentials. You want to be able to make trading and investment decisions calmly and in a detached manner, and not when there is severe emotional pressure on you, which there will be if you’re taking a chance with next month’s mortgage repayment money.

2. Have sufficient funds in your account to start with.

Another form of pressure that newcomers to financial trading often subject themselves to comes in the form of the amount of money they have to trade with. The costs savings that the internet and computer technology have brought have enabled brokers to accept very low minimum deposits. This has opened the doors to financial trading to thousands of people who otherwise couldn’t afford it.

But the price is that many of these people end up losing their money because they simply don’t have enough to trade properly, that is, to spread their trades over a wide enough range of stocks or markets or kinds of instrument. The absolute minimum amount that a new trader should have in his account to start with is in the region of $2,000, or £1,500. You can possibly get away with less only if you have active help from an experienced expert.

3. Develop your own system or method of trading.

If you’re still undecided whether to make a trade after thinking about it for one minute then you shouldn’t make it. But you still need a system, e.g. a swing trading system, to help you make the decision in the first place. The amount of information available on the internet and elsewhere is overwhelming. You can’t hope to process it all.

Whether you decide to become a technical analyst, and refer only to your charts and their indicators, or you become a fundamentalist, and pay attention only to balance sheets, company reports, and news feeds, or steer a middle path, the important thing is to have a system you’re comfortable with and works for you.

4. A reliable broker

Check that your broker is registered with the appropriate authority and has a capital base of at least $7 million (£5 million) or the equivalent. Test the trading platform they provide to ensure you can make your trades quickly and easily with just a few mouse clicks, and that all the information is clear and unequivocal. Ask if they have back-up facilities for if their server is down, and if trades can be made easily by telephone in such a case.

What are their fees like? Do they have a fixed charge per trade, or is it based on the amount you are investing? Are there any hidden fees, such as monthly or annual charges? This may be all right if you plan on making many trades, but not if your trading activity is going to be low to start with.

5. Information is the key to success – and profits.

Market information software is an essential item for any financial trader or investor. Whilst brokers often have extensive tools such as charts, price history and indicators, and news feeds, an independent package such as Sharescope from a specialist company is far better. Time spent on becoming an expert at using such software will repay you handsomely. With the help of an experienced mentor, you will quickly be able to see what any particular market is going through and what the likely direction is going to be.

A mentor is probably the most important asset of any newcomer to online financial trading. If you can find one who actually trades himself, and makes thousands a week in doing so, then hitch yourself to him and enjoy the ride.

Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan

The Swing Trading System Anomaly

The swing trading system works by identifying overbought and oversold positions, themselves the result of human emotions affecting the markets. Swing traders normally use charts to do this, but I believe charts on their own are not enough to identify the stocks or other securities that are becoming potential trades. Something else is needed for that.

The important point is that swing trading is based on different criteria from the “trend” method of trading, even though both cash in on the human factor. “The trend is your friend”, and traders following this method identify a definite up or down trend that is in place before they join it.

The downside is that very often by the time a trend is identified it is already finished, or nearly so. Even when the trader manages to ride the tail end of it he often loses out when the trend reverses and he is forced to close his trade at a loss. Swing traders seek to avoid that fate by identifying in advance when a particular stock is likely to become overbought or oversold, and therefore buying and selling ahead of the trend trader.

To summarise then, with any stock, if something happens that makes it more desirable it increases in price. But seldom will it simply move up smoothly to the new price level that it should now occupy. Instead it “overshoots” and goes above what ought to be the correct market price.

At some stage traders realise that it’s gone up too much, and buyers are no longer prepared to buy at that price, so it comes down, but, again, not to the correct level. It overshoots again and is now undervalued once more. Buyers reappear and the price starts to move up again. This up-and-down price movement continues until either it stabilises at the new price level or something else happens to affect the market price and the whole process starts all over again.

It’s these “overshoots” that swing traders watch out for. When a stock is moving up fast towards the resistance level, or moving down fast towards support, it’s most likely (though not always) going to break through, temporarily, and then it’s only a matter of time before it comes back towards its proper level and then overshoots that as well. Swing traders love these price movements because that’s how they profit.

So how do you identify stocks that are about to perform like this? By leaving your charts for a while and paying attention to what is happening in the real world. You can’t do this for every single stock, or even for every single sector, unless you have massive resources at your disposal. As an individual trader you have to specialise to a degree.

Choose your segment of the market so as to ensure a fair degree of volatility (though not too much). Get to know what is going on in that sector, what the seasonal patterns are, what the problems and challenges are. Keep abreast of the news relating to stocks in that sector. This is pure fundamental analysis, of course, and many technical analysts (and swing traders are often technical analysts) would frown on it.

Nevertheless, I believe using the two stock market trading systems together is a far better way to swing trade. Use your knowledge of your particular market sector to gauge which stocks are likely to be at or near an overbought or oversold position in the near future, and only then study your charts to identify the right times to enter and close your trades. This “fine tuning” of your swing trading system should increase your profit taking considerably.

And if you want to make even more certain of regular profits on the financial markets just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan

Discount Futures Brokers and the “Rolling Revolution”

Discount futures brokers have been around since the late 1990s. They’ve been part of a kind of “rolling revolution” in financial trading. The trouble is, this “revolution”, though beneficial to traders and investors in many ways, has encouraged cut-priced (or discounted) services with not just a reduced level of service but also a lower level of professionalism.

The futures market has existed for many years, but these recent changes mean that in place of the traditional investor, investing for the medium to long term, we now have the “trader”, who is looking for quick profits over a period of a few months at most, and often only days.

And what these traders trade is in most cases not the traditional shares or company stock, but options to buy the stock, or the future price of the stock (“futures”), which means no real attachment to the company concerned. They have no interest in its affairs other than how they affect the share price, no concern for the workforce, they’ll never attend the annual meeting to discuss and vote on the future direction of the company, and they’ll hold no stock certificate signed by the company secretary certifying the holder to be the owner of so many shares in the company. And the company may just as easily be based somewhere on the other side of the world as in the trader’s own country.

The internet’s to blame. It has enabled ordinary people to trade in this way, and at a discount, i.e. for cheaper brokerage fees than had been the case previously. Advances in computer capabilities and speed bred impressive advances in software applications. Stock brokers invested in this as they saw the profit potential, and most of them began offering discounted services and promoting themselves as, among other things, discount futures brokers.

The trading platforms that enable you to make your trades instantly without speaking with another human being, the charts and their indicators, giving price histories going back to way back when on thousands of stocks, these are all the result of that massive investment. And they now enable brokers to attract far more business than before by using the increased automation produced by their advanced software programs to offer cut price services.

And while futures are now all the rage, the traditional role of the futures broker has all but disappeared. Brokers have re-invented themselves. The typical transaction now no longer involves the broker advising his client on how he sees the future of a particular market or how the client ought to consider spreading his risk. Even more in decline are pro-active services where the broker actively suggests investments and trades, or even takes over the client’s portfolio to trade as if it were his own. Only the more wealthy even consider paying for these kind of services.

Now what used to be called “execution only” services are king. The broker simply provides access to the information the trader needs in order to make trading decisions, often by technical analysis. More astute traders rely instead on independently obtained data. Real brokerage services have been taken over by “dealers” who make calls to customers to offer help and, more to the point, make sure they are making enough trades and incurring a decent level of brokerage fees.

There are brokers who are straightforward about their fees, and there are others who are more evasive. If you’re opening an account for the first time, or switching your account to another brokerage, then you need to check the fee structure before you sign up. Watch out for hidden fees.

With each broker you consider, ask what their all inclusive “round-turn” rates are. Ask what your transaction costs will be, including any “hidden” fees. If you’re a regular trader then you’re in a position to negotiate fees rather than tamely accept the quoted minimum fees.

By protecting yourself from excessive fees, even from the new breed of discount futures brokers, you can at least more easily profit from the brave new financial trading environment.

And with the right guidance you can make really serious profits.

Just go to our home page and complete the form for your Secrets of Successful Trading.

Philip Gegan