SDB Finance Information

Finance information for you

Posts Tagged stock

What is Swing Trading?

Jan 28

Posted by admin in Investing

Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend.

Swing trading combines the best of two worlds – the slower pace of investing and the increased potential gains of day trading.

Swing traders hold stocks for days or weeks playing the general upward or downward trends.

Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.

By rolling your money over rapidly through short term gains you can quickly build up your equity.

How does Swing Trading work?

The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.

Strongly trending stocks often make a quick move after completing its correction which one can profit from.

One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.

In brief a Swing Trader’s goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques.

What are the advantages of Swing Trading?

Swing Trading combines the best of two worlds – the slower pace of investing and the increased potential gains of day trading.

Swing Trading works well for part-time traders ? especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesn’t require that type of focus and dedication.

While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride “swings” in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.

With day trading, the only person getting rich is the broker. “Swing traders go for the meat of the move while a day trader just gets scraps.” Furthermore, to swing trade, you don’t need sophisticated computer hook-ups or lightning quick execution services and you don’t have to play extremely volatile stocks.

We believe that the Swing Trading method is a better way for the individual investor to attain superior investment results through short-term trading in the stock market. This trading strategy has been carefully designed for the needs of the individual investor who does not have the resources that institutions and professional money managers may have.

How to Swing Trade?

To fully understand what swing trading really is, you first need to understand what up/down trends are.

Up Trend: Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last “swing” in the trend will serve as support for the next low. These areas are circled.

Down Trend: Simply put a downtrend is a series of lower highs and lower lows. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. Often the low of the last “swing” in the stock’s trend will serve as resistance for the next high. These are circled.

Long Swing Trades: Once an uptrend has been identified a swing trader looks for buying opportunities in that stock. This can be identified when the stock experiences a minor pullback or correction within that uptrend. The swing trader then activates a trailing buy-stop technique. If prices break out above the trailing stop loss, you will be stopped out and long in the trade. If prices decline, your buy-stop will not be touched.

Short Swing Trades: Once an downtrend has been identified a swing trader looks for selling opportunities in that stock. This can be identified when the stock experiences a minor rally within that downtrend. The swing trader then activates a trailing sell-stop technique. If prices break down and fall below the trailing stop loss, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.

Tags: , , , , , , , , , , ,

No Comments

Candlestick Patterns For Swing Traders

Jan 21

Posted by admin in Stocks Mutual Funds

Candlestick charts are an effective way to study the emotions of other traders. Candlestick patterns provide a trader with a picture of human emotions that are used to make buy and sell decisions.

On a piece of paper, write down the following statement with a big black marker:

There is nothing on a chart that matters more than price. Everything else is secondary.

Take that piece of paper and tape it to the top of your monitor! I think too often swing traders get caught up in so many other forms of technical analysis that they miss the most important thing on a chart. You do not need anything else on a chart but candles to be a successful swing trader! There is nothing that can improve your trading more than learning the art of reading candlestick charts.

There are only two groups of people in the stock market. There are buyers and sellers. We want to find out which group is in control of the price action now. We use candles to figure that out. When stocks close at the bottom of the range we conclude that the sellers are in control. When stocks close at the top of the range we conclude that buyers are in control.

In the stock market, for every buyer there has to be a seller and for every seller there has to be a buyer. If a stock closes at the top of the range, this means that buyers were more aggressive and were willing to get in at any price. The sellers were only willing to sell at higher prices. This causes the stock to move up.

If a stock closes at the bottom of the range, this means that sellers were more aggressive and were willing to get out at any price. The buyers were only willing to buy at lower prices. This causes the stock to move down.

Where a stock closes in relation to the range tells us who is winning the war between buyers and sellers. This is the most important thing to know when reading candlestick charts. We can classify candles in two categories: wide range candles (WRC) and narrow range candles (NRC). Wide range candles state that there is high volatility (interest in the stock) and narrow range candles state that there is low volatility (little interest in the stock). Stocks tend to move in the direction of wide range candles.

The number one rule when reading candlestick charts is this: You want to buy a stock when nobody wants it and sell a stock when everybody wants it! This is the only way to consistently make money swing trading!

I know what you’re thinking. You thought this was going to be about hammers, doji’s, and shooting stars. Sorry to disappoint you, but knowing all of the different types of candlestick patterns is really not at all necessary once you understand why a candle represents the struggle between buyers and sellers.

Take the hammer candlestick pattern. What happened to make up this candle? The stock opened, then at some point the sellers took control of the stock and pushed it lower. But in the end, the buyers ?won the war? and had enough strength to close the stock at the top of the range.

When we are reading candlestick charts, why would we need to know the name of the pattern? What we do need to know is why the candle looks the way that it does rather than spending our time memorizing candlestick patterns!

Tags: , , , , ,

No Comments

Placing Stock Orders

Oct 6

Posted by admin in Investing, Real Estate

Once you have made the buy or sell decision, what\’s the best way to accomplish it? Some rules of thumb for placing stock orders for exchange-listed and over-the-counter stocks.

Once an individual investor decides to buy or sell some stock, there are many more decisions that need to be made. Should the investor use a market order, a limit order, a stop order, or some other order type? Which brokerage firm should get the order? To what exchange should the order be routed? This article will help you make these decisions. The two common types of orders used when trading stocks are market orders and limit orders. A market order can be used to buy or sell stock at the best price that the brokerage firm can find at that moment, no matter how high or low that price is. A limit order tells the brokerage firm to purchase (or sell) the shares at a price not to exceed (or not less than) a certain amount, known as the limit price.

Market Orders

One advantage of placing a market order is that the trade will be executed very quickly. Often a broker can confirm that a market order has been executed within just a few seconds of placing an order. The price at which a buy order is executed will usually be the current ask price, which is sometimes called the offer price, and the price at which a market sell would occur would be the current bid price. For example, if the current quotes are 1,000 shares bid at 10 1/8 and 1,700 offered at 10 3/8, that means that you can immediately sell up to 1,000 shares at a price of 10 1/8 or purchase up to 1,700 shares at 10 3/8. The difference between the bid price and the ask price is called the bid-ask spread. These market quotes can be obtained from your broker before you place an order, so that you will have a fairly good, but not necessarily exact, idea of the price at which your trade will be filled. During times of heavy trading activity, though, the market may change between the time you hear the quotes and the time your order reaches the exchange. There is a cost for the speedy execution of a market order, and that is that you may be paying a higher price for the stock than you might otherwise pay. In this example, a limit order to purchase 1,000 shares at 10 1/4 would have a good chance of being filled, so that the investor might have been able to save 1/8, or $125, on the trade. However, if no one were willing to sell at 10 1/4, the investor would have been unable to buy.

Limit Orders

Most brokerage firms charge the same commission for limit orders as they do for market orders, but a few charge more for limit orders since they represent more work. Since a limit order often does not execute immediately, it means that the firm may have to call the customer back later to report that the order was executed. Furthermore, since the order may remain open a long time, the firm has to keep track of the open limit orders. Some firms allow a good-til-canceled limit order to remain active for up to 60 days. In order to get a feel for limit orders, it helps to understand what happens to a limit order after you place it with your broker. If the stock is listed on the New York Stock Exchange or the American Stock Exchange, your broker will send your limit order, usually via a computer, to one of the exchanges where the stock is listed or to a NASDAQ (National Association of Securities Dealers Automated Quotation system) market maker who trades the stock. Usually your brokerage firm will select the exchange to which it sends the order, although you can specify the exchange if you like. Since many stocks trade on several different stock exchanges, your limit order could end up in many different places, even if the stock is listed on the NYSE. At an exchange, limit orders are usually filled according to price and time priority. For example, the buy order with the highest limit buy price is filled first. For orders that come in with the same limit price, the order that arrives first is filled first.

If there is no one willing to trade at the price given in the limit order, then it sits at the exchange until someone is willing to trade at that price, or the limit order expires, whichever comes first. Generally, limit orders that are placed at a limit price in between the bid and ask quotes have a very good chance of being executed on the NYSE and Amex. Limit orders that are placed away from the current quotes have a very low chance of being executed, so this isn?t recommended unless you do not really care if your order does not get filled. Limit orders that are placed at the bid or ask quotes are another story. If the number of shares quoted at the bid (or offer, if you are selling) is large compared to the trading volume in the stock, then your order may be in the back of a long line. (There is an exception: If the quoted size represents only the position that the NYSE specialist is willing to trade, then a customer order takes precedence over the specialist under NYSE rules.)

A powerful daily investment newsletter with trading tips and tutorials,investment education, wealth building,long/short-term investment opportunities,long/short positions, options, …and much much more! Plus we now include tips on self-improvement and how to succeed in business and life and how to set up your own blog site and start earning money right away with out any cost!

Writen By : Larry Potter

Tags: , , , , ,

No Comments

Profit From A Falling Stock

Oct 2

Posted by admin in Investing, Stocks Mutual Funds

There are several ways to profit from a falling stock, but for tonight we are going to discuss the two most basic principals, shorting stock versus buying \”put\” options.

If you have been with us for any length of time you know I have written many times about how to \”short\” a stock. Basically you are simply selling a stock now, taking in the cash for the sale, and \”buying back\” or covering the sale at a cheaper price. so if you \”short\” ABC at 60 dollars and you sold 1000 shares, you took in 60,000 dollars. Now if ABC falls to 50, and you \”Cover\” you are buying it back cheaper. In this case you will spend 50,000 dollars. The difference between where you sold and what you spent, 10 G\’s is your profit.

That really is as easy and as basic as it gets friends. Don\’t let all the talking heads throw you a curve ball, shorting is easy and its really no more risky than going long as long as you use stops to protect yourself. Since the market goes up and down, if you only play the long side, you are missing a lot of profit potential.

But there are problems with this approach. First you need a margin account to do it, all short sales are through margin. Second, it eats up a lot of your buying power because when you go short, you are holding that position with margin that will tie up your money.

The other play is a put option. Here again Wall Street has tried to buffalo the average investor into thinking options are for the big boys. What nonsense! Anyone can and should use call and put options as a trading strategy. The risk is limited, and the returns can be phenomenal because of the leveraging inherent in options. With a put option, you are placing a bet that the stock is going to fall. Win the bet and you will win big time. Lose the bet and just like Vegas, your loss is limited to how much you bet.

If the market is going to run up for a few weeks and then spiral back down, which way should you play? That is impossible to say, we don\’t know your style, your risk tolerance, your bank account balance etc. but for us it\’s an easy call, put options win out over shorting in a scenario like that.

By using put options we can use a relatively small amount of money to be in several \”plays\” and each of them could return several hundred percent returns. Look at it like this. If you short ABC at 100 and it falls to 60 fantastic! You made 40 points and 40%. But if you buy put options for 1.75 and they go to 10.00, what is the percentage there? Over 500%. And look at the cost. It\’s next to nothing, to get such a shot at big returns.

For our money, when the time is right, buying puts against the Dow Jones Industrials, the NASDAQ 100 and the Composite and select individual stocks that carry high P/E\’s will be the way to go as we feel those will be taken to the woodshed for a spanking.

For a FREE report on HOW TO TRADE FAST, enter your email address at:

http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=12826

Writen By : Larry Potter

Tags: , , , , , , , , , ,

No Comments

What Is Indexing?

Oct 2

Posted by admin in Investing, Stocks Mutual Funds

We want to expand on something that we hinted at and it?s about ?indexing? and the myth that the market only goes up, so therefore you should buy and hold. First, if we asked you what the biggest single business on earth is, we?d bet that not many would pick the stock market. But trust us it is. The daily trading of just one popular stock is often a significant percentage of the entire daily GDP in dollar terms. It?s huge and with more than half of our population investing in the market through 401K?s, or even your insurance company investing behind the scenes, you are indeed involved.

When you are talking about an industry that exchanges billions upon billions of dollars worth of goods every day, you are indeed talking big business. Look at WMT. They sold a billion and a half dollars worth of goods on Black Friday. Wow. Well the NYSE did a billion and a quarter shares of stock swapping. And each of those shares cost between 5 and 100 dollars. The dollar amount is staggering. So, since stocks are the biggest business on earth, don?t you think the biggest and brightest minds have come up with all the tricks of the trade to keep it growing? You bet.

Indexing was one of their biggest corrupt inventions. Why? Well along with the fact that they reshuffle the index?s (there have been 27 changes to the DOW) so they can discard ?bad poor performing companies and put in winners?, there is the problem of weighting that comes into view. When an index is weighted so that company A is more important than Company B and that more important than company C, where do you think the bulk of the money that comes to an index fund will go? To company A of course. It doesn?t matter that Company B might be better, or that company C might be growing faster, the money will go to company A first, then b, then c.

So, is it any wonder why the well known names get so bloated? Is there any wonder why P/E?s get so excessive? Every person that ?puts? his money in an index fund is primarily buying that first most heavily weighted stock, first. So, indeed, that stock pretty much ?has? to go higher in time simply because every person that puts in a buck in an index, is sending a portion of it to buy that company. Now, with a portion of everyone?s dollars going to the heavyweights of an index, and in a good year an index can indeed move 40%, there are a ton of money managers that get paid to ?beat the index?. Well how can they do that? By buying smaller riskier stocks. They know that if they can create some excitement in a low float, small or micro cap, that thing can catch fire and double, or triple. They need those doubles and triples to beat the index?s or they get fired for under performance.

So, when the index?s are getting big money inflows, they roar higher. They have to. The small caps fire up so that hedge funds and private money managers get to fire them up and beat the indexs. But because of the weighting involved with indexing, what we often see is grotesque imbalances. Tiny companies with little hopes of ever really doing anything special are bid up, trading at 100 times sales. The individual investor sees the excitement and wants in, but he generally has no idea why he?s buying the darned thing. When the index funds run out of steam, the smaller issues then become targets for serious selling. The run will end as badly as others have for them with precipitous drops. This is what indexing has done for the market, it?s created a boom/bust cycle for smaller issues that is out of the scope of reality. They rarely end well.

For a FREE report on HOW TO TRADE FAST, enter your email address at:

http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=12826

Writen By : Larry Potter

Tags: , , , , , , , , , ,

No Comments

Your Prey For 2006

Oct 1

Posted by admin in Finance, Investing, Stocks Mutual Funds

As 2005 comes to an end, investors celebrate the coming new year and bring new expectation with it. As investors, we try to sell our losing investment before the year ends and sell our winning investments after the new year. This is to receive the benefit of early tax deduction and deferring our tax liability. Either way, after selling your investment, you have some spare cash to invest. Therefore, you would need some idea on where to invest your money.

Scouring the 52 week low is normally a good place to start. Tax loss selling has made many stocks to make the list. This is great for us, small investor. Barring any fundamental news, cheap stocks that get cheaper will be a good investment candidate. Turnaround investors look for stocks that are touching 52 week low and starts researching them. Many of them bounces, providing investors with outstanding return. Examples for this year include: ATI Technologies Inc. (ATYT, up 39% from the low), Seagate Technology (STX, up 29% from the low), Omnivision Technologies (OVTI, up 68.8% from the low) and even Maxtor Corp. (MXO, up 45% from the low before being acquired). Maxtor is now trading 120% above its 52 week low.

While stocks touching new 52 week low, do not always bounce, this is a good place to start your research. Therefore, your prey for 2006 should at least include companies that has recently touched 52 week low. These are several ideas to get you started for 2006.

Pier One Imports Inc. (PIR). The retail stores specializing on furniture and other decorative accessories, are experiencing customer defection this year. Same store sales has been declining and there is little indication that it will change. Warren Buffett used to own a piece of this company. He has since cut back on his stake late this year. It has recently fallen to $ 8.90 per share from the 52 week high of $ 19.98, a 55 % hair cut.

Shanda Interactive Entertainment (SNDA). For overseas exposure, especially China, Shanda should be on your watch list. It provides online gaming to the Chinese community, especially Massively Multiplayer Online Role Playing Games (MMORPG). Don\’t let the word scare you. It is basically an online gaming portal where it lets gamers fight/play with other gamers. A good way to foster customer\’s loyalty is through the interaction with other individuals. Online Gaming provides Shanda with that opportunity. It has fallen to $ 15.00 from its 52 week high of $ 45.40, a 67% hair cut. The appealing thing about Shanda is its strong balance sheet (more cash than long-term debt) and the potential growth of its market. Furthermore, the company is profitable. Those cash pile will continue to grow if that happens.

Navistar International Corp. (NAV). This company makes and distributes commercial trucks and busses. Competitors include Paccar, Volvo and the like. It is sporting a forward P/E of 6 and decent balance sheet. If it can maintain a 0% growth in profits, the stock price won\’t trade at $ 28.80 for very long.

Verizon Communications Inc. (VZ). The largest baby bells of all are having a decent year on the profit line. However, concerns about competitions and high debt load, has reduced its stock price for year 2005. It is currently trading at $ 30.27 per share with dividend yield of 5.30%. Currently, dividend is about half of its annual profit, which is considered safe. If Verizon can repeat its profit performance, the dividend for 2006 will be safe. However, it currently has a high debt load of $ 34.3 Billion. The company has tried to reduce its debt using its cash flow from operations. On Dec 31st 2002, long term debt stood at $ 44.8 Billion. Therefore, balance sheet has actually improved while stock price goes nowhere.

Fresh Del Monte Produce Inc. (FDP). The makers and distributors of fresh fruit produce is not having a good year. Pricing weakness, combined with the higher than expected cost, has decimated its stock price. Recently, management has reportedly hire JP Morgan to run an auction for the company. It can be sold to as high as $ 1.8 Billion according to TheDeal.com. This translates into $ 30.70 per share. FDP recently trade at $ 23.64 per share. If the deal goes through next year, you have the potential of a 29.9% return. However, the fact that management is exploring the buyout, indicates that business aren\’t so good at this company. If the deal doesn\’t go through, stock price may see further depreciation.

Distribute your finance/investing content for free at our article submission service. Meanwhile you can list your site for free at our web directory service.

Writen By : Hari Wibowo

Tags: , ,

No Comments

Don\’t Push A Trade Too Hard

Sep 30

Posted by admin in Investing, Stocks Mutual Funds

Have you ever started an exercise regimen, only to see that you aren\’t getting the results you wanted? It\’s awful common, yet sometimes the real reason eludes the person. I remember being in a gym, where a young man of about 30 was trying to add some muscle and definition. He\’d do three sets of this, and three sets of that. He\’d split train his upper half one day, then his lower half the next. He worked so hard, and yet he wasn\’t getting the results he wanted. He was getting stronger, and tighter, but his muscles wouldn\’t grow in size the way he wanted.

This guy was indeed becoming frustrated, and of course because everyone seems to be an expert when you\’re at the gym, I heard people telling him to do carbo loading, protein loading, work more on the \”negative\” side of the exercise, do super sets, you name it. The one thing I didn\’t hear anyone suggest was that maybe he was over training. He was taking his routines from magazines like Muscle and Fitness, written by world class body builders. Was he a world class body builder? No, he was \”Mike\” a painter. I didn\’t find it surprising that he wasn\’t getting the results he wanted, he was training his body as if he was a true world class body builder, but in all reality he wasn\’t.

I am not an expert on body building, but I\’ve done my share, and I have a fairly good dose of common sense. So, one day I mentioned to him that maybe he was pushing too hard. His body didn\’t have the years of recuperative experience that the guys in the muscle mags have. I suggested that he was stressing his muscles to the point where they should have been rebuilding even bigger and stronger, but before they could do any growing he was pounding them again. For what ever reason, he figured he had nothing else to lose, so he scaled back his intensity, and frequency of workouts. Almost immediately the results were noticeable. Within a month of his more laid back regimen, his arms, chest and legs had grown measurably. Doing less got him more.

Sometimes it\’s the same thing in the market. Sometimes we push so hard, over analyze so much, that we find ourself doing more harm than good. Staring at a screen watching every tick higher or lower, starts to get your mind racing about every conceivable possibility on earth. Pretty soon a small downdraft has you mashing the sell button for a loss, and then five minutes later it\’s back above where you bought it. Sometimes you can do so much research that you get information overload and then you do absolutely nothing instead of making a play. Because we are humans, our emotions usually rule us. But, in the investing game, emotions will rip you to shreds. The best traders and investors I have ever met have mastered the art of removing emotion from their investing.

This is not an easy thing to do. When you hit the buy button, money, real money that you\’ve worked, for is now on the line. We don\’t like to lose money, so our brain kicks into high gear. Instantly a completely normal ten cent downdraft is the end of the world. Panic sets in. You are convinced that you just bought the evil stock from hell, determined to see to it that you lose all your money. You sell out with a loss and sit back trembling. Whew, glad that\’s over, you say. But more times than not, you look later and the stock is comfortably higher than it was when you bought it. You lost money, on a winning trade because you \”over did it\”. You over analyzed. You pushed too hard.

In a trending market, you want to look for reasons to leave a stock in play. If there is a sound reason for it to weaken, then certainly you have to bail out and move on. But sometimes a stocks weakness is not because the stock did anything wrong, it\’s some outside factor that influenced the problem. That\’s what happened one Wed to a lot of traders. The market was supposed to be up. But even after tremendously strong numbers it was weak. So, it stands to reason that individual stocks were weak too. But was that a reason to sell out? Or would the appropriate thing to do, be trying to find out why the overall market was weak, and then make a decision as to what to do? Obviously the second choice makes the most sense.

The moral of this story folks is that sometimes it\’s better to take a more relaxed approach. We aren\’t in the business of scalping for pennies here. We are trying to enter stocks that are breaking out, showing momentum, or moving on news or product development. Sure there are going to be times when you enter a trade that seems to make sense and it will go haywire on you. Absolutely. But if the reason for the trade was sound, and all of a sudden you see the stock going the wrong way, it\’s often best to sit back and try and find out if it\’s stock specific or there is a wider situation going on. That Wed the market weakness was the result of a rumor that there had been some form of \”incident\” concerning a subway. Terror fears flared up. Stocks sold a bit. It would have been easy to just hit the sell buttons and bail out. It took some discipline to sit back, survey the overall land scape and decide that the trend was still intact.

Try your best not to over do it folks. Don\’t stare at every tick. Don\’t over analyze. This isn\’t easy to do by any means. But I absolutely believe that you can all increase your winning percentages if you do indeed take a more relaxed stance. Sure you still want stops in case there is some calamity going down. But even stops aren\’t written in stone. If something is about to stop you out, sit back a moment, look at the overall market, was there a rumor? Was there a report? Are the other stocks in the sector weak too? Downdrafts happen. Sell programs happen. They key is not panicking when they do. Don\’t over think it. It\’s not easy, but it\’s necessary.

For a FREE report on HOW TO TRADE FAST, enter your email address at: http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=12826

Writen By : Larry Potter

Tags: , , , , , , , , , ,

No Comments