Cricket is a passion in India and the audience treats cricketers as Gods. For those who are in the stock market whether by trading or investing, it is nothing less than a passion. It would be interesting to find similarities between the two passions of almost every Indian, The Cricket and Trading.
– In Cricket Toss is very crucial. The team decides it strategy beforehand what they will do after they win or lose the toss.
-Similarly in Trading, When you approach the trading in morning. You need to have a Plan B in place too. You do not know whether the market will act as per your understanding or not. Plan B will keep you in the game and help you win too in case something goes wrong.
There are three versions of international cricket:
Online stock trading is not something that can be done in a jiffy. It’s a game of millions or even billions, so it must be catered to with sagacity. Following are some of the tips that would assist you in making your online stock trading effective and efficacious.
Choose your Trading Style
You must be aware of the fact that which trading style suits you the most. You can go for the day trading, where the trade is closed each day or you can become a weekly or monthly trader. Nevertheless, it is imperative for you to evaluate the best option for you, so that so could perform effectively.
Choosing the right Stock Broker
If you do not hold much knowledge about the online stock trade, then you may consider hiring a broker. The stockbroker will assist you in securing the reasonable gains. However, it is equally important for you to have an eye on the activity of the broker, so that you may avoid any risks of being defrauded. Continue reading “How can you make online stock trading effective?”
Should I build my own Stock trading system or copy an existing one?
Every trader who wants to make money and generate trading profits in the stock market needs one. A good strategy can increase the chances of winning because it sets entry points, exit points, and risk management rules. You, therefore, need to spend some time looking for the best strategy.
You can find suitable Systems on the internet. You might be able to come across free systems but many others are sold at good prices. It’s easy to see why expert Systems are costly. They are the tools that can help investors make well beyond the initial cost of a system. Despite the high price tags though, stock trading systems that are for sale are often ideal to use because their cost is a warranty of sorts. You can reasonably expect high system quality that is the result of research.
Foreign exchange market is where the currency is traded. When trade in goods and services were limited as in olden days, the system of the transaction was through barter. Barter was a system where the transaction was carried out by exchange of goods. But with the expansion of trade, this form of transaction became quite cumbersome. An intermediate between the goods traded was invented. Formerly this was in the form of coins made of metals which had intrinsic value such as gold, silver, and copper. The use of coins to buy and sell goods became convenient. The problem was when the value of goods sold or bought was high. It required that much more coins which were just too cumbersome posing a practical problem. Moreover, trade further expanded. Something easier to handle had to be invented. That was how bank notes made its appearance to substitute coins. Initially, the banknotes were pegged to valuable metals such as the gold standard. But this was later de-linked. Now the value of banknotes comes from the value decreed by governments. These banknotes are issued by banks that are controlled by national governments. Continue reading “Why is Currency traded?”
Use of Probability of win and Statistics in Trading
Having an ‘Edge’ and trading vs. Gambling
Gambling: The odds are against you and you have to rely on luck to win. For example, take the lottery. Who makes money with the lottery? Well, it’s used by governments to pay for schools, etc. That means that they make a profit on the lottery. If 1 million individuals pay $1.00 each for a ticket, the only way they can make a profit is by paying out less than $1 million. So, the math for the lottery is such that even if some individuals are lucky, they cannot usually exceed $1 million in total winnings among all winners. So, in other words, buying 1 million tickets yourself with $1 million, you would end up with less than $1 million in winnings, even if you have winning tickets. The math has been done and the probability of the game has been fixed against you.
The operators of the lottery have the ‘edge’ in this game. The only way you could possibly win as an individual is by sheer luck. You would have to randomly get one of the winning tickets. You have no control. You cannot repeat any success (in the rare event that you do win). Most of the time you will lose. Statistically, over time, you will pay far more into the lottery than you get out (if you get anything out).
The same principle is used at the casino. All the games in casinos are fixed at specific win/loss ratios which always favor the casinos (the house has the advantage of the ‘edge’). Sure, they may pay out some large sums occasionally (losses to the casino) to a few people, but they collect small steady sums (winnings to the casino). As long as their income exceeds their expenses, they make money. And with the odds fixed, they do, lots of money. All gambling is set up this way. The house always has the ‘edge’ in all gambling. In reality, this edge does not have to be significant. Even 51% winning and 49% losing will make a casino lots of money over time. It’s a numbers game.
How do you get the edge? What really is an edge?
If you design a trading system, test it and it works to make you money, it should do better than randomly entering trades.
The edge is the percentage advantage you have using your proven trading strategy over randomly entering trades in a market.
For example, My system is able to predict days the market goes up 65% of the time and I can buy that market based on my system. Alternatively, I could enter the market each day using a coin toss, giving me 50% accuracy in predicting correct market direction.
Calculating the edge for this example:
Edge = (percentage of win of system) – (percentage of win of random system)
Edge = 65 – 50 = 15%
If my own system is only as good as a random entry system, I need to change systems or make some adjustments on the edge would be zero. We need an edge greater zero to make a system work.
You don’t really need much of an edge. Even a tiny amount is sufficient. Being able to have 51% winners is enough, giving you an edge of 1%.
How to Trade Support and Resistance on a stock chart
Trading happens over exchange with various participants punching the orders round the clock. This cumulative activity creates some price zones or levels. Those levels signify something and are used as a reference by many traders. Those levels are called Support and Resistance levels.
The Invisible magic of price action?
You must have felt that a stock sometimes rebounds from a certain price zone or level many times and you wonder what makes it do so? Most of the times stock reverse from a particular price and you again fail to know why this is happening. This is not a magic. These price levels are called as the support and resistance levels.
How are these support and resistance created?
When trading action takes place in a new script. The psychology of the traders helps create those price zones where they feel the stock is either overbought or expensive(Resistance levels), Price at which stock is cheap and oversold( Support level). As the trading involves a large number of traders the probability of what they think is right level is going to be high. Simply, because of the Wisdom of the crowd principle.
After some time of trading activity, that stock develops a price pattern based on the psychology described above. Now, the new traders or investors base their future prediction of price movement based on the historical price pattern they just saw. They Just see left and find out where the price has normally taken reversal. They utilize Technical Analysis to gauge the price action and predict targets. Continue reading “How to Trade Support and Resistance in Stocks”
There are many strategies that can be learned by day traders. Some of the more popular techniques used by day traders are:
This strategy assumes that the stock being traded will continue its current direction, either moving up or falling down. The idea is to buy a security that has been moving and follow the momentum of the trade.
This strategy assumes the stock can no longer continue trading in its current trend and is due for a reversal. The contrarian trader buys stocks that have been falling or shorts one that has been rising because they expect the trend will change. They usually use technical tools which indicate Overbought and Oversold prices. Continue reading “Popular Day Trading Techniques”
The top penny stocks are the ones that will make you money. These are shares under $5 in the US and INR 30 in INDIA issued by companies looking to develop and grow their businesses. An ambitious capable management team whose mission is to become strong dominant players in their respective industry runs these fledgling corporations. It’s a sign that these companies are focused on increasing sales, profit and shareholder value.
Top penny stocks are about investing in companies with legitimate businesses. A good indication of the company’s honesty is whether they are up to date on their financial reporting. This shows that the company has real sales and profit. Top penny stocks emphasize investing in quality companies.
The top penny stocks generate extraordinary returns for the investor. These are shares of companies that trade below $5 in the US and INR 30 in INDIA. Companies that issue these shares are young companies that have been in existence for less than five years. The proceeds from these stock issues are used to finance expansion, advance research on proprietary technology or both. Given the brief operating history of these companies, their relatively new products and technology, investing in penny stocks can be very risky. If the right penny stock is selected, the returns to the investor can be many times over. Many of today’s major corporations had their start as a penny stock.
To improve your odds of picking that penny stock winner, here are some points to consider:
is the most exciting yet challenging tasks of earning money through the investment in stocks. There are a lot of misconceptions about investing in stocks.
One of the largest misconceptions of all is that one size fits for all. That isn’t true at all. Other very famous misunderstanding about stock picking is that people think that once they have opted for one strategy after a lot of careful evaluation, they don’t need to change that at all. This is also
Other very famous misunderstanding about stock picking is that people think that once they have opted for one strategy after a lot of careful evaluation, they don’t need to change that at all. This is also the false concept. There is nothing like a perfect stock picking strategy. The most common explanation for not having a perfect stock picking strategy is the change in the economic circumstances of countries which lead to the change in economic conditions of the industries operating in those countries. Such problems totally tilt the balance of attractiveness from one stock to other.
Allocating assets or (capital) amongst different stocks is, therefore, a tricky affair and will always remain a tricky affair forever because of so many uncertainties involved. A lot of theories have been presented about stock picking which may be proven right or wrong.