Posts Tagged ‘stocks’

Buying Stocks on Margin

October 5th, 2011

Should I buy stocks on Margin?

Margin is the act of buying stocks using borrowed money through your broker. The amount of margin you can use is decided upon by your broker and the size of your account. Basically, the broker will lend you money based upon your accounts worth. Very similar to borrowing money for a mortgage on a house. In that scenario the bank looks at your value and what you can put down, then they loan you the rest for the house. With margin, you are attempting to use borrowed money to make a much larger gain. As you can easily see, borrowing money to invest in the stock market can be quite risky. If you buy in a bull market and use all the funds leveraged to you, you will make much more money than you would have without using margin. The same goes for a bear market and taking a loss. You can then lose much more money than you expected. Margin is a dangerous game. Read More about trading on margin.

How To Chart a Stock

June 9th, 2010

If you trade stocks, you must know how to chart them. Some people search through charts to find buy or sell signals. I find this wasteful of a stock traders time. You can and need to chart all types of stocks including penny stocks. Charting tells you where you are on a stocks price pattern this means it tells you when to buy or sell. There are plenty of great companies out there, you don’t want to get caught buying them at their 52 week high and having to wait around while you hope the price comes back to the price you paid.

What is a chart: Charts plot the price of a stock over time. The best charts are candlesticks, these charts plot open and closing price while depicting whether the stock closed higher or lower. A red candlestick shows that the price closed below were it closed the day prior and a white stick shows the price closed higher. Within a chart there are also many additional features that depict the overall trend of the stock.

Choosing a time frame: If your day trading, buying and selling intra day, a 3 year chart will not help you. For intra day trading you want to use 3,5 and 15 minute charts. Depending on your longterm investment strategy you can look at a 1 year, which I use most often to a 10 year chart. The yearly chart give me a look at how the stock is doing now in todays market. I’ll look longer for historical support and resistance points but will make my buys and sells based on what I see in front of me in the yearly.

Stock Patterns: There are many patterns out there, either bullish or bearish. Bullish means that a stock is looking strong and bearish means the stock is looking weak. Most of your patterns are based on the trends, which way the stock is moving currently. There are different patterns that represent reversals, bottoms and tops. Some are more worthy than others.

Price Support: Support is a level of price that you do not expect the stock to fall below. You can think of a stocks price going up as a staircase, it will bounce against a certain price and trade sideways, then it breaks through and trades higher, the old price that the stock had trouble breaking above is now the support price.

Price Resistance: This is the price that the stock had previously stopped at. As a stock is moving up it will eventually pull back. That pullback point becomes resistance and the next time the stock approaches that point traders will be cautious. The more times a stock stops at a certain price the stronger the resistance becomes at that price.

Daily Moving Averages: There are many moving averages which is just the average price of a stock over a long period of time, on a yearly chart I like to use 50, 100 and 200 daily moving averages. They provide a long smoothed out curve of the average price. These lines will also become support and resistance points as a stock trades above or below its moving averages.

Dow 11,100 Time For Pullback!

April 14th, 2010

Settle in and prepare yourselves for a pullback here. Everything technical is suggesting the stock market will pull back. We are at a strong resistance point here. I just want everyone to be prepared, the news is screaming 11,000 and more to come. Some are also suggesting this means the recession is over. I personally think this is insanity.

Does anyone know why the stock market went up? Yes, it was an oversold bounce from March 09. Were there more reasons you ask? Maybe, but none that I’ve seen. This rally has come on low volume while the market was at a bottom and way oversold. During this time, the worlds economy was also going very poorly. With everything looking bad the good old U.S.A is as stable an investment that you can find especially when the technical analysis screams buy.

Unemployment bad, business tax situation bad, new hirings bad, gas and oil bad, debt bad, housing bad, and the stock market is running why? In my opinion its because of Technical Analysis and timing. During the election race and the end of the Bush cycle the market besides being oversold went down more than it should and there is some correcting going on. In order for the market to hold 11,000 and keep on running it will require some good things to happen and I do not see that happening at the moment.

According to the numbers there are a lot of day traders in the market but major investors are bearish on the current situation. Investment advisers begin to turn bearish at these types of major resistance levels. The safest bet for them here is to watch their investments but invest nothing new. This creates a tired look in the technical analysis, a kind of rollover point.

Don’t run out and sell your stocks today then start shorting ,but set up your portfolio for sells to maximize current gains. Figure out what you will sell and where when my call is proven to be correct. Never jump the gun on this type of call, You don’t want to sell to early or begin shorting too early. This can cost you a lot of new losses and missed gains. Today If I was trading the Dow, I would sell it and wait for a pullback, if I still wanted to own it. Then when it began to head downward I would short it to make some gains on the way to my pullback point. I will trade the stocks I own in a similar fashion. Some are ready to sell now and others I can give a little room to wait

This is my advice. I am not your professional trading adviser but I do understand the market. I am not a professional and any mistakes made are yours I can’t be liable. Keep it simple and take my advice to look at your portfolio here, either alone or with your trusted financial assistant. Play it right and you can capitalize on your gains and the downturn in the market, not like the last time it crashed when you just held on for dear life.