Home | Finance | Stock Market Investing
Your trading system is a set of rules that you have built up that should be met before you enter a trade. The more ways that a trade is confirmed- the better and the more money you're likely to make. You might wait for a certain pattern to emerge on the charts that indicates that you should trade, so you might find a buy signal for example. One of your rules should be to make sure that there is not a conflicting signal (i.e. a sell signal in this case) on the longer term charts. Your trading system should also include what to do in different circumstances after you have placed your trade. So this should include where you will place your stops (whereby stops allow profits to run and give the ability to lock in some profits or to break even on a trade or worst ways, to reduce any losses.) Know yourself. You need to be able to change your mind about a trade you are considering. You shouldn't always have a bearish (down) or bullish (up) slant or bias towards a market before analysing it. Most traders will remember market crashes and so will trade on the 'short' side of a market most of the time- meaning they will sell initially (without having bought anything first.) But in the long run stock markets and indexes, including the DOW Jones 30, S and P 500 and FTSE 100 rise due to increasing growth and company profits. After all- it's only the leading public limited companies that get listed in these indexes and if the market capitalisation of a stock that's in the FTSE 100 for example, falls, it gets rejected from the index and replaced by a potentially stronger stock. Markets often behave like an elastic band. They can become over stretched beyond a so called 'equilibrium' point as traders panic- with prices becoming over bought or over sold. And then prices snap back. So it can pay to wait until prices are over stretched before placing a trade. This fits in well with the fact that prices will often move back to key moving averages of prices. The only sort of fundamental analysis worth using in my opinion for short term trading decisions is seeing how a market reacts (ie seeing how the price reacts) to bad news. If the price of a security goes up or is pretty much unchanged after bad news relating to the security, it shows strength and you should consider buying. Especially if this potential buy signal is confirmed by other buy signals for the same security. It follows that if there is good news but the price of the security falls or is basically unchanged, this is a sign of weakness and you can expect prices to fall- so you should consider selling. Following the advice given on financial programs is something I definitely don't recommend. You can really suffer from information overload. Very often you'll hear analysts from different financial institutions having totally different points of view on a market. But of course that's what makes a market- buyers and sellers. The thing is, one side is wrong (generally anyway- they could both exit at different times for a profit!) A little tip for trading the DOW: The first two hours and the last hour of the trading day give good opportunities for momentum trading- meaning trading in the same direction as the market. So to sum up, create a system that suits you and do your own thinking and chart analysis before entering a trade.
Information and Articles: http://www.mastersmba.com
Providing Information on various topics, please browse our other Articles for more informative resources, we house information on every topic imaginable so regardless of your needs you can be assured to find the answer here. If you wish to reprint this on your own website, simply click the "Web Version" in the right menu, and you are presented with a pre-formatted document to use.
A lot of the information is written by the Master Article team, and published exclusively on the MastersMBA.com website, and we do our best to research all information to ensure it's as accurate as possible. However at times we also publish documents given to us by other sources, we do examine these documents to ensure they are as accurate and correct as possible however at times they discuss highly specialized fields making it hard to authenticate the validity of every fact in the document. These are written by specialists in their respective fields, and we do trust their integrity and judgment however it's always a good idea when doing any research to consult a number of sources and form your own conclusion based on a number of view points. Also if you are looking for Google Chrome Extensions you can check out that link.
