Every investor chooses to increase their stock market returns. This is possible through options. However, it is a difficult thing to achieve and requires research and patience. To increase your returns through options an investor has to predict the direction that the stock will go and the time frame in which this move will happen.

If either is incorrectly predicted, the investor can loose their money. If correctly predicted, then the investor’s returns can double what they would have made with a normal straight investment in the same stock.

Stock options are financial instruments as they give the investor the chance, but not the obligation to purchase a stock. They come in four different choices. Short or long positions on a Call or Put. Long positions on a Call or a Put means the investor can purchase a Call or a Put. On the other hand, Short positions give the investor the opportunity to sell a Call or a Put.

A Put and a Call are different then the short or long positions. When a stock goes down, the value of a Put goes up. Thus a Put is what profits when the stock declines in price. A Call is the opposite of a Put. When a stock increases in price, the value of a Call increases. Using this information, if the stock price were to go up, the investor should buy a call. However, if the stock price were to go down, the investor should buy a put.

Other than the short or long positions on a Call or Put, there are other parts of an option that are important. The right for the investor to purchase something has a time limit. There is the expiration date. Each option has a date in which it will expire and will be of no use to the investor anymore. Each option is different. Some options are available for a few consecutive months starting immediately, whereas others may be a couple of months starting from a particular date. The expiration date of each option is always on the third Friday of each month. However, if it is a holiday, it will be on the Thursday.

Other than the expiration date, there is another important part to an option. Each option also has a strike price. A strike price is the price that the option will be exercised at. The price at which something is bought is referred to as the strike or exercised price. Each option’s strike price is different. This means that there are quite a few choices when wanting to buy an option. From calls or puts to multiple strike prices, the decision to buy an option is difficult.

If an investor can foresee changes in stock prices within a certain time span, it is advised that they use stock options. It can increase their returns which would otherwise be lesser if they were to invest in the same stock without options. A way of predicting changes in stock prices is the use of technical analysis. It allows investors to find patterns in stock prices and by using this they can increase their returns through options.

Arkaitz Arteaga MarketStock.net

When starting out in Forex currency trading, there are two basic approaches to analyze the Forex market. These two approaches are Fundamental analysis and Technical analysis. The main elements of these Forex trading styles are explored below.

Technical analysis is the most likely choice for a beginner Forex trader. It focuses on the study of price movement through charts. These charts are used to identify trends and patterns. With this information, they then predict what is most likely to happen in the future, using past events. The theory behind technical analysis is that all market fluctuations is reflected in the currency, thus by examining price action, all trading decisions can be made. Being able to identify trend in the early stages in the key to technical analysis

For example, a basic chart shows the past relationship between any two currencies the investor has chosen. It shows the peaks and troughs in the relationship, and after experience a chart should help the investor predict future currency movements.

Some of the indicators used when applying technical analysis are resistance, support, moving averages, Bollinger bands, trend lines and pivot points. When using price based indicators there are few recommended by traders. They are the relative strength index (RSI), commodity channel index and stochastic oscillator.

If a beginner, this is probably the least likely style to use. Fundamental analysis consists of examining economic, social and political data. They also look at macroeconomic indicators such as inflation rates, economic growth rates and interest rates. The key idea being fundamental analysis is that if a country is doing well, this should also mean their currency is doing well. Most beginners choose not to take on fundamental analysis immediately is because it is a long gruelling process with vast amounts of research to be done. As well as that, an overload on information is possible.

Part of fundamental analysis is examining anything that can affect the currency of a country. For example, news coverage, GDP (Gross Domestic Product) changes, political events, inflation predictions, current events, government reports, retail price data, current events and changes in interest rates.

The impact of economic conditions in a country can affect the value of their currency. For example, government budget deficits or surpluses. The market can react negatively to government deficits whereas the market reacts positively to government surpluses. Another economic condition that can affect a country’s currency is trade. For example, if the trade flow for a country suddenly reduces, it can have negative effect on the currency of that country. Analyzing and trading currencies based on fundamental analysis is only good for a long term currency investor.

Market psychology and trader perceptions can influence the market in a variety of ways. This article has explained the differences in the two forex trading styles available, choosing which is best for the trader, is up to their wants and needs.

Arkaitz Arteaga MarketStock.net

Stock Analysis (Patterns)

Cup & Handle
The cup and handle is a charting analysis where traders look for of course “cups and handles”. This is where prices begin high then dip then rise again. This pattern will resemble a cup. It will then steady out for a period of time (this will resemble a handle) before breaking out again and finally shooting to a new high. The goal of the investor is to buy “at the handle” and this would be the most profitable time to enter.

Head & Shoulders
This is another pattern that looks like a head and shoulder. It is formed by a peak and dip followed by a higher peak and then another dip and rise. The first and last peaks are the shoulders and the middle highest peak is the head. This indicates a downward trend and the big drop will come soon after the second shoulder.

Stock Analysis (Indicators)

Bollinger Bands
These are sets of 3 lines. The two outer lines show market volatility. As the distance between the outer lines increase it indicates a more volatile market. As the distance between the lines decrease it indicates a less volatile market. The middle line is the moving average of the two outer lines. The distance of the middle line to either the upper or lower line indicates whether the stock is oversold or overbought. If it’s closer to the lower line it signals an oversold stock. As it closes to the upper line it signals that it is oversold and the price should rise soon. Bollinger bands are usually used along with other indicators to support a suspected trend or change.

Relative Strength Index (RSI)
The RSI takes the ratio of days the stock has finished up against the number of days it has finished down. The time period is around nine to fifteen days. An RSI below 30 indicates an oversold stock, meaning that its price is due for a rise and now is a good time for traders to go in. An RSI above 70 on the other hand indicates an overbought stock meaning that it is due for a price fall and traders should sell off. This shouldn’t be exhaustive in your research indicators. In a bullish market many stocks will seem overbought but may still be due for a rise. A more accurate way of analysing the stock is to see historical charts of how the stock prices moved with the RSI.

Money Flow Index (MFI)
The MFI looks at the volume of shares and price. It is similar to the RSI in that it gives a score of 1 to 100, and an MFI of 70 and above is a sell signal and 30 and below is a buy signal. Long term charting of MFI is more accurate then short term

The key to being accurate in your analysis is to use a mix of these technical analysis indicators and patterns together. This along side fundamentally analysis is a sure bet to picking the right times to enter or leave securities.

Arkaitz Arteaga MarketStock.net