There are a number of stock market trading styles that different kind of traders use. There is no best kind of style, but each is suited to a trader’s needs and situation. The following are a few of the styles that are common in the market. There are generally four primary stock market trading styles. These are swing trading, trend trading, momentum trading and scalping.

Choosing which style you wish to use depends on your situation. An investor’s time frame is the main aspect to look at when deciding which style is best for them. The correct pairing of trading style and pairing will ensure you are profitable in your efforts in the stock market. This ranges from the aggressive day traders to the conservative long-term-investors.

Scalping
Scalping are trades that are done (bought and sold) during a very short period of time. This can mean that a buy and sell in just a matter of minutes. Each trade makes very small margins but a trader generally would make many transactions in a day. Scalpers, usually aim for high volume stocks which are liquid. They try to buy on daily lows and sell immediately when the stock goes up. It is also a good method for investors who do not have a lot of capital and reuse their capital n every trade.

Momentum Trading
Momentum trading is when a trader sees a stock price picking up and joins it. The investor will take a short or long position in the stock anticipating that the momentum of the stock will continue. This is generally how bubbles grow, due to many traders jumping onto an accelerating stock. Investing period for momentum trading is around a day.

Swing Trading
The general time frame for swing trading is one to four days. This is most common among mom and dad investors. Stocks are often chosen on the basis of technical analysis. Swing traders generally have the advantage of not having too much competition form major traders. Technical analysis I used to looked for indicators of short term price movements. Swing traders rarely do any fundamental analysis as they are looking for short term fluctuations. The majority of their decisions are based on price trends and patterns.

Trend Trading
The time frame for trend traders is around a month. This looks at a securities’ long-term momentum direction. As investors are holding the stock for longer there is a greater deal of risk involved. It is wise for trend traders to do fundamental and technical analysis on the stock. The main indicators that trend traders look for are higher highs. This indicates that a stock is trending upward.

It is very important for a trader to choose the correct style of trading depending on their time frame. Each requires a totally different kind of analysis and each style of trader will have a different set of securities in their portfolio. There are risks associated with all styles with Trend Trading being the riskiest and Scalping being the safest.

Arkaitz Arteaga MarketStock.net

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

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

The best method to foresee stock trends is through technical analysis. It is common practice in the stock market and allows investors and traders to predict stock fluctuations by studying charts and various indicators. Technical analysis is completely independent of any type of research on the company’s intrinsic value or the field and type of business they are in. Technical analysis only looks at past price and volume movements of the company’s stock.

Investors who use technical analysis are usually short-term traders who only hold their position for short amounts of time until their desired price target is reached. It is not recommended to use technical analysis for long positions because it does not account for the work the business does. This typically means it doesn’t look at factors like company’s growth projections or future goals.

The whole foundation of technical analysis is supported under the idea that share prices move in patterns determined by how the market sells and buys stock as a whole. It takes the entire market as a collective person that has a resounding trading pattern. This is primarily based on market psychology and past market behavior. This also accounts for historical events like natural disasters or economic crises and how the company’s stock movements have reacted accordingly to each of these events. This study of the market is vital for any successful technical trader. The key to good trading for technical analysts is to know the best times to enter the market and how long to hold their position so to make a profit.

When a trader understands these patterns they can generally predict how share prices will turn and use this knowledge to their favor. This will tell them what items to add or remove from their portfolio. Generally if traders are wrong about their predictions they should keep fail-safes and have a viable exit strategy. This is primarily what stop losses are. Traders will have a minimum price of where a stock can reach before they exit to cut their losses.

There are many indicators when it comes to studying charts. The main and most common indicators are based on ‘Support’ and ‘Resistance’. Most stock prices fluctuate up and down, so when a stock is moving down is does not technically indicate that it is on a down trend and vice-versa if it is moving up. Stocks generally move in wave patterns and remain between their support and resistance. If a stock breaks either then it is said to have a new support/resistance and this price can be predicted. These are times when a lot of traders will have to choose to hold their positions or leave.

Charts

Technical analysis is strongly dependent on studying charts to track stock movements. Bar Charts are commonly used for beginner traders. A bar chart will generally consist of bars which show the opening and closing price and whether the price has fallen or risen.

Another, more useful chart is the candlestick chart. This is a Japanese form of technical analysis that has growing popularity in the west. It is said to be more accurate in predicting price movements compared to bar charts. Each candlestick shows the stocks opening and closing prices in the ‘candle’ and also shows the highs and lows of the day in the ‘flint’. Red or black candles indicate that the stock closed lower then it opened and white or green ‘candles’ indicate the opposite. Each of these candlesticks is an indicator of future movements. A small red bodied candle with small flints is a sign of a downward trend. A green bodied stock with short flint however indicates an upward movement is coming. There are many other candlestick indicators like shooting-stars and hang-mans that predict different movements.

Arkaitz Arteaga MarketStock.net

The Forex Market:

Trading national currencies in a market is known as FOREX. The Forex market is a place for individuals, businesses, financial institutions, the public sector and nations to make a profit off the varying currency prices. This is done through judging which currencies rise and fall against other currencies. These currencies are traded in pairs. This generally means that every currency will pair against every other currency and have a price. For example if you are trading between sterling pounds and US dollars and both currencies fall 10%, you are in the same spot as you were before. You wouldn’t make a loss if you used either currency to buy the other because their ratio will be similar.

The Forex Market however is not as complicated as the stock market. Although, a greater deal of knowledge is required as you don’t study companies, but rather you study nations. The Forex Market is an over-the-counter market. This means it a global market with no centralized trading area. The Forex Market will be available to anyone twenty-four hours a day, five days a week.

Since the Forex market is not widely publicized, not much information is readily available. Thus, not many people will fully understand it. As well as that, since the profit margins are extremely small, many people will not think entering the forex market is worth the risk.

When two currencies are traded it is known as a currency. This is how the currencies are trade in the Forex market. There will always be a set of currencies that are more popular to trade with. These are high volume currencies and it is unnecessary to study all the currencies as each requires a great deal of study. The main idea behind successfully trading in the Foreign Exchange Market is to create a strategy that works for the investor.

The Stock Market:

The stock market is one of the more traditional ways to create a profit from an investment. The stock market can produce double digit profits compared to the return from bonds, but it is not the easiest market to take part in. Trying to achieve 20% to 30% gains in short periods of time creates a lot of risk as well as uncertainty. The investor would have to perform vast amounts of research, which would still not be a guarantee. This is because it is never known when a company would decide to fold or go bankrupt.

One of the main advantages of the stock market is that a person with little knowledge about it can still make a profit. For example, knowing that blue chip stocks don‘t loose value, would allow the person to invest in it and still create a profit. Another added advantage of the stock market is that it is good for long term investing. Investment trusts and unit trusts are the most popular long term investments.

The differences between the stock market and forex market are significant. The advantages and disadvantage of the stock market and the forex market have been explained. Choosing which one to participate in is up to the trader. It depends on their wants and needs, and the amount of time they wish to invest into trading.

Arkaitz Arteaga MarketStock.net