dantexeus163-blog

[dantexeus163-blog]

Shhhh... Listen! Do You Hear The Sound Of Stock Broker?

Unless you might be capable of develop a considerable trading edge on the other traders, you'll be losing your money, if you live disciplined and organized. In this article, I talk about some elements that I use within my trading edge.

Fundamental Analysis

Fundamental analysis is the method of evaluating the financial condition of an company using financial statements, price/earning ratios, revenues, share of the market, sales and growth, etc. This type of analysis can be time consuming so as an alternative to going through pages of fiscal reports, I simply take a look at IBD ratings.

I prefer to use Investor?s Business Daily (IBD found at ) to obtain a quick overview of an stock. The IBD rating covers:

1 - Earnings Per Share (EPS) rating: tells me a standard?s average short-term (recent quarters) and lasting (last several years) earning growth rate. The number I see is the place where the organization compares to all the companies. The scale runs from 1 to 99, 99 being the top.

2 - Relative Price Strength (RS) Rating: Measures a standard?s relative price change in the final yr in comparison with all the other equities. The scale runs from 1 to 99, 99 being the top.

3 - Industry Relative Price Rating: Compares a share?s industry price action in the last half a year on the other 196 industries in IBD?s industry list. The scale comes from A to E, A being the best.

4 - Sales + Profit Margins + ROE (Return on Equity) Rating: Crunches a strong?s sales growth rate during the past 3 quarters, before income and return on equity into one letter. The scale is from A to E, A being the most effective.

5 - Accumulation/Distribution rating: Applies an equation of price and volume alterations in the final 13 weeks to ascertain if it's being accumulated or distributed. A = heavy buying, C = Neutral, E = heavy selling.

If you want the idea of including fundamental analysis into the trading plan, consider trading only stocks that meet some minimum requirements - for instance A or B, > 70, etc.

I love to use fundamental ratings longer term trades for example the ones I consider weekly charts. It isn't really useful if you trade intraday.

Technical Analysis

Fundamental analysis is great to construct a listing of strong stocks, or in order to filter out weak stocks, but that?s about this. It does not offer you an objective approach to enter and exit trades. All my trading decisions (entry, exit, and stops) derive from technical analysis.

Technical analysis may be the study of prices. The price action draws patterns on charts also, since human behavior can be repetitive, the cost patterns can also be repetitive.

You can decide on a variety of chart types. The Japanese candlestick charts are undoubtedly the very best and it will be the only form you need. There are entire books dedicated for the study of candlestick patterns - if you are serious about studying candlestick charts, examine books authored by Steve Nison and and Gregory L. Morris.

- Support and Resistance: The most important concept in technical analysis is Support and Resistance. It forms the inspiration for every single trading decision and might cover many pages but I will limit myself to simplified definitions plus a couple examples:

Support level: A price level which a declining market or stock failed to penetrate

Example: the low from the previous day forms a place of support and is often used as being a stop loss.

Resistance level: A price level that a rising market or stock failed to break through

Example: a previous an excellent source of an uptrend forms a place of resistance and could be used as being a minimum objective to take some profits.

Some technical indicators might also provide some support and resistance, as an example moving averages, to some extent maybe since many traders expect it.

- Oscillators

An oscillator is a technical indicator that notifys you instantly whether a market or a regular currently trades in the "overbought" or "oversold" condition. Some traders use oscillators to forecast an alteration of direction. Some examples range from the RSI, Stochastic Oscillator, and MACD.

There are countless oscillators and technical indicators. I personally take a look at these to remove some stocks if I have too many high quality ones to pick from. I never make use of them being a signal to open or close a trade.

- Public Sentiment

I try to find support and resistance for the VIX (Volatility Index) daily chart that is expected reversals.

I look at the Put/Call Ratio (5 MA and 10 MA) about the daily chart to find out if traders are too bearish (MAs > 0.8) or too bullish (MAs

(MA = Moving Average)

- Market internals to find out if the market industry is overbought or oversold

I have a look at the TRIN (5 MA and 10 MA) around the daily chart - overbought (MAs 1.2).

I take a look at the McClellan Oscillator ? the market is overbought if it rises above +70 and oversold if drops below -70. A buy signal is generated if it grouped into the oversold area (-70 to -100) and then appears - a sell signal is generated whether or not this rises to the overbought area (+70 to +100) and then turns down. If it goes past the -100/+100 levels it might be a manifestation of continuation from the current trend.

- Market and Industries

I love to buy stocks from industries in the strong uptrend and short stocks from industries in a very downtrend. I also think about the direction in the industry of waking time (positive or negative).

Putting it all together

This article is not about instructing you on how to develop a benefit but hopefully it demonstrates to you that there are a variety of tools that can be used to boost your odds. It takes time to look for a combination that fits your personality. It takes time for you to find what works for you personally.