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Trying to figure out the best stop loss when day trading is always a hard thing, even for more experienced traders. One thing is most certain, those traders that consistently do not use stop loss orders face almost a 100% chance of losing a significant amount of money, if not all of it. Even using stops, if they are inapropriate, will result in net losses no matter how good the stock pick is. In addition, adding positions before market moving news events occurs can assure increased volatility and increased odds of stopping out.

The major thing to concentrate on is the current market conditions - this is very important. Not what the Dow Jones Average is doing, it is what many stocks are doing overall and how they are trading. What is the general volatility level for the day, is stuff trading slow and steady or are they whipping up and down quickly on a slight move in the futures market? This makes a large difference in not only the stop placement, but in the overall risk level for the trade. Most people assess risk by the amount one can lose when day trading or swing trading. What most people fail to think about is the actual odds of that loss happening.

While there is no easy formula to figure out the odds, if you watch the pattern of behavior of how similar stocks are trading, you can get a pretty good idea. If current conditions are calm, you can usually use a smaller stop amount and still have decent oddsit will not get hit. When more volitile conditions are present, using a smaller stop is a really bad idea because of the significantly higher odds that even a smaller than normal oscillation in price will hit your stop.

The way you figure the odds in a stop happening when day trading is somewhat straightforward. Look at the average range over the last 20 minutes or so, the high to the low area of the bars. Do not pick the most calm period of time, as this tends to not stay constant. If current times are super calm, go back on the chart to a more volitile period for the day (or another day) and then figure the range. It does not have to be exact, an approximation is fine. Once you have measured this range, this becomes your maximum risk.

What we want to do is to lower this max amount to a lesser level. This can be accomplished in 2 different ways. The first way is to study the pattern of trading behavior for that stock locallly when it reaches a prior high level - does it normally fade back or does it have momentum and push through? If it starts to push the last few times it reached a high turning point, then it is probably ok to buy the stock on strength. If it tends to fade or try to sell, better off to see it push, then put your order 1/4 of the range you computed earlier, lower than the high its at now. So if the range was 1.00, and the stock was at 40 now, you would put your order at 39.75 to put on a long. You will most likely miss some trades doing it this way, but have to ignore the urge to chase the prices. If a similar pattern is occurring on a lot of other stocks (in general) you have to be extra careful.

The second way to lower the risk is to split your order into 2 parts. So if your trade size you want is 500 shares, just buy 200 shares now. Wait until it pushes a decent amount up (meaning it has pushed enought that it has moved past the fade the breakout move area), then look to add the other 300 on a 5 or 10c dip. Move your stop price up higher .45 now (figuring you have a 1.00 stop to start) on the whole thing. The other choice if the price tends to fade after pushing higher is to buy 200 shares now and then place the balance of your order .25 above your stop (assuming it is 1.00). The max stop remains the same on all shares. The difference here is if market conditions get poor for going long when day trading for a period of time, you are going to lose a lot more averaging when its selling because you will get filled on the add, then stopout 2 minutes later on all of it.

The way around this is to simply cut back size - when the market gets unpredictable, play ONLY 1/2 normal size or less until it starts to act more predictably. The name of the game is preservation of capital first and foremost (hence the stops), but second its to avoid easy loss situations. While is is very difficult to actually tell that trading conditions are improving without actually trading, it is a very good idea to trade with less shares until you visibly see conditions look better over time.

Technorati Tags: day trading, day trading robot, daytrading, investing, learn to trade, stock market, stock trading, stocks, trading, trading help, trading rules

The stock market today is more volatile than ever. Many investors got burned badly in the last few years as the market plunged into recession and that makes them skittish.

Since no one has figured out how to predict the future, stock market values are based on past histories.

In the long run, valuing the stocks based on past histories can be pretty accurate, on the other hand, you can’t simply rely on this prediction for short term period. Mostly this prediction is next to impossible for 100% accuracy

You have to know something about human psychology to understand what can happen in the market. People tend to be overly optimistic when times are good and they get greedy.

Here are some things you should know about the stock market today: 

• Warren Buffet, one of top investors, have started investing their own money in the market. That is obviously become a sign that indicate the market is at or near the bottom during this recession. Even the popular Canadian stock exchange also at the bottom in this recession.

• 80 percent of the gains for depressed stocks come in the first year of a recovery. That means that if you wait until things have already turned around to buy in, you will have already missed the biggest opportunities.
• The stock market today is filled with lots of companies that are under funded by pension plans and have huge hidden debts.

  Eventhough the stock market today seem a scare place with lots of massive losess in the memory, but the truth is, the only thing you should be worried about is waiting too long to be able to get back in.

  Lots of opportunities in the market right now. It’s only requires a lot of studying on your part, to make sure that every investments you place are with the companies that have strenght and are well. And the last but not least, it is also very important you take the time to learn about how does the stock market work before you get started.

Technorati Tags: day trading, investment online, investors, stock market

With a reputable online broker, online stock trades are available to anyone. There are a few things you need to know before you get started because the stakes can be high and you can lose a lot if you are not careful.

There is one rule for online stock trade, that is never invest money which you need this month for for next month to pay all your bills. In other words, never invest your money that you can’t afford to lose.

Investing is much safer if you are in it for the long haul. Even during a recession, you do not lose unless you sell. So, remember when you start online investments, always plan to run it for the long term.

If you can afford to leave your investments alone, in most cases the market and the companies you have bought stock in will recover over time.

The way investors get in trouble is when they panic when they see the market drop and they start selling. Of course once the selling starts, more and more investors are drawn into the panic.

If you know you are buying for the long run then you will not be tempted to panic when everyone else does. In fact, if you are smart, that is exactly when you will be thinking about buying.

Most online stock trades are almost entirely automated and that make the fees become lower than the tradional ones, whic means you can actually make more profits on each of your investment since you don’t have to pay any broker’s fees.

This is a great way to get started. It is also a good idea to start slowly and invest over time because if the market does something crazy, like falling through the floor, you will not have just put every penny into it.

If you still have cash on hand and waiting to invest, you may be pleased since you are about to buy stocks at a big discount.

That is what makes investors really like online stock trades. For many investors, currency forex online trading is everything.

Technorati Tags: day trading, investors, online stock, stock trades

If you are currently buying and selling stocks online or are interested in starting you owe it to yourself to check out share builder.

This website offers a different way to buy stocks that will appeal to a lot of investors because it is simple and it makes sense.

It is easy to use and much cheaper than using a traditional broker. While these things are true of most online stock brokers, share builder is a bit different. It is actually much the same as an online option trading.

You don’t have to buy a minimum number of shares at share builder, they offer stock trades of any publicly traded company for only $4 for any dollar amount you want to buy.

Another great thing with this shar builder, you can start off at any level you feel good with as they don’t require you a minimum investment to start.

Other online sites require you to put a minimum amount of money in your account when you open it. This means you have to save before you invest. With share builder you can start investing straight away. That is a good thing if you want to buy stock online with share builder.

Your fee will be much lower percentage of the overall cost with share builder if you are willing to buy larger amount directly since no matter how much stocks you buy, they will charge you $4 for one time transansaction.

It really make sense to consolidate your purchases of the same stocks all together since the $4 fee applies to each different stock, not to the total purchase.

In other words, it would be much cheaper if you buy $100 worth of one stock each week than buying $25 each of 4 different stocks each week for a month.

That way you will only pay $4 in a week fees instead of $16, which means you would’ve spent $48 more money by the end of the month. So, you’re interested in stock market, give share builder a try!

Technorati Tags: day trading, share builder, stock market, stock trades

You will need an online stock broker if you are interested in taking charge of your own investments.

By having a stock broker you will have advantage that is the fees are become reasonable so that you will make more profits on your investment since you spend less of it on fees.

TD Waterhouse, Scott Trade and Etrade are examples of reliable online stock broker you can choose You better shop around to find out which online stock broker offers the best deal for you, since many of them may be differences in the fees they charge.

I want to start online trading with a small amount of investment to start, you better find one that won’t charge you for having less than a minimum balance required.

Look carefully at the companies core competencies whose stocks you’re interested in so you are sure that the ones you pick will pay off for you.

It is very important for everyone who want to start online stock trading to think of their investment in the long term. If you plan to buy stocks for the long term, then you will be fine.

Most solid companies will have their ups and downs but if their core competencies are strong then they will recover and their value will return. As long as you did not panic and sell at a loss then you will be fine down the road. Some people have recommended to read stock market for dummies , it tells everything about ups and downs in the stock marketplace.

Hopefully this will not happen, but unlike putting it in the bank, your money is at risk and you could lose it. Investors who put a big chunk of their retirement into American automaker stock can tell you all about that possible outcome.

So never invest the money into stock market if you are going to be needed to pay your morgage the next month. If you take out all your money and invest them all into the market, you will certainly lost out.

The last but not least, it is very important for you to understand everything, at least some basics about online stock brokers before you get started.

Technorati Tags: day trading, etrade, online stock, stock broker

Many people find online commodity trading as a whole different thing but exciting for trading on the internet. If you know what you’re doing, interest in the market is actually increasing, so that means larger potential for gaining profits.

You can join some schools who provide courses, even only last for few days, but they teach people about the basics of the stock market and online commodity trading.

Whether you decide to attend the class for the course or not, it is very important for you to know about commodity trading before you jump into this market. Learn how to control your orders and how to place orders in the commodity market.

This involves learning how to use the latest software. Studying how professionals make money through buying and selling will provide you with good examples of how you need to conduct yourself even though the trades you will be doing will likely be on a much smaller scale.

You can control the major losses by learning which commodity trading transactions involve the most risk. It doesn’t matter even if you find the russian stock market seemed to be more lucrative than the one in the US for example.

Learn the market, and you will be able to determine which investments are likely good for you and which ones should be avoided for their risk factors. To increase your leverage, use different type of contracts at the same time. Such as dow index.

If you want to do well in the online trading market, you must have discipline and move carefully with a solid plan and established knowledge about the market and software you are using. Everything makes the trading looks complex, but if you do it correctly, it can actually give you profits and with less risky.

If you put the time learning the stock market and carefully make a decision, you may find yourself want to make online commodity trading become a full time career. Many people find themselves want to make it as their full time career since it is considered to be very lucrative business.

Thanks to the internet as it makes the stock market so flexible so you can start slowly and increase the trading volume whenever you feel comfortable.

Technorati Tags: commodity trading, day trading, online commodity, online trading

So many investors who are potential, young and old, are interested in buying stocks.

There are ways thta you can get started and relatively easy and safe to learn about stocks, so you don’t need to be intimidated even the stock market seemed to be complex.

The easiest way how to buy stocks is to go to a broker. A broker is someone who knows very well about stock market, he or she knows when to buy or sell the stocks.

You can establish an account with a broker and they can recommend stocks for you to buy based on your investment goals and the level of risk you are comfortable with.

The broker will keep an eye on your stocks account, and if he feels you should buy more of another or sell a specific stocks, he would tell you by giving you recommendation.

If you want to have more control over your investments and want to start investing with a small amount of money then learning online stocks will be the right choice for you.

When you establish an online account for trading stock, you will need to give important information such as your bank account as well as your credit card information, so for this make sure you choose a reputable online brokerage firm as you don’t want your identity to be at risk of theft.

As soon as you have an account, there are a lot of tutorials available online on how to buy stocks online. Remember that online stocks trading is not a child play, so you must be serious learning about it.

If you feel intimidated even when you invest a small investment in the market, it is advised to start with a program that simulates investing.

Use real market data online that allow you to pick and track any stocks market so that later you can see how you would have done if you had invest your money in that stocks for real. That way you learn about stock market futures as well.

Do this for a few months, and that will teach you a lot and will build your confidence for the real thing.

Technorati Tags: brokerage online, buy stocks, day trading, online broker

Once someone has mastered the basics of trading, the biggest hurdle is actually finding good ideas to watch for a trade.  Some people subscribe to chat rooms with other traders, some people like to watch real time news, and others like to program computers to scan the market or use a day trading robot to help them find ideas in real time to make money.

One key advantage to a day trading robot is its ability to be unbiased and apply the same set of rules every time.  The real key is finding a day trading robot that is reliable in its stock picks and is easy to use.This is of course no easy feat, because there are a ton of impostors and stuff that used to work but now is of little use because the market changed but the robot was not able to adapt.

One key component of any day trading robot that should be essential is the ability to find stuff in real time, but give you enough time to actually act on the information it provides.  It does no good to use a day trading robot that scalps something so fast that you cannot even get an order in should you choose to follow what it is doing.You can always choose to let a day trading robot have control of your account, but a lot of traders are uncomfortable with this type of situation and like to keep control.  In addition, there are always nuances that occur each trading day that a computer program cannot take into account but a human trader can.

Any trader looking to make use of a day trading robot to find ideas should realize the limitiations and use it as a great tool to find additional ideas to trade.It is fantasy land to expect a trading robot to be right 90-95% of the time, or for it to make 40% every month in your account.  I can tell you 100% anyone who has such a tool would never sell it or lease it out - they would be living on a private island off the wealth it creates daily.In order to get the maximum benefit from using a day trading robot, you need to have realistic expectations for performance.

Technorati Tags: day trading, day trading robot, daytrading, investing, learn to trade, stock market, stock trading, stocks, trading, trading help, trading rules

The Covered Call / Buy-Write Strategy For better or worse, most investors purchase stocks with the intent of holding their shares for an extended period of time.

We do this mainly because the media and industry professionals have drilled into our heads, year after year, time after time, that it’s best to buy and hold. The recent bull market phenomenon also fueled this mindset because the ‘buy and hold’ strategy worked extremely well - for a while.

Whether or the not the ‘buy and hold’ strategy is still the most efficient way of investing remains a topic for discussion. However, it is still the strategy that most investors are comfortable with and tend to follow.

The first strategy we will discuss is a hybrid of the buy and hold strategy, one that provides for better and more consistent returns a large majority of the time when compared to naked stock ownership alone.

When we buy a stock, there are three possible outcomes. As we discussed before, two of these scenarios are typically negative and only one outcome is typically positive. If the stock goes up, that is good. If the stock goes down, that is bad. And if the stock does not rise or fall, that is also unsuccessful.

To briefly recap, not only do you have a loss in opportunity cost (the money invested in your stagnant stock could be making you money if somewhere else) but also, you have incurred commission costs on both the way in and way out. So, in this case, only one of the three scenarios provides a positive return.

We will name the three possible scenarios as the “up” scenario, the “down” scenario and the “stagnant” scenario. By employing the covered call or “buy-write” strategy, you can change the outcome of the scenario profile so you have two positive potential results instead of only one.

Employing the covered call or “buy-write,” we still have the “up” scenario as a positive result, but now the “stagnant” scenario will also produce a positive result since we collect a premium and the third scenario, the “down” scenario will not be as negative.

Thanks to the covered call strategy, now two of three scenarios end in a positive result and the third has a result that is less negative.

Let’s take a more in-depth look at the covered call strategy and its construction. There are two components of the covered call strategy, the stock component and the option component. The stock component consists of a long stock position (you own stock). The option component comprises of selling one call per every one-hundred shares of stock owned.

Remember, one option contract is worth one hundred shares of stock. So for example, 1000 shares of stock equals 10 call contracts or 200 shares equals 2 call contracts.

The following table displays a few more examples of the correct construction of buy- writes.

Please take special note that the ratio of stock to calls must be exactly 100 shares to 1 option contract.

The philosophy behind the covered call strategy is not complicated. It means using a long stock position combined with a short call option to build a positive flow of extra income, as, for example, a person would buy a home and subsequently rent it to pay the mortgage.

Another analogy is that of the insurance company. An insurance company receives premiums month in and month out. Over a period of time, this constant stream of income easily builds to a point where it outweighs any pay out the insurance company may face, even for catastrophic events.

The constant and reoccurring collection of option premiums works better if done over longer periods of time (for example, one year.) That time frame allows the odds to play into your favor.

Now let’s talk about the odds. There have been several studies done on the topic of premium buying versus premium selling. The goal of the studies was to determine whether it is better to buy options or sell options.

Recent studies have found that selling the premium was the correct trade 78% to 83% of the time. That is a very high percentage and is worth taking advantage of when a good opportunity presents itself.

The covered call strategy takes advantage of the fact that an option is a depreciating asset because its extrinsic value goes to zero at expiration. The process by which an option’s extrinsic value dissipates is called time decay.

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A funny thing happens when you put up a price chart and ask people to define what the trend is.  Even when its completely obvious to someone like me, as in not any question at all, you will still get many different answers based on the exact same chart.This results from people not knowing how to find a trend on a price chart with any speed or accuracy.  It is actually quite simple, and is a key thing to know if you want to learn to trade.

The first thing to do is to size the chart properly.There is no real point in loading 5 years of data on a stock you plan to day trade and hold for a mere 5 minutes.  So here is a guide for what you need as far as time loaded on a chart:

Daytrade:

1. 1 min chart:  Have at least 2 hours of data (120 bars) on the screen but no more than 6 hours (1 full day).
2. 2 to 5 min chart: Make sure you have at least 3 hours of data up, but no more than 2 days.
3. 10-15 min chart:  Have at least 3 days of data up, but no more than 1 week.

For swing trades, which are a longer term hold, you will want a 10 to 30 minute chart on your screen, and additionally about 10 days of data.

As soon as you have the chart data up on your screen, change the bar type to a "bar chart" style.  This is easier to see the trend.Start by looking for every V bottom area.  Anytime there is a low with a V bounce, make note of it.Additionally, look for / top areas where the price spikes up and then sells off sharply.Focus in on the major ones where it moves significantly away from that area in a short period of time.Next you will want to get your charting draw tool and connect the V to each other V you see.  Connect the / to each other /.  Connect the low of the V, the highs of the /.  Again, this is a key to learn how to trade.

Lines that slope up to the upper right corner mean the stock is currently in an uptrend.  Lines that slope from the upper left down to the right means the stock is in a downtrend.Another easy method: Go to the first bar on the left, and then to the very last price on the right hand side.  Draw a line between the two.  If the line is sloping up - its an uptrend.  If the line is sloping down, its a downtrend.Another key aspect to notice is the oscillations around a central trendline.  Does it go +/- 2pts, +/- 1pt, +/- .50 etc - on average, not exact.This is how you can tell in general the strength of the trend.  The lower the oscillation, the stronger the trend.The thinking here is that the price hardly oscillates because the buyers in an uptrend chase is up and bid, and the sellers in a downtrend chase it down and offer so it does not really counter move much.

Another thing to keep in mind the more you practice, the faster it gets - the lines are no longer necessary.I can glance at a chart and know the trend and approximate strength within seconds.Additionally, you really need to know the trend direction and strength on the next higher timeframe than you are trading on.  For example, on a 5 minute chart the trend might be up, but on a 15 minute chart it is still down.  This needs to be paid attention to, because the longer term trend can push the shorter term trend back into a downtrend.  In general, you want a higher term chart to be a multiple of 3 vs the chart you are trading.  So if you are on a 1 min chart, you watch the 3 min chart also, if on a 5 min chart, you watch the 15 min chart.  Once you can easily tell the trend of any chart, other aspects of learning to trade become much easier.

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