Category: Trading Dictionary (page 1 of 1)

April 17, 2021 / 0 Comments

Growing the Trading Account without Following the Rules

A lot of newbie traders have not enough money when they first start trading and all of them have at least heard about the money management. A part of them understand that the money management is important, but they think that it doesn’t concern them. Some traders don’t put enough money in their trading accounts because they don’t want to risk more than a certain amount. Other traders may understand that all the building parts of the trading are important, but still can’t manage to follow all the trading rules. They say that they will grow the trading account and then they will follow all the trading rules.

I’ll grow my trading account and then I’ll follow all the trading rules

I used to think this way because I was afraid of losing the money I worked hard for. I was thinking that it would be easier for me to risk the money made by trading.

It happened to me in the first year of my trading career, when I believed everything that I was reading in the trading books. I found two trading methods in a book I was reading, one of them was a news trading method. I believed that this method was very good and I even believed that risking 10% of the trading account was a good money management for that system. So I said that would build the trading account, using that method, and later I would use the other method for trading and making money. After a couple of consecutive loses I was down 40% of my account. I didn’t have the confidence to continue trading that method. I learned the lesson; I learned that I should never trust the method just because it’s described in a book. I learned that I should test a method before starting to trade real money. I also understood that I should risk less per trade. But I continued to search for holy grails that would give me only winning trades.

Buying a lot of cheap goods

When we are in a shop we may easily buy different things that don’t cost much. We may not need all that goods, but just because they don’t cost much we buy them. So we end up buying a lot of things because when we think about the single piece it doesn’t affect our budget so much, but if we sum all the amounts we realize that we’ve spent a lot.

The same thing happens when trading. Let’s assume that our profit target is $100, but we see only $50 potential profit we think that this time we will take only $50, because we are afraid to take a loss and we prefer a sure profit instead. This may be fine if it’s our last trade in our trading career, because as we don’t know where the price will go we can decide to take profits. It may also be fine if we do it once, because $50 will not make the difference. But if we continue to do it systematically we can discover that this is the cause of our failure as traders. You can read more about this in the article Exiting a trade is as important as entering it.

Preserving the trading capital

Successful traders suggest first to concentrate on preserving the trading capital while gaining experience and then to concentrate on making money. I agree with them. But this affirmation shouldn’t be misinterpreted.

This year it happened to me again to want to grow the trading account, before starting trading it with more trading methods. This time I tested the strategy, but when I was in a trade I closed it prematurely. My profit target was $100 but as soon as I was seeing $50-60 of profit I closed the trade. I was saying that I was doing this for growing the account size. How can we preserve capital, while gaining experience? Personally I was using this excuse to exit the trades prematurely.

This time I remained profitable, but my profit would be bigger if I closed the trades at the targets and not led by emotion.

Giving up an addiction

I think you’ve heard a lot of times phrases like. “This is my last cigarette”, “Today I’m eating the cake, but I’ll start a diet tomorrow” and of course “I’ll build my account and then I will follow my trading rules”. It’s time to start growing your trading account. You can do it only by following your trading plan. If you don’t follow it, why do you have one?

Solutions

To preserve capital, don’t enter the trade if it doesn’t meet your criteria or if you are not sure about the chart formation. But once filled, follow trade management rules, don’t close it prematurely and don’t give it more room.

If you realize that you are not able to follow your rules on a series of trades, try to change them. Test how the method behaves with the trade managing rules that you are able to follow. If you are happy with the result you may trade that way. Otherwise, if you will see that not following the rules leads to losing money, you will be motivated to start following your trade management rules.

Define the rules for growing your trading account and use the rules that are compatible with it. Try scalping instead of trailing stop. This way you can have minor drawdowns. You have to test the trading system and see what works best for you based on the money you have in your trading account.

April 10, 2021 / 0 Comments

Choosing the Right Time Frame to Trade

One of the main problems of a beginner trader is the lack of money. The problem they should face is choosing the right timeframe for trading. But as you know the markets change. Sometimes when the volatility changes you have to adapt the trading strategy or to change the timeframe you are trading on.

Vulnerabilities of using fixed stop loss and take profit

I think the most vulnerable trading method is using the fixed stop and profit target. Assuming a trader feels comfortable risking a certain amount of money on a certain timeframe. When the volatility increases the trader should decrease the timeframe or he should change the trade management or stop trading for a while.

Lower timeframe doesn’t necessarily mean more money

There are different opinions about the lower timeframes. Some traders affirm that the intraday movement is just a noise. Other traders affirm that intraday moves can be exploited to generate more profit. The charts look the same as on bigger timeframes. I always had the opinion that trading the lower timeframes you can make more money, because you can find more opportunities. But when you trade the one minute chart you may realize that the price is moving too fast and you can’t manage to take all the signals that a trading system generates. Unfortunately, most of the times, you will not be able to enter the trades that move fast in your direction. Keep in mind this when testing the trading system.

Lower timeframe doesn’t necessarily mean better opportunities

Some traders think that on the lower timeframes they can make more money, because there are more opportunities. It’s obvious that the same system will give more trading opportunities on the 1 minute chart than on the hourly or daily chart. But when you test a method on two different timeframes you may realize that on the lower timeframe there will be more losing trades, because you may find more choppy situations. You will have to use more filters to achieve better results.

Lower timeframe doesn’t necessarily mean lower risk

Lots of traders choose to trade lower timeframes because they think that on the lower timeframes there is lower risk involved. This is true partially. The trade will require a lower risk in terms of money but if you make more trades and if it happens that all of them are losing trades. You will have a bigger lose. For example if your risk on the daily chart is $1000, but the risk on the 10 minutes chart is only $250 you may think that it’s better for your account to trade on the 10 minutes chart. If you will have 4 consecutive losers you will lose exactly the amount you would have lost if you traded the daily chart, plus the commissions. Take into consideration that in this example I assumed that you traded one contract on the daily and on the 10 minutes chart. If you risked the same amount in percentage, so the risked amount per trade was $1000, than four consecutive losers would give you a $4000 lose. I’m not encouraging you to risk more per trade and trade the daily charts. You can use the micro account if you trade FOREX, you can reduce the number of shares if you trade stocks or you can find a filter for your setups. This way you’ll increase the percentage of winning trades and you will make fewer trades, so instead of doing five trades a day you may do only five a month, this way you will reduce the risk and will improve your results.

A profitable trading system on a daily chart isn’t necessarily profitable on intraday charts

Lots of traders fail because they simply try to apply on lower timeframes the rules they find in trading books, that where meant for the daily or weekly charts. Most likely they will not work on the lower timeframes, especially if the method is based on some indicator and not on the price action. But newbie traders will try to trade using that rules without even testing them. Someone do it to reduce the risk, others because they believe that they will make more money, others because they are not patient and they want more action. Just because the chart looks the same, it doesn’t necessarily mean that the system will give you the same number of winning trades. So it’s a wise thing first to test your trading method before using it on other timeframes.

The spread and commissions

On the lower timeframes there may not be enough volatility for you to make money if you take in consideration the commissions or the spread. The movement looks the same, but the amount of pips is very different. Choose the optimum exit strategy.

Conclusions

In my opinion, a valid reason to trade the intraday charts is if you can’t afford to risk the amount required on the bigger timeframe. This can be dealt with easily by using a micro account FOREX broker. You should trade on the timeframe that best fits your temperament and is compatible with you risk tolerance.

March 28, 2021 / 0 Comments

The Basics of Trading Plans

Why Have a Plan?

Why outline a plan? Because your plan will help determine your trading style, strategy and philosophy; i.e., the more ambitious the plan, the more aggressive the trading style should be. In this case aggressive trading does not mean a greater number of trades, but generally implies more risk, usually in the form of larger commitment of capital invested in a higher number of stocks; in which case you may need to start with four or five thousand dollars rather than $2,500.

By writing down in outline form what you want to achieve and in what time frame, along with your long and short-term objectives and goals, you will be able to see and refer back to what it was you wanted to accomplish in the first place. Trading the stock market is fifty percent planning, twenty five percent execution, and one hundred percent psychology. You need to determine what you think you will get from buying and selling stock in terms of satisfaction, prestige and compensation, then put it down on paper. If you go into the market not sure of what you want out of it, you will almost certainly not put into it, what you need to get what you want out of it.

Your plan should cover your style (Trend follower, fundamentalist, Chartist, Cramer-ite or combination) and the philosophy or technique you will use (Swing-trader, mid-term trader), along with detailed risk management techniques as well as entry and exit criteria and whatever trading rules you adopt from your software choice. (i.e., using on-line modified strategies, I will swing-trade low dollar stocks using Jim Cramer’s criteria on the major markets and…) Post your plan in plain view at your trade station; read it every time you start trading or when doing research. As you grow into your trading style you can modify or change the plan to fit what you are doing as long as what you are doing is showing a profit. If you do not show a profit within the first few months you need to stop, review, redo your plan, and start again.

LRT has a trading plan outline and full trading plan available for sale at the LRT store.

Decide on a style

Your MO

A trading style is simply determining what type of trading to favor:

• Day traders – are out of the market at the end of each trading day

• Short-term traders – hold positions open for two to five days but not over a weekend • Swing traders – hold positions open for a few days to a few weeks

• Mid term traders – hold positions open for up to six months

Day Trading requires more money to open an account, $25,000 or more, and we do not recommend day trading for beginners. All other traders should let profits determine the length of time to keep a position open. Some first time traders set a 25 to 35 percent profit goal to close the trade. Others simply adjust stops to prevent giving back more than 5 percent of the unrealized profits. Still others just let it ride as long as each week shows a profit. We think first time traders should have well-defined entry and exit points. Focus on how you will determine your trading style and profit taking strategy.

Favoring a particular trading style does not prevent you from changing to another style of trading from time to time. At some point you may find that you are doing all four styles of trading; in all likelihood you will probably not stick to just one style of trading. Successful trading is about going where the profits are. We recommend starting as a short term or swing trader because it gives you time to develop your trading skills and learn risk and money management techniques based on your skill and account size. As you start to make money and your account grows you can take on a little more risk. Whatever style you decide on, remember, it‟s not about how quick you can make big profits, but how often you make a profit. Be realistic. Set your profit targets at obtainable levels and concentrate on risk control and money management. This is trading, not investing. Let your profits run and cut your losses quickly.

Trading Rules -Knowing what you want – and what it takes to get it

Whether you are a working person getting up each day taking care of a family or going out and earning a pay check; you have developed a credible work ethic on your own; regardless of what type of work you do or at what level you are. If you keep a household together or a business together you have demonstrated the ability and self-control to do whatever you set your mind to. Most of us have jobs we more or less like or can tolerate until we find something else that is better, either within the company we are currently working for or by moving on to another company. We do this because we have to; we have made commitments to ourselves, our families and to a lifestyle. Sometimes we‟re not sure what we really want to do, so we go on doing what it is we do because we haven’t set any personal goals for ourselves. Change is easiest when done in little steps, the first step is deciding to change, and the next step is to focus in on the closest point of the change you want to make. Learning to trade stock and profit from it, will change your life, not because of the money you can make and the freedom it can give you; but because of the self-confidence and sense of control over your own fate that comes with being able to do it.

Taking the first step toward becoming a trader requires learning another way to make money, one that can lead to an alternative way to live your life. One of your first goals would be to learn the basic methodology of trading: Protect Your Capital. Using risk and money management to control your losses, along with developing a reliable profit making strategy, and understanding the cycles and trends of the overall stock market as well as the different sectors and business groups will put you on the path to successful financial change. Your first objective may be to find a source of information and data that provides you with what you need to accomplish your goal. A second goal could be to develop a consistent system of picking stocks that eliminates subjectivity and delivers a high percentage of profitable trades. Your next objective in support of your second goal may be to identify straightforward entry points which allow you to make quick, confident buy decisions that constitute a totally objective method of entering trades.

A third goal along these same lines might be to formulate a profit ladder that provides predetermined exit points that allow you to maximize profits and protect against large losses should the market move in the wrong direction. The underlying objective here would be to establish predetermined profit percentages to place stop orders and trailing stops to meet your goal. The above goals and objectives cover the basic principles and techniques of profiteering and give a broad look at the methods and techniques to be disclosed in later chapters.

In every endeavor there are always rules. Trading rules are merely discipline in print; they are what we call self-governing-success. A set of simple and practical trading rules can make your trading experience a lot less costly. You should establish a set of rules that matches your trading style. Here are some rules for first time traders to consider:

• Don’t Over-trade

• Never put more than 2% of your total capital into one position

• Only buy a stock that meets all of your qualifying criteria

• Never use Market Orders

• Trade With the Trend

• Always check for recent insider trading on stocks you are about to buy

• Take Windfall Profits when you get them

• Always use stop orders and/or trailing stops

• Know the type of trade you are in (Short term, Swing, etc. etc.)

• Never give back more than 15% of your profits

• Never let a profit turn into a loss

Rules are refined, developed, and done away with as a trader’s goals, objectives, discipline and money management techniques develop. Each trader must continually be aware of the risk of trading and abide by their rules religiously; write them down and hang them on your trade station so you can see them every time you trade. Each of your strategies should have its own set of rules that support you goals and objectives.

If you have a strategy with an objective that is based on a percent gain/loss (exit after 100% profit or 10% loss) and you have a rule that says never give back more than 15 percent of your earned profit, and your position starts to decline after making 70% you should know at exactly what dollar value you will be exiting this trade and adjust your downside stop to protect your profit.

Rules should be developed in support of a strategy. Knowing the mathematical expectation, expected return and Profit to Loss Ratio of all of your real-time strategies is a key part to developing rules that you can live with. Too many rules clutter the trading process, too few rules increase risk.

Record Keeping

In the trading business it is hard to find the right combination of strategy, timing and execution that gives you the results you want. When it happens you need to be able to repeat what you did as soon as you can. If you keep a checklist of your trades it will make it very easy to repeat a winning process. We have found that keeping track of the strategy source, the strategy criteria, number of stocks found, sectors and industries are things that should always be recorded. Also, your checklist should include all of the qualifying requirements and conditions for the stock selection process.

Online brokers provide all the transaction records and tax data for you. However, we have found that stock splits, symbol changes and prior year cost basis may not always be easy to recover from your on-line account, so we recommend you make it a habit to print change data as it happens and keep a hard copy on file as a back-up.

Research notes that lead to a winning strategy or any one of a dozen other factors that contribute to the development of a particular stock strategy that turns out to be a big winner, can be used again and again if kept until conditions change on the position or the portfolio or stocks that the research or strategy produced. Once you are an established trader and have committed to memory all of your winning strategies and techniques, you may not want to save all your notes, but we can‟t tell you the number of times we wished we had saved our research notes and checklist to reconfirm a winning concept and strategy.

Record keeping isn’t going to change what happens to the initial trading process, but you’ll be surprised how it can change subsequent trading for the better and how much time it will save in the long run.

If you are ready to begin trading, go to “Getting Started“.

September 10, 2017 / 0 Comments

The History of the NASDAQ Stock Exchange

The NASDAQ is an American based stock market which is designed especially to enable various investors to purchase stocks and sell them on a speedy and transparent computer network. It was founded by Gordon Macklin.

Makeup OF NASDAQ

nasdaq-history Currently, the stock company has about 3200 trading companies and its trading shares takes place in different kinds of companies including:

Consumer durables and non-durables.
Capital goods.
Healthcare.
Public utility.
Finance.
Energy.
Transportation.
Technology.

HISTORY OF NASDAQ

In early 1961, the S.E.C (Security and Exchange Commission) was given the go ahead to look into the reason why fragmentation was present when it came to the trading of Over the Counter stocks (OTC). In the course of the investigation, the National Association of Securities Dealers (NASD) was commissioned by the S.E.C so as to find out whether the automation process would aid in the trades’ execution.

In 1971, NASD thereby founded the National Association of Securities Dealers Automated Quotations (NASDAQ). This NASDAQ was purposed to act as some sort of exchange for the Over the Counter securities. However, all the trading transactions were carried out electronically. During the first instance, NASDAQ comprised a bulletin board kind of system. There was no actual trade taking place between sellers and buyers. Furthermore, NASDAQ aided to even out the odds for both parties by narrowing down the extent between the ask prices and the bid prices. However, various brokerage firms were against this trend since it meant that they would not earn as much as they would supposing the old business rules were followed.

In 1990, the organization became the first of its kind to leverage capital markets and introduce technology expertise all with the aim of providing better services to the clients and attract even more investors.

In 1998, the National Association of Securities Dealers Automated Quotations merged with American Stock Exchange (A.S.E) and together they formed the NASDAQ-Amex Market Group. This group became the biggest stock market to perform electronically in the United States of America in both the total amount of volume generated and the number of shares traded.

Dot Com Boom

Due to this developments, NASDAQ will adapt its system to be associated with the Dot Com bubble for generations to come. Since NASDAQ comprises of technology stocks, this factor gave way to the great rise and fall of the stock market mostly as a result of technological issues especially with big names like Oracle, Cisco, and Microsoft being in charge.

By the time we got to 2001, through a number of transactions, the Norwegian exchange known as OMX bought NASDAQ. As a result, it was renamed to NASDAQ- OMX Group. This purchase helped NASDAQ to become not only the second largest stock exchange company in the United States of America but also the fourth largest stock exchange company in the whole world.

After the transaction took place, the National Association of Securities Dealers Automated Quotations started operating in New York. NASDAQ was its own regulatory company and this allowed it to become a securities exchange with the self-regulating feature enabling it to set out its own rules and regulations for the participating parties. In the year 2005, NASDAQ began to offer public relations and = investor relations not forgetting multimedia services to the companies under them so as to improve their capital health.

In mid-2007, NASDAQ bought the Boston Stock Market. This made its client base grow even bigger as the clients of BSM were now part of the merged stock company. In 2008, the NASDAQ also bought the Philadelphia Stock Exchange. The more companies it merged with, the more clients NASDAQ attracted. It is for this reason that the firm is among the largest in the world.

In the year 2013, NASDAQ OMX Group acquired Thomson Reuters’ public relations, multimedia solutions, and investor relations businesses so as to expand its corporate solutions business. This acquisition made NASDAQ OMX Group to be the number one provider of company solutions. It extended this service to well over ten thousand clients.

In 2014, NASDAQ OMX Group rebranded back to NASDAQ. This was due to its fast growth and global recognition hence there was a need for a permanent identity to represent the brand.

In 2015, the National Association of Securities Dealers Automated Quotation acquired the analytics group and index provider Dorsey Wright and Associates.

July 2, 2017 / 0 Comments

Different Stock Market Order Types Available in the Trading Industry

Advancements in technology have contributed to the changes in the trading industry. Most investors now rely on the online trading technology while buying and selling their stocks. Increased use of online brokers in the 21st century has made stock trading faster, cheaper and easier than ever before. The stock market prices keep fluctuating every day meaning that the investors should stay up to date with the current changes in the market. Therefore, Understanding Different Stock Market Order Types is essential in increasing profits from stocks sale. Stock-Market

Different Stock Market Order Types

Some investors would prefer trading on stocks using fixed prices while others do not. The investors also dictate terms that stockbrokers should follow during the trade to ensure maximum profit. The terms and instructions given to the brokers determine the ideal order type depending on the risks the investor is ready to take. Below is a detailed explanation of the most popular orders types:

1. Market Order

The stockbroker has the liberty to execute the trade at the prevailing price in the market. It is the fastest trading method since the buyer aims at getting the lowest available price while the seller’s focus is on the highest offer. Execution of the order is easy, but the price keeps fluctuating especially in volatile markets.

2. Limit Order

The investors using this order have control over the buying and selling prices of their stocks. A stockbroker can only execute a buying limit order only if the stock falls at the limit price or below and can only fill a selling limit order only at the specified price or above. The trader has complete control over the price of the orders unlike the market orders, which depends on the current market price. Remember that any limit order cancels after 180 days.

3. Stop Order

Stop order protect an investor from losses by combining the market order and the limit order. In this order type, the investor gives the stockbroker a particular price, which activates the order. The brokers then execute it as a market order on the future trades. Investment-Decisions

4. Stop Limit Order

The orders work the same way as the stop loss orders, but they become limit orders after activation instead of market orders. The order executes if someone is willing to trade at the specified prices of better prices.

5. Buy Stop Order

It is common with investors looking to protect their profits over a particular stock that they have sold at a lower price. The price for the order is higher than the market price for the buy stop order while the sell stop order usually has a stop price below the market prices.

Bottom Line

Market orders, limit orders, and stop-loss orders are the most common ones in trading. However, investors have additional orders to choose from while getting the ideal stock-orders types. Other types of stock orders you can consider getting include basket orders, day order, trailing stops, and valid till cancelled order. An investor should also consider doing research while getting an order by looking at its time and money saving capabilities as well as the risks involved.

June 30, 2017 / 0 Comments

The Comprehensive Guide to After Hours Stock Trading

The marketing and buying of securities outside normal trading periods is after-hours trading. This type of stock trading can take place between 9:30 in the morning and 4 PM. Potential sellers and buyers communicate with each other through electronic communication networks. This match will occur without making use of a stock exchange. Is your quest for after hours stock trading? Reading through the rest part of this article will help you on after hours stock trading.

Benefits Of After-hours Stock Trading:

After-hours stock trading is comfortable
This method of trading stock is flexible
Economic indicators and important news are available outside normal trading hours
Traders have the opportunity to trade on new information with ease
You will not have to wait for normal trading day to make decisions
Traders can find some great prices during this period

Limitation To After-Hours Trading:

A great risk attached to this form of trading is volatility

Real After-Hours Trading Periods:

Studies have shown that after-hours trading in the morning can occur between 8 AM and 9:15 AM. After-hours trading can as well occur between 4:15 PM and 8 PM. As early as 6 AM, you can also discover some pre-market trading. This opportunity can take place during normal trading periods and days. It will continue for a period of time until the market resumes in the morning.

How To Use After-Hours Volume To Find The Most Volatile Stocks:

When the bell rings, news releases or company earnings appear to traders. When traders react to the news, there will be both volatility and volume. Most of these events happen when the market is complete. This will give traders the avenue to react to the events as they appear. It means that a trader will not have to wait for the following day. If you want to take advantage of any opportunity, explore the calendar showing a list of stocks.
One important thing to know when finding the volatile stocks is to take note of them during the day. Go ahead to narrow them down into a smaller option of stock to trade. Traders can achieve this goal by using a filter of stocks carrying an average volume of fewer shares. If the shares do not show any important volume between 9:30 and 4 PM, then you may not expect changes. tradeaalysis

Facts About After-Hours Trading:

This innovation in stock trading is possible through the operation of ECNs. ECNs remain a system that enables investors to communicate by using electronic devices. This system allows big investors to communicate without an appearance. The after-hours concept has been available in time past. This is to create an excellent communication medium for investors. Most investors can now access after-hours trading by using a brokerage account. This can refer to after-hours market and extended-hours trading.

Conclusion:

When the last transaction occurs, then after-hours market closes. It will display the last cost of a stock that traders have access to in the after-hours market. It is a complex concept for people who do not understand the deal. The truth is that after-hours stock trading can be beneficial.

April 10, 2017 / 1 Comment

Getting Started With Short Selling Stocks

Short Selling is a strategy in which a trader sells a commodity or security that he or she does not own to profit from a falling market.? In this trader will borrow the product or security from his broker, who usually, in turn, has acquired the shares from some other investor who is holding his shares then immediately sell on to the buyer. At a later date, the trader must buy back the commodity or security from the market to close the position.? If the value of the product or security has fallen during this period the short selling trader? Profit will be the difference between his original sale price and the buyback price.

What is Short Selling?

Short selling is the strategy to express the bearish viewpoint of trade towards a commodity or security. Essentially this is another face of the coin in any freely traded commodity where trader feel that current value of the commodity is inflated and does not represent actual value. This is the exact opposite to more known buy and holds bullish strategy where the investor buys the product or security feeling it be undervalued and will increase in price.

Short sellers need to be aware of three important aspects which can affect the profitability of their short positions.

Interest on Borrowed Security? As the commodity or security is borrowed from broker or third party account, so interest is required to be paid on that. This is not applicable if you are settling your account on the same day but can erode profits if kept on rollover for the long duration. Depend on brokerage firm it percentage can change but it?S around overnight interbank lending rate.
Dividend Distribution? If the security which is shorted by trader gives out bonus, then short seller need to short the dividend i.e. the dividend amount will be taken out from his brokerage account. So it is essential to keep track of dividend date of security trader wants to short.
Short Squeeze – A short squeeze results when the price of the stock rises and investors who short-sold the stock rush to buy it to cover their short position. As the price of the stock increases, more short sellers feel driven to cover their positions and this result in further escalation of price in short duration of time.

Markets in all developed economies provide easy short selling procedures where individual shares can be shorted and rolled over for multiple days but currently in Indian Stock Market Short sale of shares is only possible on the intraday basis. If traders who want to take the bearish view of individual scripts for the longer duration they can do it through the futures market. It is to be noted that availability of scripts in futures markets is insufficient as compared to an overall number of traded scripts.

When the underlying market is in the downtrend, short selling is the best strategy if implemented correctly in the hands of Commodity, Equity, and Forex traders. To be a successful trader one need to learn both long and short strategies as the market itself goes through bullish and bearish cycles periodically giving the plethora of opportunities to generate wealth.

March 19, 2017 / 3 Comments

After Hours Stock Trading Made Simple

After-hours trading consists in trading securities after the specified regular trading hours on major exchanges. Both the Nasdaq and the Stock Exchange in New York operate regularly between 9:30 a.m. and 4:00 p.m. ET. However, in the after hours trading session, buying and selling orders can be performed in the hourly interval of 4:00 pm to 8:00 pm EST. From 8a.m to 9.15a.m investors have access to the morning after hours trading session.

Electronic communication networks’ emergency opened a new stock trading era. An electronic communication network consists in an interface that allows individual as well as large institutional investors to interact anonymously and electronically, hiding their actions.

Up until the 1990s, institutional investors were the only ones to primarily use after-hours trading. However, when electronic communication networks became more widely available, after-hours trading became accessible to most investors. In order to take advantage of this trading option, investors have to use brokerage accounts. The after hours trading is also known as the “after-hours market” or “extended-hours trading”.

After hours trading advantages

Traders operating during the after hours session can benefit of certain advantages. Among these several advantages is convenience. Trading after hours means trading at off-peak times, which can provide more flexibility. Economic indicators, earnings releases and other significant news events are released outside of standard trading hours.

Stock Market Trading Investors can react quickly to breaking news stories by having the ability to trade around the clock. They can trade immediately on new information during the after-hours trading sessions rather than waiting to take a position during the traditional trading day. Trading after hours can also give investors the opportunity to find some appealing prices. In order to take full advantage of the opportunities to trade during after hours sessions, investors may apply some specific strategies.

After hours trading risks

While trading after hours can give investors some advantages, they have also to remember that there are risks to participating in this extended hours trading. Any investor should be mindful of these risks:

- Less liquidity – During after trading hours it might be more difficult to convert shares to cash and there may be less trading volume for your stock.
- Wide spreads – Lower trading volume can lead to a wide spread between ask and bid prices. This means that it may become more difficult for individual traders to have their orders executed at favorable prices.
- Competition – Individual investors trading in an after-hours market have to compete against large institutional investors with access to more resources.
- Volatility – Compared to regular hours trading, the after hours trading market is less traded. This means that in after hours trading investors are more likely to experience severe price fluctuations than when trading during regular hours.

Conclusion

The emergence of electronic markets has made after hours trading highly accessible to individual investors and retail traders. Extended hours trading have been once the dominion of big institutional investors, but today this market is open to anyone. Whether you are want access to wider trading opportunities or you are just looking to get a feel for how the market will open, many new possibilities are opening when you are following market action outside the regular trading hours.