Tag: day trading (page 1 of 1)

July 24, 2018 / 0 Comments

Learn to Trade: Margin Trading

To be a margin trader means to use funds you lend from a broker. This way, you trade assets with borrowed funds. The asset in question then becomes the collateral for that loan that you took from your broker.

This has great potential to significantly increase the profit. However, it is also quite possible for it to cause incredible losses. Creating a financial leverage is a well known two-edged sword in the world of finances.

Due to the high-risk nature of this line of trading, it is only possible by use of margin accounts. But, let’s take it slow and go one step at a time.

What is Margin Trading?

In very general terms a margin is a border, an edge of something. However, in the financial world, the word margin has a slightly different meaning. Namely, the margin, in this case, is related to the collateral we have mentioned previously. The margin is used to cover the credit risk the margin trader poses for the lender. Essentially, it is the sum of money that you would have to ensure from your funds. The margin can vary greatly, which usually depends on the resource in question. For an example, a margin for currency futures is usually quite low. In fact, it would rarely get over 6 percent of the total value of the contract. However, if stocks were in question they would require quite a bit more. To be a bit more precise, you would usually have to cover at least 30 percent of the value and up to one half of it. One should bear in mind that the margin requirement will always follow the stock and how volatile it is. The more volatile the stock in question is, the higher the requirement will be.

Margin Accounts

Since margin traders accept the risk that comes with it, they must use a special type of an account. These margin accounts are quite different from the usual cash accounts. Margin accounts are usually offered by brokerages to create a possibility for the investor to borrow funds which he can then use to purchase securities. They always expect the investor to put down a certain amount before borrowing the rest. This is usually 50%. The broker will, of course, charge for the service in question and the securities are a collateral. The main difference between a margin account and a cash account is that you cannot short sell with cash accounts. Also, certain instruments can only be traded in them. For an example, futures and commodities.

The Risks of Margin Trading

Margin trading is definitely one of the riskier businesses out there. For that reason, there are multiple entities monitoring it and governing it. The Federal Reserve Board, Financial Industry Regulatory Authority, and even self-regulatory organizations (for an example – stock exchanges) as well as every single brokerage company.

For example, the New York Stock Exchange follows the margin debt sum. And, as of the 11/2017, the debt was almost 560 billion dollars. Of course, this does not come as a surprise. After all, almost every single equity index was at an all-time high or near it. It is relatively common to see margin debt follow market peaks. However, those who follow the movement of the market over longer periods are worried. They can compel investors to sell their assets to cover their margin calls which worsens the drop of stock prices. This pressure can cause complete market crashes.

Consensus: Leave it to the pros

We can all agree that this form of trading is definitely not something you would recommend to a beginner. It is a smart choice to leave it to traders with experience and those who are familiar with the risks. Even if the leverage can significantly increase your gains. If you do not have the experience one needs for a margin trader, you should stick to long-term investments.

October 24, 2017 / 0 Comments

Some of the Most Common Mistakes New Day Traders Make

Trading in the stock market is great way to earn a lot of money really fast. With the development of technology, individuals can now break away from the stock market floor to trade from their home computers in their PJs. However, although the concept seems easy enough, it isn’t. One such trading technique that is often coined is day trading. This is pretty much what it sounds like: trading in the space of one day.

When you’re day trading, you are opening and closing trades within minutes of each other in order to score a profit. The process is very high risk bu

t, if mastered, can make you a lot money very fast. Many beginners go into the day trading game with little knowledge about what to expect and what they need to analyze. This results in some enormous failures and there are hundreds of them. If you want to learn how to become a day trader, you will need to start by avoiding common mistakes.

Make sure you don’t make the mistakes that every beginner makes and take some friendly advice from the professionals. If you know what mistakes are commonly made, you can aim to avoid them. This is what this article was made for. Here, we will discuss some of the most common mistakes beginner day traders make, so hopefully you can avoid them.

Never Planning Ahead

This is a huge one that beginners always forget. When they jump into day trading they don’t make a plan or form a strategy and this leads to great losses. Beginners will not fully understand a stock when they position themselves and do not have a strategy for entering and closing. When you enter a trade you need to have a strict goal and price you want. Never go in blind and understand what you want from the stock.

In addition to not planning, when a beginner does plan, they never stick to it. They let emotions and tensions to cloud their rules and strategy. If you see a stock starting to go up, don’t gamble, close when you said you were going to close otherwise you could lose everything.

Trading too much in One Day

When you first start it may be tempting to sit at the computer all day and trade, trade, trade. Some go into the game believing that the goal is to never stop trading if you want a chance at profiting. This is the wrong mindset to have with day trading and, in some cases, you can even take a few days off from the computer if you’re doing it right. It is also good to not get stuck with one strategy or stock. If something worked last time, it might not work again. So mix things up. Stock-trader-looking-at-monitors

Riding Solo

Among all these mistakes, one of the biggest is trying to teach yourself everything and figure out the strategies by yourself. You may hear that self-education is the best way to learn but you will need some guidance when it comes to day trading. This is because the risk factor is so great you can’t afford to make mistakes. Join a chatroom and talk to some of the professionals about their experience. They might be able to share some insight into their stock picks.

Conclusion

So there you have it, three of the biggest mistakes new day traders make. Although there are only three points each one is detailed enough to learn from. To sum up: plan ahead and stick to your plan, don’t go trade-crazy and mix up your strategies and, finally, join a community and learn from the guys already profiting. With time, you will become an excellent day trader.

July 26, 2017 / 1 Comment

How to Read a Stock Chart Like a Pro

Every time you tune into some TV channel specializing about the stock market, you must be overwhelmed by the amount of raw data they are showing to the viewers. The success in stock market depends on how well you can interpret and analyze the data, i.e. the stock charts. A stock chart tells all about the stock market. There are various types of charts such as candlestick charts, support and resistance, trend lines, OHL (open-high-low-close), point and figure and others which are viewable in different frames. One common thing about all charts is that the charts are either daily, weekly or monthly and always shows a pattern. Analysing stock market data

Stock Chart Types

Although there are different types of stock charts available, most charts display price and volume of stocks. Candlestick charts are one of the most common patterns used by Japanese people and became popular worldwide. Candlestick charts are used when you have a dataset that contains low, open, high or close values for each time period. The candlestick charts look like box either filled or hollow. Many traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of the price action of a stock. From the candlestick charts, a trader can easily get the relationship between the open and close value and the high and low value of a stock for a particular time frame. The open and close are considered the most vital information in the candlestick chart. As a general information, a hollow candlestick indicates buying pressure and filled candlestick indicates selling pressure of a stock.

Support and Resistance

In the stock market, support and resistance are two important values in the stock chart. Someone wants to invest in the stock market must understand the meaning of these two values thoroughly. Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. When the price declines towards the support level, the stock value goes very low. As a result, the buyer wants to buy more stock, but the seller is less inclined to sell. As the price reaches the support value, it is believed that demand will overcome supply and prevent the price from falling below support. Resistance is exactly opposite to the support. Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. As the stock price rises towards resistance value, the seller wants to sell stocks, but the buyer is less inclined to but due to high price. As the price reaches resistance value, it is believed that supply will overcome demand and prevent the price from rising above resistance.

Trend Lines

Out of all the technical jargons in the stock market, the trend line is the hottest topic among technical analyst and traders. A trend line is a chart that gives a quick understanding of the market from the uptrend and downtrend of the stock values. Trend line charts are the most important for a newcomer or a veteran in the stock market.

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.