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Introduction to Day Trading

admin — Wed, 14 Jan 2009 01:44:29 +0000

Day trading is the practice of buying and then selling a stock all within a single day of market activity. Day traders dabble in a number of different financial instruments, such as stocks, currencies, stock options, and futures contracts such as interest rate futures, equity index futures, and commodities futures.

It is not uncommon for a day trader to execute hundreds of trades in a single day, whereas others might only make a few trades. Some look for swings in prices that may last a few seconds or a few minutes. Such a trader literally will buy a stock and then sell it within a few minutes, or sometimes within 30 seconds or less. Others look for changes in momentum and will hop in at the beginning of an upswing and then ride it out until the upswing is over. This is known as momentum trading. Another strategy that day traders often employ is called position trading, where they look for a stock that is likely to experience a significant increase in price over a period of a few days or even a few months. They hold their position until the price plateaus, and then they dump it.

Most average day traders look at the resistance and support levels for the price of a given stock. When a stock has reached its historical maximum, it is said to have reached its normal resistance level, meaning it probably will not go up much more. When the stock has reached its historical minimum, it is said to have reached its support level, meaning it will probably not go down much further. However, new resistance and support levels are established all the time, so it is not always smart to rely on historical price levels to gauge future price movements.

Most traders look at websites like MarketWire for the latest breaking news developments to make their investment decisions. If a company has just put out a favorable press release, the price of the stock will likely go up in the short-term, so it is smart to buy some stock as soon as the story is released, and then sell it when the buying frenzy starts to lose its momentum.

One of the most common practices utilized by day traders is known as buying on margin. When you buy a stock on margin, you are basically borrowing money in order to buy stock, and of course the money that you borrow has to be paid back at a certain time. Most brokerages usually require that you have a certain minimum amount in your account in order to borrow. Some financial institutions require that you have an account balance equal to 25% of the amount you are going to trade on margin, and some require 50% of the amount borrowed. And usually, the trader is required to exit a certain percentage of the positions they have in various stocks by the close of business on the day when the trades were initially executed. Buying on margin is extremely risky, because the money you lose on trades is still owed the lender. Margin orders are not recommended for inexperienced investors.

Another popular trading strategy is called short selling. This is where the trader borrows a stock from a financial institution and then sells it, hoping that the price will go down in the near future so that the trader can buy the stock back at a lower price when it comes time to return the stock to the lender. The difference between the price it was initially sold at and the cost to buy it back in order to return it to the lender represents the profit for that trader. Short selling requires advanced knowledge of market trends.

After a stock is bought and subsequently sold, there is a settlement period that must elapse before the money earned from the sale can be used again to place another trade. The settlement period is usually 3 full business days. This can be especially frustrating for neophyte day traders who have opened up their first brokerage account and then put all of their money into one stock, and then sell it the same day when it goes up, only to discover that they have to wait until the transaction is settled in 3 business days before they can place another order. So, if you are new to trading, do not use all of your money to place a single trade; set aside some money so that you always have some money in your account that is not tied up in settlement, so that you can continuously trade without interruption.

I hope this information has helped you to become familiar with day trading. Try to set aside some money for investing and start while you are still young. The earlier you begin, the more money you can potentially make down the road. Some day traders make millions, others lose everything, so you should carefully research the companies you are going to invest in beforehand and you will do fine.

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Is options Trading better than Futures Trading? As in options the risk is predefined.?

admin — Tue, 13 Jan 2009 05:10:51 +0000

It depends on the volatility of the underlying asset prices. Futures are played with physical assets most of the time with hedges created with Futures. Options can be played Naked without physical underlying assets in hand. Index options are less riskier than individual options since they fluctuate with the market. Individual options with high betas fluctuate higher than index options. For futures it is the same. Individual options and futures wit beta less than 1 is less riskier. But then probably less trading take place in such instruments for lack of volatility to make it interesting worth trading for profits.

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what is options trading and futures trading?

admin — Sun, 11 Jan 2009 02:54:57 +0000

please explain it

If you are thinking about Futures, I would go with ETF (electronically traded funds) or mutual funds that hold futures. Futures are very hard to trade, and can be very risky. I have been in the business of giving advice for a while, and I would rather put my clients in something that has a solid money manager (mutual fund that buys futures) and a proven track record in all types of markets. So if the market turns suddenly, you don’t lose 100% of you investment (options). You can make the same amount of money with a beta (risk to the market) that is fairly low.

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How to make profits from trading on Futures and Options in a Stock Market?

admin — Thu, 08 Jan 2009 23:34:59 +0000

Option strategy are numerous. One that can yield high profits is to buy deep in the money calls or puts on high quality companies. A call if you think the stock is going up, a put if you think the stock is going down. In this way you can own a position in a company for only a fraction of the cost of the equivalent shares. Say XYZ is selling for $30 per share and a August 06 call at the $25 strike price is selling for $6. XYZ goes to 33 then the call will go to to at least 8 for a gain of 33% on your investment while the shares increased in value by only 10%
That's leverage working for you. Now if the stock in below 25 at the August expiration your call investment is toast and you have lost all of your $600. Hopefully you have long before sensed your mistake and sold the call to recover a portion of your money. Preservation of capital is the single most important aspects of investing. Learn to take small losses so you will be in the game for a big win.

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Mad About Options: mins Inc. (CMI)

admin — Thu, 08 Jan 2009 19:46:29 +0000

Matt Buckley and Jud Pyle of Options News Network look at mins Inc. (CMI).

Duration : 5 min 9 sec

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Technorati Tags: options

any site to learn futures and options trading in Indian stock market?

admin — Wed, 07 Jan 2009 02:45:26 +0000

the NSE website has a bsic primer.

www.nse-india.com

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Forex Trading – Using The Right Tools To Avoid Costly Mistakes

admin — Wed, 07 Jan 2009 02:32:42 +0000

Foreign Exchange Trading, also known as Forex, is the world’s financial market. Within Forex, currencies are purchased and sold on a regular basis, generally for the purpose of carrying out international transactions.

A perfect example of international transactions with Forex, would be an instance of Canada purchasing items from the United States. Canada would have to purchase USD (United States Dollars) to complete the transactions. They would therefore, essentially buy USD using their own currency called CAD (Canadian Dollar).

Of course, Forex is operating in the same way as the stock market, only brokers can trade on the market. Typically, in each country there is a large bank, these banks are generally known as Forex brokers. Therefore, if you are interested in Forex trading, you will need to choose a broker to handle the transactions for you.

When choosing a broker, you need to determine which brokers are dealing with the Forex trading market. You should also consider the goals you have within the market. For example, in some instances it may be suitable to use a local banker for the transactions.

However, if you are interested in the market, on a more serious level such as converting global Forex receipts, intentions of profiting from the market, or hedging the risks, you may want to consider opting for a specialized Forex broker.

When choosing a broker, you should also consider the commissions they earn. You should also base your decision on the amount of time it takes the broker to complete your transactions. You should also ensure that the chosen broker has a host of financial tools at their disposal for use in Forex trading. Some examples of such tools include instruments for Forex currency options, futures, and forward contracts.

When it comes to tools and your Forex broker, you will want to ensure that the broker has the extensive knowledge on how to use these tools. For example, with it comes to forward contracts, this is typically offered only through banking institutions.

Your broker should also understand when they should implement these tools. As in the forward contracts, they should know that forward Forex trading should only be implemented when the date of the transaction and the specific number of transactions should be implemented.

Overall, it is important to deal only with a Forex broker that has the experience, knowledge, and expertise that is required when dealing with Forex trading. When entering into the world of Forex trading, you should also have the knowledge needed, you do not want to rely on the hopes that your broker can offer you the advice needed on all transactions.

Summary:

Forex trading actually means Foreign Exchange Trading. A country needs Forex for carrying out internal transactions. You can earn money by investing in the forex trading market, just like you can do at the stock exchange; if you are have the required knowledge.

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Where can we get good e-books on futures and options trading for free?

admin — Mon, 05 Jan 2009 01:47:17 +0000

If you are trying to learn about concepts then there are free tutorials available on the website of Chicago Board of Option Exchange. Thier website is www.cboe.com and browse through the education section.

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How do I start my own fund that trades futures and options?

admin — Sat, 03 Jan 2009 02:38:59 +0000

Early in my investing career I quickly lost $118,000 in every market you can think of. Since then I have learned how to read financial reports, understand the effects of geoploitical situations throughout the world and I have extensively studied technical analysis (patterns, support/resistance, indicators based on oscillations & candlesticks).

I'm a CFP, and have been very successful in the past two years. I have netted a 8637% gain on my personnel investment. I rarely hold an investment more then 20 trading days and quickly drop any investment where I had an incorrect read.

Option trades –
SIRI Dec. 2005 CALLS +16%
RJR Dec. 2005 PUTS -7%
SIRI Jan. 2006 CALLS +38%
MXO Oct. 2005 PUTS +16%
MXO Mar. 2006 CALLS +645%
JCP Jan. 2007 PUTS 13%
SWFT Oct. 2006 PUTS +45%
LCC Oct. 2006 PUTS +73%
EK Jan. 2007 PUTS +144%
PNRA Jan. 2007 PUTS +86%
OMX Nov. 2006 PUTS +40%
OMX Nov. 2006 PUTS +65%
OMX Nov. 2006 CALLS +53%
XMSR Jan. 2007 PUTS +191%
BAB Dec. 2006 PUTS +37%
MTZ Oct. 2006 CALLS +26
Well I have enough capital, I'm sure. But, I want to help others by creating my own fund specifically in options and futures.

Here is what you want:

http://www.turnkeyhedgefund.net/

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what is futures&options trading on NSE(national stock exchange)?

admin — Thu, 01 Jan 2009 02:03:49 +0000

Futures trading is like commodities like Pork, corn, sugar….

Options trading is buying or selling a stock for only a limited amount of time at a 'discounted' price (you don't actually own the stock). Many use options to hedge their long or short positions

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