Trading Index
TRIN. A market indicator calculated by the following: Arms Index = [(# of advancing issues / # of declining issues) / (Total up volume / Total down volume)]. A value of less than 1.0 is termed bullish, and greater than 1.0 is bearish. Also called Arms Index.
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Saturday, March 14, 2009
Dividends
Trading DividendsThe practice by some corporations of buying and selling other corporations' stock to maximize collected dividends, for tax benefits (since corporations pay very little tax on dividend income). also called dividend capture.
Equity
SAMPLE GRAPH
stockholders' equity
The balance sheet quantity of a company's common stock equity. This quantity equals total assets less liabilities, preferred stock, and intangible assets such as goodwill.
Stockholder’s equity consists of contributed capital and retained earnings.
The quantity of stockholder’s equity indicates how much the company would have left over in assets if it were to go out of business immediately.
As most companies are expected to grow and generate more profits in the future, they end up being worth far more in the marketplace than the value of their stockholders' equity.
This is why stockholder’s equity is more important to value investors than growth investors. Stockholder’s equity is often called the book value of a company.
stockholders' equityThe balance sheet quantity of a company's common stock equity. This quantity equals total assets less liabilities, preferred stock, and intangible assets such as goodwill.
Stockholder’s equity consists of contributed capital and retained earnings.
The quantity of stockholder’s equity indicates how much the company would have left over in assets if it were to go out of business immediately.
As most companies are expected to grow and generate more profits in the future, they end up being worth far more in the marketplace than the value of their stockholders' equity.
This is why stockholder’s equity is more important to value investors than growth investors. Stockholder’s equity is often called the book value of a company.
Strategies
Day traders Strategies
First look at market conditions, searching for high liquidity & high volatility. Markets with higher liquidity usually have lower spreads, slippage and other costs.
For example
EURUSD, the most widely traded currency pair, has far lower spreads than less liquid pairs like the AUDNZD or GBPJPY.
The lower the liquidity, the wider the spread and the more pips a day trader will need to overcome in order to have a profitable trade.
Volatility refers to the average range a currency pair tends to trade in a day.
Compare GBPUSD to EURGBP. Because the Pound Dollar tends to trade in wider range it offers more opportunity for day traders to grab hold of market moves.
Trading EURGBP on the other hand can be one of the most painful experiences imaginable for a day trader, since is pair tends to stick to a tight daily range and offers little opportunity for intra-day speculation.
First look at market conditions, searching for high liquidity & high volatility. Markets with higher liquidity usually have lower spreads, slippage and other costs.
For example
EURUSD, the most widely traded currency pair, has far lower spreads than less liquid pairs like the AUDNZD or GBPJPY.
The lower the liquidity, the wider the spread and the more pips a day trader will need to overcome in order to have a profitable trade.
Volatility refers to the average range a currency pair tends to trade in a day.
Compare GBPUSD to EURGBP. Because the Pound Dollar tends to trade in wider range it offers more opportunity for day traders to grab hold of market moves.
Trading EURGBP on the other hand can be one of the most painful experiences imaginable for a day trader, since is pair tends to stick to a tight daily range and offers little opportunity for intra-day speculation.
Capital
Sufficient Capital
Although leveraged accounts allow day traders to open large positions with small amounts of capital, unsuccessful day trading strategies are too often the result not having enough funds in an account to weather downturns. Successful day traders know that most positions will not become profitable the moment they are opened.
This makes strategic position sizing an absolute essential, as it determines one's staying power in the market and can often mean the difference between a winning trade and a losing one. Traders that increase the amount of idle capital available to cushion their positions either through a large initial balance or smaller position sizes lower the risk of margin calls.
An over-leveraged account may only be able to withstand a small disadvantageous price move before a margin call locks in a floating loss. By reducing the position size a day trading strategy requires, the trader reduces his/her exposure to the market and is able to manage their positions more effectively.
Although leveraged accounts allow day traders to open large positions with small amounts of capital, unsuccessful day trading strategies are too often the result not having enough funds in an account to weather downturns. Successful day traders know that most positions will not become profitable the moment they are opened.
This makes strategic position sizing an absolute essential, as it determines one's staying power in the market and can often mean the difference between a winning trade and a losing one. Traders that increase the amount of idle capital available to cushion their positions either through a large initial balance or smaller position sizes lower the risk of margin calls.
An over-leveraged account may only be able to withstand a small disadvantageous price move before a margin call locks in a floating loss. By reducing the position size a day trading strategy requires, the trader reduces his/her exposure to the market and is able to manage their positions more effectively.
Fundamentals
Market FundamentalsEvery professional day trader will tell you they have a good understanding of what drives markets. Where that expertise lies, though, may vary from one day trader to another. Some develop bias based on underlying economic fundamentals, like the direction of trade & capital flows or central bank policy.
Other professional traders say they have developed a sense for turning points in market sentiment, knowing precisely how to differentiate a true reversal from a fake-out. This characteristic can be summed up simply as market expertise. Traders who do not possess such qualities are often left guessing as market conditions shift, resulting in heavy losses.
Professional traders surveyed for this article suggest the best way newcomers to the market can develop the expertise needed to be a successful day trader is through practice. Demo accounts, mini accounts and e-minis all allow practice with small amounts of start-up capital.
Day Trading
"Day Trading" refers to opening and closing positions within the same day. The markets do not fluctuate much over the course of a given day relative to their movements over longer periods of time. Therefore, day traders will look to use as much leverage as possible to magnify their exposure to those market moves that they can find.
Most day traders treat market speculation as their full- or part-time job. They see trading through the lens of a daily employment regiment, punching in at the beginning of the day and closing out any positions at the end.
Gift to the Markets
Day traders benefit the market by offering liquidity and efficiency. Markets operate best when there are active buyers and sellers at all times. With numerous day traders operating in the market for Euros and Dollars for example, a bank knows that when you exchange your travel money they can easily and instantaneously find a counter party to your exchange.
In terms of efficiency, any trader who has looked for any small arbitrage opportunities knows that few if any easily exist in markets, since day traders will take advantage of them the moment they appear.
Most day traders treat market speculation as their full- or part-time job. They see trading through the lens of a daily employment regiment, punching in at the beginning of the day and closing out any positions at the end.
Gift to the Markets
Day traders benefit the market by offering liquidity and efficiency. Markets operate best when there are active buyers and sellers at all times. With numerous day traders operating in the market for Euros and Dollars for example, a bank knows that when you exchange your travel money they can easily and instantaneously find a counter party to your exchange.
In terms of efficiency, any trader who has looked for any small arbitrage opportunities knows that few if any easily exist in markets, since day traders will take advantage of them the moment they appear.
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