Best stock trading strategy

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

Stock market is one of the world’s most dynamic market. If you have a look at the electronic board of the indices and the pace at which it moves, you will know how dynamic the market is.

The basics to enter the stock market is to have a strategy. when i say strategy, it mean when to buy a share, at what price should i buy, when i should i exit? these are few question you must ask yourselves

If you think you can buy the shares and sell when the price goes up and make profit, well you are wrong. You will never know when the price will go up. Who knows, the stock might be already standing in its highest position ever. You might have bought the share at a wrong time.

So how should you device a good stock trading strategy? First things first. Create the portfolio. Wait for a few months. Learn the behaviour of the shares and its fluctuations with respect to the market’s behaviour.

In the mean time, you can also learn about the behaviour of the company you are trying to invest in. You must note that share price rise and fall with the investors confidence. A company which cannot hold its investors can never succeed. You must make careful analysis of these aspects.

You can also use this time to read some of the past datas using charts. You will get an idea of the minimum and maximum position of the share you are going to invest in. When you have all these datas under your belt, you can do your investment with ease. When you think the time is right, you can invest your money and the most important thing in stock market is to have exit strategy. If you have decided to get out at a certain limit, you must do it. Never allow your greed to take on you. Your exit strategy is more important than anything else.

Photo by Isaac Smith on Unsplash

The analysis of fundamental strategies on the Forex

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

The technical analysis that we have just studied will certainly enable you to multiply your possibilities for profits on the Forex. However, this analysis should be completed with a clear understanding of the different basic strategies.

In fact, it is primordial that before drawing any conclusions it is important to understand the economical environment in which a trade takes place. We can illustrate this aspect using the example of the Yen which underwent a major increase between February and March 2007. If we only refer to the technical analysis we can observe some excellent entry points with the pairs concerning the Yen at the beginning of March. 

However this event should be seen in its economical context.  In fact, the latter took place before the crisis and at this time the carry trade was still experiencing huge success. If we were to place this event in the current time it would constitute a real error of judgement to take a sell position on the Yen. In fact, this currency is actually experiencing great demand by numerous investors as well as financial establishments who, through this intermediary, wish to settle debts accumulated in the Yen before the crisis.

This reflection brings us to the conclusion that the analysis of a currency deemed as the counterpart reveals a certain importance when we take position on a trade. It is therefore necessary to know how to conduct an analysis. In fact, although many Forex traders quasi-systematically associate the Dollar with other currencies this choice is not always the best as it doesn’t enable the possibility of maximising opportunities for profits. 

In this case, what is the best choice for the matching currency? Let us return to the example of the Yen, remembering that at that time the American economy was starting to slow down and the potential for a rise in the Dollar was fairly weak. At the same time the Pound Sterling seemed to be promising a much higher increase. Also, due to objectives fixed by the BoE, a continual rise in its interest rate was expected. It was therefore more judicious to place an investment on the GBP/JPY than on the USD/JPY.  

This therefore brings us to the following conclusion: It is very profitable to make your choice concerning which currency pair to trade in accordance with the growth potential of the country concerned as well as the economical situation of that country. It is therefore primordial to remain well informed as to the different elements as whatever the exactitude of a technical analysis, it is of no use whatsoever if it is not studied within its economical context.   

Let us now examine in detail some of the basic strategies that enable trading in a concrete manner. 

Study of announcements and position

Once your strategy has been established, you should follow the announcements and their eventual consequences on the Forex market. In fact, as we have previously seen, the effects of announcements can have a real impact on the rates by greatly influencing the investors. 

The announcements are consultable on a daily basis via the economic calendars or through dedicated newsletters. We will now examine reading and interpreting these calendars. 

Firstly it is highly important to note that these economic calendars are quoted in GMT. This signifies that for European time you should add two hours in winter and one hour in summer. 

The first column indicates the time at which the event is programmed to take place and the second refers to the countries concerned by this event. 

The third column gives the title of the announcement, that is to say the event. Referring to the fourth column, this gives the period (here expressed in months) at which the event is announced. 

The two items of information that interest us most here are indicated in the two columns situated at the top to the right. The consensus informs us of the figures awaited by the economists at the time indicated in the corresponding column. Finally, the last column indicates the preceding figure recorded. What should be noted here is that the more the preceding figure is similar to the awaited figure, the less the influence that the announcement will exert on the markets, the inverse also holds true. 

However, it is just about impossible to analyse and compare these figures rapidly enough to make a correct decision. In fact, at the same time these figures are published the entire market reacts in accordance with the importance of the announced event. The major movements do in fact take place following an announcement. It is for this reason that certain traders prefer not to be holding a position at the time of an announcement to avoid a destabilisation due to the engendered effects. 

Some Advice

At the time of an announcement, it is recommended either to take position before the beginning of the announcement in such a way as to be able to negotiate its effects over the whole period or wait in order to take position at the exact time that the announcement takes place. The latter requires a certain availability together with great attention and reactivity but allows you to take position immediately according to the observed occurring trend. Another technique consists of taking position at the time the first signs appear of a turn in the market once the announcement has been made. The taking of profits by investors often balances the speculative aspect engendered by such an announcement.  

It is interesting to note that at the time of an announcement its effect on the currency rate is almost immediate with a tendency to continue throughout the day. If you decide to use this style of trading on announcements you should not use a strong leverage effect and should be careful to not take too many risks concerning your capital.  

The Carry-trade strategy

The Carry Trade strategy consists of using the differences observed between the interest rates of different currencies for trading purposes. The Carry-Trade strategy is one of the most frequently used on the Forex market. It in fact amounts to completing an operation by purchasing a currency at a high interest rate and at the same time selling a currency at a low interest rate. The profit here is easily understood as it simply corresponds to the difference between the two rates of interest. Of course, this profit is only really interesting if you use the leverage effect. It is also necessary to possess all information concerning the different interest rates of the currencies concerned. 

* Let us take a simple example

We know that the New Zealand Dollar offers an interest rate of 3.5% whereas the interest rate of the Yen is at 0.1%. By purchasing the NZD and selling the JPY we obtain a profit corresponding to the difference between these two rates, that is to say 3.4%. This profit can be made every day by the carry trader. There again, the benefits of using a leverage effect here can be easily understood given the small amount of revenue that is represented by such an operation.

There is a simple calculation that enables you to evaluate the long term profits for a carry trade. You simply need to multiply the difference by the number of days and divide by 360. 

The difference between the two interest rates expressed in pips is called the “swap” in an exchange. It can easily be found on the different trading platforms. This swap in an exchange is indicated by a loan operation combined with a deposit operation. The loan is accomplished here using the currency that offers the higher interest rate and the opposite for the deposit operation. This swap is applied on a daily basis on the position held. 

Caution! The real impact of these exchange ‘swaps’ on a position is not observed except for those currencies offering a major difference in interest rates although it is applied in a regular manner on all the currency pairs. The currency exchange ‘swaps’ are also called ‘roll-overs’.  

At the end of each day’s trading, each position is said to be ‘rolled over’ to another trading date. This ‘roll-over’ consists of closing a position and re-opening it with the modified difference between the closing rate and the opening rate. It is precisely this difference that is expressed by the exchange ‘swap’.  

To summarise, the carry trade comes down to identifying an interesting entry point on a currency pair that shows a strong difference between the interest rates and keep the position for as long as possible. This choice of entry point is extremely sensitive as it determines the direction in which you position yourself on the market. In fact, far from being a perfect position for a trader, this carry trade strategy, like all other strategies offers both limits and risks. The risk of change can in fact rapidly become an obstacle to your forecasts. 

Despite the risk of abrupt movements, the carry trade remains one of the most efficient methods for making profits over the long term. 

The reason for diversifying investments

The fact of investing the total sum of your capital on one sole currency can pay off handsomely if you are lucky. This technique is however very risky as if you lose, you lose all your investment without registering any profit in any part. To trade well on the Forex one of the rules to respect is that of caution so keeping risks to a minimum. It is therefore essential to not place all on one currency but on the contrary to diversify your trades in order to register profits that can recompense any eventual losses.  

The notion to take into consideration when diversifying your investments is that of the ratio profit/risk. By analysing at the same time both the potentials for the profitability of your financial operations and the risks that you are incurring, you will implement a strategy of diversification. 

The Forex is actually the ideal market for applying this strategy and spreading your risks. Contrary to the stock market, on which it is necessary to find buyers in order to offset any recession suffered by the stock markets, here it is easy to inverse a position by selling on one hand and buying on the other. The high liquidity of the Forex contributes to this strategy by offering the possibility to sell or buy at any time of the day.  

The main objective of diversification is here to cover the risks undergone on one of your positions using an opposite position. You therefore have full control of your investments and it is easier to master your real risks from the moment where you pay particular attention to the risks you take. The orders are there to help you master these risks without requiring too much diligence.  Remember that whatever happens, your orders will be completed at the rates you have set. 

Due to the leverage effect that we explained earlier, you can either decide to take a chance on making major profits but at the risk of losing a lot too, or keep your risks to a minimum and rely on your strategy and money management to make lesser profits. 

The ideal position is therefore to trade on 3 or 4 pairs simultaneously in order to limit your risks to the maximum, even if this signifies that your profits will be a little smaller. However, do make sure you carefully choose the pairs you invest in. 

Certain trading platforms offer their clients tools that indicate in real time the client’s exposure to different currencies. This information, coupled with your intuition and technical analysis will enable you to reduce or increase your exposure. 

As we detailed earlier, a currency should never be considered alone but rather in correlation with another. This is exactly the reason for diversification. To benefit from the different trading methods it is not enough simply to analyse one currency compared to another but rather one pair of currencies compared to another with one of the currencies being common to both. Very often, these pairs move in parallel as they are both vulnerable to the same economic susceptibilities. This is therefore the ideal method of identifying opportunities while at the same time diminishing your risks on certain investments. You can therefore evaluate more precisely your exposition to one or several currencies.  

Some Advice

When you trade on the Forex, it is preferable to compile your portfolio with trades relative to currency pairs that move in opposite ways. The more marked this effect, the more you will cover your investments. Of course, this method will proportionately lessen your opportunities for profits. Use the correlation rate to determine the direction in which the different pairs are moving. The more the rate approaches the value of -100 the more the rate has a tendency to move in the other direction, and the same with the opposite.  

As the Forex is a dynamic market, these correlation rates vary over time. It is therefore necessary to update your data on a regular basis.

Buying stock and shares in margin

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

When you buy shares, you pay the full amount according to number of the share and price of the share. But if you pay only a part of the amount, thats called buying on margin.

For example, if you buy a 1000 shares worth GBP 1 per share, you pay GBP 1000 and buy the shares. But when you choose to buy shares in margin, you will be required to pay only for 50% of shares, which is GBP 500. The remaining amount will be paid by the brokerage firm.

But there are limitations with regards to the margin depending upon the stock brokerage firms. Some brokerage firms set the minimum limit in the form of amount say GBP 2000, which means you have to pay atleast GBP 2000 to buy the shares or they might set the limit in the form of a certain percentage which means you have to pay the percentage instead of the fixed amount. But the catch is you have to pay the interest for the amount they are giving you. In the mean time they will be holding your a certain amount of your shares.

If you are unable to pay the interest, your shares will be sold by your brokerage firm and the amount will be recovered. This is something like buying a home in mortgage. When you are unable to pay the mortgage, your home is seized. Just like that.

When you are buying shares in margin, you have to make sure that your share value is rising to a level, so that you can make profit and pay interest as well. But as per law there is a limit upto which you can hold the shares in loss. But if the share value goes below that limit, then your shares will be sold and amount you owe to brokerage firm will be recovered. In this process the risk is mainly for the investors and not for the stock brokers.

Buying on margin has huge risk as mentioned above. You might end up losing your entire capital, as you are not in complete control of your stocks. So buying shares in margin is not really advisable for the beginners of stock trading as they dont know the behaviour of the shares. If you have reached a level where you can judge the movement of shares, then you can start buying shares in margin.

Strategies based on a technical analysis of the Forex

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

The use of technical analysis is particularly appropriate and important on the foreign exchange market. Indeed, this market being permanently open, one does not encounter an opening gap. The purpose of this chapter is to explain how it is possible to use the different technical analyses to trade on the Forex.

You will quickly understand that this analysis is essential to accomplish fruitful operations.

The analysis of the support and resistance levels

You should remember that a support level represents a threshold below which a price does not fall and a resistance level, the threshold above which it does not rise. These support and resistance phenomenon are therefore indicators which give concrete and reliable information on the different movements of currencies.

To make the best use of these indicators, you will have to become accustomed to using the support and resistance lines. Your objective here is simply to take a buying position above the observed support level and to sell this same position below the observed resistance level. However, you will also be able to sell when the prices passes below a resistance level and to buy when it rises above the support level.

When you begin trading, it is strongly recommended to trace these support and resistance lines even if with experience you will learn to detect them without the need to trace them. The most appropriate charts are the 4 hour charts and the daily chart. These two types of charts are in fact the ones which will give you the best representation of the market trend of the pair you wish to study.

How to trace support and resistance lines

With the help of your chart, begin by indentifying the highest points and the lowest points. Caution! To be accurate, these points must appear in your chart at least twice.

After that, join these higher and lower points with horizontal lines. Each line should pass through at least two high or two low points. You have just traced the support and resistance lines.

By looking at your chart, you will notice that certain lines pass through more points than the others. The more numerous the points, so the more this support or resistance line will represent a reliable indicator. This means that these support and resistance lines will be more difficult to break. 

All you have to do now is to take your selling or buying positions according to the support and resistance phenomenon observed. 

Remember that the resistance levels are sell signals and the support levels are purchase signals.

Trends Analysis

The technical analysis of trends aims to determine the recommended time to enter into the market. To do this, we consider that the Forex market follows only one direction on a long term basis.  

Here therefore we will use monthly, weekly and daily charts.

To make good use of trends analysis, you need to determine the precise moment when it is possible that a turning point in the trend will take place. When you use a weekly chart, it is recommended to refine your analysis with the help of 4 hours or 30 minutes charts before taking position because these two charts will allow you to spot the support and the resistance levels of these trends.

How to use the indications given by the tendencies?

When you observe a bullish trend, it is recommended that you choose an entry point as close as possible to a support level. On the contrary, if it relates to a falling trend, choose an entry point close to a resistance level.

How to anticipate a turning point in the trend

There is an efficient technique to determine at which time a turning point in the trend could happen. To do this, we use an exponential moving average period 10 coupled with an exponential moving average period 25 on a daily chart and an exponential moving average period 45 for a 4 hours chart.

You can then conclude as follows: If the long exponential average is below the medium exponential average, this is synonymous of an upward trend or bullish tendency. On the contrary, when the long exponential average is located above the medium exponential average, it signifies a bearish period or falling trend. Therefore, when the two exponential moving averages meet at a precise point, this point indicates a reversal of the trend.

Caution! It is not recommended to base your decisions only on the trends analysis to take position on the Forex. In fact, the information that you gather will be reliable only if you use it in association with other technical analysis tools, especially the support and resistance phenomenon.

Double Zero strategy

As stipulated in the chapter dedicated to psychological phenomenon, investors often have a tendency to place stop and limit orders on round numbers. With this indicator, you can easily implement strategies based on the execution of these orders.  

In fact, the number of opportunities offered to you by the foreign exchange market increases considerably from the moment you understand the thresholds where the principal stop orders are placed because the execution of these orders has the main effect of creating major movements on the market.

This technique, called the double zeros, is used, consciously or not, by many traders. One could say that the accomplishment of the objectives from the placement of these stop orders is generally realized. One could quote here the example of acceleration observed the first time that these psychological thresholds are reached.

Moreover, in addition to the individual investors, other actors on the market tend also to influence the movements related to the psychological thresholds. The operators also use round numbers to place their option limits. This phenomenon is due to the fact that in the volumes traded on the Forex, the exchange options part increases constantly. Therefore, the options traders will show the same reaction as traditional traders by placing major orders when a price reaches double zero.

Some advice

Take your buying position on a double zero when you observe a bearish movement and be sure to place a stop order at 20 pips below the entry point and a limit order at 50 pips above this same entry point. In the same manner, a sell order should be placed on a double zero after a bullish movement, not forgetting to place a stop order 20 pips above the entry point and a limit order at 50 pips below this same point.

Here again, the method we have just indicated should, to be efficient, be complemented with other technical analysis tools.

The break out technique

To benefit from this analysis, it is necessary to apply it on several consecutive days.

This analysis indicates that it is judicious to take a buying position when:

  • The highest and the lowest points recorded the first day of the period were not broken during the following days.
  • The price finally manages to break through the highest.

The breakout technique is particularly appropriate to the day trading style but will require you to carry out preliminary identification work on the breakout points or breakthrough points. These breakout points are actually the first day’s highest and lowest points of the period. To detect them, you must first check that the highest and lowest points of this first day were not broken during days 2 and 3. Then, you only have to connect them with two horizontal lines, one connecting the highest points and the other the lowest points. 

Finally, to benefit from your analysis, you simply have to take a buying position as soon as the price reaches the higher line or take a selling position when it reaches the lower line.

Some advice

When you decide to take a buying position, make sure to place your purchase order 10 pips above the breaking point. After that, place a stop order at 20 pips below the entry point and a limit order 50 pips above this same point. On the contrary, when you take a selling position, take it 10 pips below the breaking point and place a stop order 20 pips above the entry point and a limit order 50 pips below this same point.

Keep in mind that the higher the volatility of the market, the more interesting it will be for you to take position on a breakthrough point. However, pay attention to false breaks which are easily identifiable as they correspond to the support and resistance levels of the price.

Thomas Jegu and the “U” strategy

Beginning as a simple trader, Thomas Jegu was quickly noticed for his exceptional performance on the Forex market. Thanks to simple methods and strategies, he quickly managed to adapt himself to the foreign exchange market and its risks. One of his most popular strategies is without a doubt the “U”. 

The “U” strategy enables the identification of the most interesting entry points of the market. To achieve this, one only needs to visually analyse the various charts, regardless of the market configuration. Then, simply apply the appropriate Money Management.

How to spot a ‘U’ configuration

To identify a “U” configuration as accurately as possible, you will need to use three different types of candlestick charts: One of 4 hours, one of 30 minutes and the last of 10 minutes.

The first allows us to analyse the background trend, the second the short term tendencies and the last one the medium term trend.

This analysis highlights an eventual movement on the overbought or oversold prices and so benefit from the following corrective phase.

Simply put, the “U” configurations always follow the direction of the trend. So, if the background trend is bullish, the “U” configuration will speculate on the purchase and, to the contrary when the background trend is bearish.

To correctly identify these configurations, it is recommended to firstly identify a bull or bear rally of different rates, i.e. one or two successive candlesticks, rising or falling. (Note: The shadows of these candlesticks must be higher than 100 pips over 4h, 30 minutes at 80 pips and 10 minutes at 60 pips.) Then you need to wait until two or even three consolidation candlesticks form, which will signal the end of the bull or bear trend. Finally, when the prices correct respectively at 25 pips over 4 hours, 30 minutes at 20 pips and 10 minutes at 15 pips, this is the signal to buy or sell.

Once this identification has been made, you can take a buying position by using a leverage effect from 5 to a maximum of 20. Then place a stop order 20 pips below the lowest point of the consolidation candlesticks and a limit order at the level where the fall was confirmed. Of course, in the case of a long term trade, one simply has to increase the stop and limit order levels.

Some advice

To take the least risk possible, verify that you have a minimum of three consolidation candlesticks before taking position. Trade only in the direction of the trend as to do otherwise is too risky, and never forget to place your stop order to avoid important losses in the case of an inversion of the market. 

Basic of online stock trading

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

Internet had brought revolution in all the fields and stock market is not an exception. Once stock market was only for the rich people as it involved lots of formalities and investment, but with the advent of the internet, the stock market has become a boon to people who have lower income. Once the stock market was all about spending lots of time with analysis as all the details were available only in paper and transaction done in person. But after the arrival of the internet, all the activities (Buying and selling shares, analysis) are done with the mouse clicks.

Internet has brought lots of changes within the stock market. Let us see some of the changes and advantages brought by the online stock trading.

1. Brokers: Initially the brokers were one of the most expensive aspect of stock trading. As the stock brokers were completely involved in trading, investors actually had less idea about the stocks and they simply followed what the stock brokers advised. Stock brokers also charged high brokerage due to their command in the stock market. But the scenario has changed with the internet. With more access to the stock market, investors are more involved in the stock market ever before. Even though stock brokers are still an essential part of the market. Stock broking also got expanded with different kinds of brokers as explained in previous article.

2. Electronic stock data: Before the arrival of the internet, all the stock prices were published in the newspaper next day. which means you have to wait almost a day to know the latest share prices. Or you were supposed to call the stock broker to know the latest. But now almost all the investors have access to streaming share price datas and with mobile phone it has got even more easier.

3. share Analysis tools: As i previously said, investors were totally relying on stock brokers for recent developments on share prices. But now with advanced tools like charts, electronic RNS, trading software etc. things have just become easy. Investors can now make their own decision in buying and selling shares. With the advanced charts, you can analyze the past movements of the stocks and with advanced trading softwares, you dont have to be sitting before the computer as the computer would do the job for you.

But with the developments always comes the risk. Here are some of the risks in online stock trading.

1. Data theft: With all the transaction done online, the chances of your money getting to someone’s hand is more likely. As the online transactions are controlled by passwords, its easy for the people who have good knowledge about the systems to take it away without your concern. You might even come across some strange brokerage fee (ie) phone brokerage is more expensive compared to online brokerage. Data theft is one of the reason behind this expensive brokerage.

2. Loosing track: With online softwares, maintaining stock portfolios is easier. So people tend to track lots of stock at the same time instead of tracking one or two. so investors normally loose track of the share prices or recent developments which might be crucial to make profit or prevent loss. So investors should learn to the keep the balance.

3. Stock trading softwares: As the usage of the software is getting more and more everyday, investors might get too dependent on the softwares as the softwares always has the tendencies to commit mistakes which might end up crucial for your investment. So investors must keep in touch with datas from all the corners instead of just one.

Automatic Trading : Should it be trusted?

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

Although the Forex is experiencing a time of glory and becoming more and more popular with individual traders, we see an increasing number of tools and software including, more recently, automatic trading software.

But how reliable is the latter? Is this type of software efficient and can it be used by everyone?

The advantages of automatic trading

The merits of automatic trading are vaunted unceasingly by the distributors, promising you gains in time, security and money, but in reality is a machine truly capable of achieving satisfactory results by trading instead of you?

It is true that the main advantage of such a tool is that you can gain time by letting the software do your trading work while you are busy with your daily tasks. After all, a machine does not need to sleep, or eat, unlike you. This software was created in response to demand by individuals, more and more of whom are investing online.

Also, the automatic trading software was developed to be capable of making more calculations than a human can do. It takes into account numerous technical factors and can, in just a few seconds, complete a precise analysis of the market without making a single error.

The software can therefore appear to be quite appealing but you will need to know how to choose the software and up to which point you trust it with your capital.

The shortcomings of automatic trading software

One important thing to know is that automatic trading software will not do all the work in your place. You will have to spend some time setting up the rules according to your strategy in order that the machine can implement them during operation. Certain software that is more complex is aimed for traders with a solid knowledge of computers and therefore not recommended for beginners. There are certain software programmes however that have been adapted for beginners with, for example, an intuitive interface but still require a certain technical knowledge of the market in order to choose the indicators to follow and decide on a firm strategy.

It is important to remember that certain, more psychological, elements of the Forex market will never be taken into account by the software. It was created to react in a logical manner to mathematical information and in that resides its main drawback. The Forex is above all a human orientated market and the trends that can be observed often result from the psychological effects of announcements. We cannot therefore expect a machine to understand or display intuition or free will. This software can therefore be used as a complement to your human skills but not to trade entirely in your place.

Our advice when using automatic trading

To really profit from automatic trading you must follow a few simple rules of which the following are the most important:

  • Learn to master on your own the technical aspects of the market.
  • Take the time to prepare a precise strategy.
  • Take into account the psychological effects to refine your analysis and manually adapt your configuration as necessary.
  • Choose a solution that is both simple yet efficient and that really saves you time.

In conclusion, the majority of Forex experts will recommend that you opt for a semi-automatic trading by using orders, for example, instead of completely relying on automatic trading software. In this way, you can still benefit from the advantages of automatic analysis as well as taking into account other, more implied factors.

Penny stocks for dummies

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

Penny Stock Options For Newbies

A fantastic method to investing is in penny stocks. Whilst they are quite volatile and high-risk, they can generate an incredible financial gain if you do it properly.

It’s not so easy to just get started buying and selling penny stocks and options with no background in the subject. You need to fully understand the best place to look, what to avoid and the trade secrets for making the most of your profits.

Practical experience in penny stock trading is the best strategy to have an understanding of them. Nevertheless, in the beginning, without experience you must do the very best they can; whilst you might not have experience you can at least acquire knowledge before you start.

Many different techniques exist to help you get the basics including articles or blog posts, tutorials and even a penny stocks for dummies book. Using one or a combination of these methods will help you gain the knowledge that will hopefully lead you to be successful at comprehending the nuances of penny stock trading.

The more information you can find from various sources the better armed you’ll be to go out and trade in penny stocks and options with a fair amount of self-confidence and a good success rate. Those folks who have the essential knowledge along with experience can help make it crystal clear in order to optimize your experience.

The way to avoid being ripped off is probably the most essential things to be discovered from a penny stocks for dummies course. Whether intentional or not, penny stocks and options can be talked up or even discredited at any time, causing their share price to explode – or drop. Those attempting fraud will frequently take advantage of this weakness. One notable example from 2011 is rapper 50 Cent’s use of Twitter to cause the price of a penny stock (HNHI) to increase dramatically. 50 Cent had previously invested in 30 million shares of the company, and as a result made $8.7 million in profit. It was only after critical feedback that he subsequently informed his followers that he owned shares in the company he was promoting.

Steering clear of schemes that appear too good is the most obvious advice people, and your gut, will tell you. If somebody guarantees that a stock will blast over the top within the next few days, it is usually appealing to buy shares and make it big. You have lost out if the stock is unsellable later on or the company folds.

Just take guidelines from dependable sources. Having faith in counsel of respected investors and ensuring you understand all about a business prior to buying is advisable. Make sure it looks good to you personally before you decide to take anyone’s advice.

Paper trading is the last strategy you can try. This type of trading gives you plenty of experience minus the risk. You pretend to purchase penny stock shares with an imaginary amount of money and then decide when to sell after monitoring for a little while. You’ll be able to very easily track your losses and gains in this manner without actually losing anything. Whenever you are ready for trading you will have learned the correct method to trade.

In order to make the very best investment possible you have to be cautious. By gaining all the expertise and experience you can without really trading you will be ready to go ahead with some volume of know-how, even just starting out.

The Spread Betting Strategy

Eduardo Montero

Author: Eduardo Montero

Last Updated on March 30, 2022

Inspired by Paris sporting methods, spread betting has become a true investment strategy for Forex traders. We therefore propose to look closely at this strategy that is easy to implement and has already proved its worth, notably in the United Kingdom where it has been used for several years.

Here therefore we will explain its operation in detail together with its advantages and disadvantages.

The operation of the spread betting strategy:

As indicated by its name, the spread betting strategy operates as a simple speculation on a financial asset such as a currency pair, or, why not, with CFDs, on shares or even commodities.

Spread betting has exactly the same function as classic Forex trading, the only difference being that here you speculate a precise amount per point won or lost. For example, if you believe that the EUR/USD currency pair will rise you may decide to speculate one Euro on each point on the rise. In the case whereby the EUR/USD pair falls, you will also lose one Euro per point lost.

As with classic trading, you may of course place ‘stop loss’ and ‘take profit’ orders to master the risks and objectives of your trades. There again, the broker will be paid from the spread with no hidden costs.

The advantages of the spread betting strategy:

There are numerous advantages to using the spread betting method for your investments on the Forex. Here are the major ones:

  • You have a great range of assets available to you as spread betting can be used on all the assets generally offered by the brokers.
  • This strategy is economically viable as, apart from the classic spreads, you should not have to pay any supplementary fees.
  • You can benefit from a high or low leverage effect to increase your potential profits.
  • You have the opportunity to speculate on the rise or on the fall of an asset and therefore make profits whatever the direction of the trend.
  • Finally, you know in advance how much you can make or lose as you yourself decide the amount you wish to allocate to each point won or lost.

The disadvantages of the spread betting strategy:

Of course, spread betting does not offer only advantages. Among the disadvantages of this method are the following:

  • Profits from spread betting can be substantial but this also incurs risks relating to losses, which is why it is important to use stop orders.
  • In accordance with the current regulations of certain countries, the profits made using spread betting may be considered as profits from financial products which are therefore subject to taxation.