Anyone who watches the stock market has seen (almost on a daily basis) stocks that rise a significant and enticing amount. You can’t help but wonder “How can I get in on this? - I would be set for the month” (or week depending on what you expect from trading). Before I continue I must explain that this concept is day trading in its purest and riskiest form. However, it is terribly tempting to contemplate, so lets explore the numbers to see if we can find some answers to this question.
To start we need a more specific question - lets entertain the example question: If a stock goes up say 3% one day and then 5% the next, what does it do the third day? (This question was not chosen at random, various attempts at this calculation have shown that these values over a 2-day range provide the most, and therefore steadiest, data. I also think it is the most intuitively reasonable question for exploring this type of data).
The answer is: 87% (972 out of 1117) of occurrences had an average gain of 7.5% and a median of 9.5%
(6 months of data up to Feb. 22, 2008, 4493 stocks reviewed, next day value on high not close).
A great answer! But don’t start thinking you have found the holy grail of stock trading - it is fairly misleading - I’ll tell you why:
First: This study is flawed in the way it is performed as it only includes stocks that increased GREATER THAN 3 and 5% (not equal to or about), so it doesn’t differentiate between stocks gaining, for example, 4 and 6% and those with 11 and 9%. Also, it does not include a statement that the stock does not gain on the day before (the 3%) to eliminate stocks that have been rising for over 3 days in a row and removing redundant data.
Second and more importantly: This data cannot be taken at face value because it does not take into account 2 major factors which are necessary if we actually want to achieve these gains.
- If the stock in question move with enough volume, at a high enough value, so a trader can get in and out at these prices.
- If the trading occurred after hours or was the high so brief that a trade could not actually be performed.
To eliminate some of these factors I can refine my study by including some limiting factors:
- Close to open values are the same on the day in question (eliminates after hours trading)
- The stock did not gain > 3% on the day before (eliminates stocks increasing for more than 3 days)
- Average trading Volume > 50,000
- Average value > $1.00
The (better) answer becomes: 65% (134 out of 206) of occurrences had an average gain of 5.9% and a median of 4.4%.This provides slightly less exciting results, and it does not eliminate all the factors that may make this type of trade hard to accomplish (also the sample set has greatly decreased), but the results are still encouraging.
(My) Conclusion:
Don’t attempt this type of trade unless you are willing to risk everything for a potential 5% gain!
However, these numbers show that profit by this method is obtainable and the overall odds are in the traders favor. This short study is in no way a scientific or reliable study of this type of behavior. Results would likely vary if it was repeated a month or so from now. However, it does show a small sample of what the market is doing currently, and that this type of trading may just have some merit.
If you decide to take action on this data, I would advise you do your homework and practice, it is not for the faint of heart. One further word of caution (although I could give many): the prudent investor must know when to get out; these types of gains usually don’t last for long.
Alan L. Goosedange
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The industrials sector of the stock market is where I am most involved nowadays. While the big names like General Electric (NYSE: GE) and Caterpillar (NYSE: CAT) may not jump out at you as big gainers, plenty of these rock-solid companies have been hit unfairly, and I see value. As an added bonus, industrials companies often act as a hedge to thriving markets like agriculture. We’ve got some killer stock picks for this week, lets see what we can dig up.
Industrial Machinery - Harsco (NYSE: HSC)I may be a sucker for fallen stocks, but Harsco’s drop off their highs was especially unwarranted. You want proof? How about beating fourth-quarter earnings estimates of $0.70 with $0.74 and increasing 2008 guidance. How about topping revenue expectations by $75 million. Harsco manufactures in mill services and gas technologies.. they are the top dogs in a boring market, and I’m loving it. A whopping 70% of their sales are international, and even in a slowing world economy, an unusually high rate of recurring service revenues gives me confidence in Harsco’s ability to maintain earnings momentum. Don’t be concerned with rising costs and problems in home construction, Harsco’s end markets such as global steel production and non-residential construction are expected to remain firm in 2008.
Despite slight challenges in Mill Services in the most recent quarter, Harsco outperformed with strong gains in Rail & Mineral Technologies. I see nothing but upside in growth for 2008, and with a key acquisition possibility, Harsco could completely out-do themselves. Access Services has a nice hedge against a possible falling non-residential construction since about 25% of their industrial maintenance business is recurring. Very protected from a slow-down, and undervalued at $55 versus a target of $75… I put a purchase price at under $54 for Harsco. Conglomerates - 3M (NYSE: MMM)3M is big-time diversified, offering everything from scotch tape to respirator devices. After raising 2008 guidance, multiple firms have issued BUY upgrades from HOLD in January. Investment research firm Stern Agee believes that 10% EPS growth in 2008 appears done deal under virtually any scenario.” This kind up build-in security net from a further economic downturn is just what we want. 3M right now is the kind of excellent company that investors are a bit antsy about buying back into after a fall-off from previous highs of $95 to $75. I affirm that there is no problem here; get in now before the big movers start to buy the shares back up.
We love international growth in a bloated US market, and 3M has 65% growth overseas… 30% of that in high-growth emerging markets. They are the “no magic required” investment we want in 08′. None of their business segments should have ANY problem creating the level of growth built into current valuations, and Reuters has downside estimated at 5% compared to a 15%-17% upside. There certainly aren’t any bells and whistles about 3M, but their global footprint in emerging markets positions them well to benefit from steady business ventures with relatively low risk. With a target price at $95, and an appropriate purchase price at $77-$79, I feel that this conglomerate juggernaut is a winner.
Industrial Engineering - Jacobs Engineering Group (NYSE: JEC)In their most recent earnings release (January 21, 2008), management at Jacobs Engineering Group hinted toward strength in key end markets, such as energy, which leads me to believe they will be at least matching their 15% year-over-year growth initiative. Also in this call, they beat earnings estimates by a few cents and increased 2008 guidance, citing a favorable pricing environment among other factors. This positive outlook “includes variance in the U.S. Economy.” But what I like most about Jacobs is their visibility. Operating margins fared better than expected in a challenging environment, and backlogs increased to nearly $15 billion, yes billion. Granted, this stellar growth may be more of a challenge for the year, but I feel that they can at least produce strong gains in the second quarter. If guidance remains positive at this point, the sky is the limit.
JEC is undervalued in my opinion, and their continued performance hasn’t missed a beat. When the market turns, Jacobs should be ready to ride the bull. On top of a strong free cash flow position, they have virtually no debt. They operate in four sectors: oil & gas, chemicals, national government and infrastructure, each with plenty of potential. Energy seems to be their most anticipated gainer in 2008, suggesting that clients offer a “commitment to spending” amid low volatility incurred by oil prices. Add this in with a steady pipeline of products, and we see oil & gas well leveraged in the market. I target Jacobs at a one-year $96 tag, and feel an appropriate purchase price should be from $70-$73.
Ag. Machinery and Construction - Manitowoc (NYSE: MTW)I have been a fan of Manitowoc cranes for the past few quarters, now we finally have the market underpricing this company like we want. Manitowoc competes with Terex (NYSE: TEX), an excellent company by all marks with high growth potential. However, I feel that most analysts miss on the fact that Terex’s cranes are low quality… workers want Manitowoc! They have already capitalized on international demand, and smashed earnings estimates of 68 cents with 74 cents. Earnings reports also yielded that continuing operations performance rose 119% year-over-year and sales of cranes jumped 56%. Manitowoc’s management confirmed that despite worries about the housing construction market, MTW’s operations were indeed minimally exposed to the pain.
There is no reason for this trend to slow in 2008, and trading under $40 is just not fair. We all know that the agriculture market has been surging as of late. Manitowoc has a hand in producing related equipment, and is also a major player in the emerging Asian markets… where non-residential construction is constant. Management believes they can maintain strong growth by focusing on new product introductions, market share increases (achieved by cross-selling through its expanded distribution network), and improved penetration in Asia. Prior to the sell-off in late-2007/early-2008, the crane industry was seen as “in the middle of a multi-year up-cycle” in demand and production. I expect this trend to continue now that shares of Manitowoc have unprecedentedly been crushed off their highs. I can see them hitting $54 a share, with an appropriate purchase price just under $39 for optimal value.
There are plenty of places to look for growth in 2008 out of the industrials sector. While I did not find any defense & aerospace companies particularly appetizing, I am bullish on the industry and would suggest looks at United Technologies (NYSE: UTX), Northrop Grumman (NYSE: NOC) and Lockheed Martin (NYSE: LMT). Agriculture giants like Deere & Co. (NYSE: DE) may make viable investments as well, but you must be wary of the premium you often need to shell out for shares of stock. Please feel free to email me any stock questions you may have. -The Net Fool
http://www.thenetfool.com - Turn Time Into Cash - I’m Bullish on the Net!
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Learning how stock trading works is an important part of online investment. Even if you don’t plan to pursue stock trading as s full-time career, knowing when to pick stellar stock options is primarily based on knowing the ins and outs of online stock trading.
For beginners like you, it is essential to have a working background on online stock trading, or, instead of learning how to pick stellar stock, you might be the one being taken for a ride. The best way to learn all about online stock trading rests in your choosing a reliable and reputable online trading firm.
When picking an online stock trading firm, you may start by surfing one that offers free account registration, with a beginner level. Many stock firms would say that you don’t need to learn the ropes to pick stellar stock on the floor; all you need to do is sign up and type in your credit card information and they’ll do the rest — beware of such statements.
It is essential for you to learn how online stock trading works, so that you’ll know where your money is going and if it’s working for you, and not for the online trading firm. Be clear about what you want, and go for it. Don’t rely on sites and traders who state all you have to do is sign up and they’ll do all the rest. Fraud works by making you feel like you don’t have to worry about anything else, at all. An online site with beginner levels is one way of knowing that that site cares about its investors, and not just the profit.
Another key feature of a reliable online stock trading firm is its ability to give you access to real-time and delayed stock quote news, updates, tips, picks and stock analysis that will help you pick stellar stock options. Many online stock trading sites offer beginners with information that would help them learn how to manage their investments, and how to pick stellar stock using stock reports, day trading stock tip updates and information. This is essential, because the key to making great buy offers is information.
Many online brokerage sites offer real-time day trading stock tip and stock quotes to keep you informed of the shifts and movements on the floor. Some may even offer after hours stock tip and updates for your mutual fund options and stock investments. Just to be on the safe side, try searching for sites that offer the best ways for you to get firsthand information from the market. These sites offer day trading stock tip developments, stock quote data, and other stock trading information. Getting real-time stock information is essential especially for day trading and direct stock investments.
On the other hand, delayed stock quotes are often used for after hours trading on mutual fund stock options, as well as stock analysis and market projections. You can also use these information in developing your own stock trading strategy, while earning the experience to make the best day trading stock tip.
As a beginner, you may be handling relatively solid stock options just so you can get a feel of buying and selling stocks. Soak in as much information and experience you can. After some time, you’ll be able to move on to bigger and more volatile stocks, and your learning experience will make the difference between being able to pick stellar stock and mediocre ones.
Learn how you can pick stellar stock online. Find a stock market investing guide to help you get started with stock investing.
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February 13th, 2008 by admin
You know that to succeed in the world of stock trading, you need to know when the price will go up or down, right? You know that you can’t just jump in here or there and expect to be profitable. This you know. But most likely you are searching for that perfect trade setup. You want that fool proof method of selecting trades.
Well, I’m here to tell you… that you have not found it yet.
And you never will.
There is a much better way to approach trading. Build a toolbox. No, not a physical toolbox, but a collection of winning trading methods. No one method is always applicable. You can’t always just find on trade set up. You need more than one. The flag pattern is a good pattern. Used properly it will make you money.
It’s easy to recognize. You’ll see it like this. The market has just made a run up. Then there is a small period where the market comes back down a little. The daily bars are smaller. And they are collectively form a squarish shape. This looks like a flag on the “pole” of the recent run up in price.
You trade it by simply placing a limit order above the flag. When the price breaks the flag, then you are ready to make money. The trend has resumed. Ride it on up. Place your stop at the base of the “flag”. Put it just underneath the flag formation.
That’s one of the great things of this. You can put a really tight stop in place, with a large profit potential.
Do you want to learn more about how I do it? I have just recorded a 25 minute CD called “How To Pick Winning Stocks - The Secret Formula”
Request your free copy here: Click here for your free CD.
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February 13th, 2008 by admin
How do you know when a market has stopped falling and is ready to turn around and go back up? How do you tell when the market has bottomed? There are several techniques, and I will share them with you now.
1) You need to look at price and volume. The simplest way to tell that the market has bottomed is simply by looking at bars that get huge amounts of volume.
If the market has traded down very far but close up higher than the close and there is heavy volume that is a very strong clue that the market may have put in a bottom.
2) Has the market gotten choppy, like its hit an invisible glass floor? If so look back in the chart’s history. Has there been any other support or resistance in that area?
If so, then most likely is resting on that again. Wait for the price to break up, and there is your confirmation that the bottom has been put in. In fact what I just mentioned is the most important thing. If the market has put in a bottom, the best way to tell is to let the price tell you that by going up and staying up.
There is nothing worse than trying to catch a falling knife. You will cut yourself. The same is true of the market. You don’t need to pinpoint the exact bottom. You just need to find the place where it has turned around. You know for sure that it has turned, when it has turned. (Kinda obvious, huh?)
Do you want to learn more about how I do it? I have just recorded a 25 minute CD called “How To Pick Winning Stocks - The Secret Formula”
Request your free copy here: Click here for your free CD.
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February 13th, 2008 by admin
Let me introduce you to the idea of Wall Street paying you money. To get the stock market to pay you money you need to get to know the world of options trading. In the world of options trading, if you trade more than one option at the same time (buying one and selling the other) that is called a spread. If the spread costs you money, it’s a debit spread.
However, if it puts money in your account, it’s a credit spread. A credit spread is usually theta positive. That means that it makes money from the passage of time.
The passing of time is a sure thing. (Note: that does not make your trade a sure thing, but it does stack the odds in your favor).
ere’s the basics of a credit spread. You sell an option that is more expensive, and you buy a cheaper one.
Here is an example.
If ABC stock is trading at 100, and you sell a call option with a strike of 105, and buy a call with a strike of 110, then you are in an out-of-the-money credit spread. (This is called a bear call spread).
A bear call spread or a bull put spread (the opposite thing) are the simplest credit spreads. There are more complicated ones too. You can do an iron condor, or an inverted butterfly. Speaking of that, you hear a lot about the butterfly spread, but not much about the inverted butterfly. If you want to do something interesting, study about the butterfly spread. Then realize what would happen if you flipped that around.
I think you’ll like what you discover.
Do you want to learn more about how I do it? I have just recorded a 25 minute CD called “How To Pick Winning Stocks - The Secret Formula”
Request your free copy here: Click here for your free CD.
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February 2nd, 2008 by admin
Like so many other industries, the Internet has changed the market and the way we do business. The stock market is no longer a members only field game of stock brokers playing the market.With the click of a button, the average individual now has access to the same information and facts that only stock brokers were privy to a few years ago. Gone are the days when market traders and specialists had the advantage of profiting from the ignorant public.
With today’s technology, you have the same opportunities as the professionals at your fingertips. The difference, of course, is knowledge and experience, both of which are within your grasp. High speed access to information, providing real-time quotes and instant online trading has sprung day trading into a new profession of its own. People are realizing that they too can master the concept of day trading and compete professionally in a level-playing field.
Today the only obstacle in the path of a rookie is experience and that can be obtained only through time and practice. Even though nothing can compete with the reality of experience, a good education could help prepare you. The fact is there are many possible gains from the market, but there are also just as many losses. The tips are designed to help you avoid the same mistakes that others have made when they started out. Bear in mind that these tips will not guarantee you a winning trade every time, but by following our advice, you will keep your losses to a minimum.
It begins with a basic overview of the stock market and gradually migrates toward the intermediate level of specific tips and profitable strategies for survival in the industry. Most of the informative advice, issues, and content focuses on the interests of the online day trader. A glossary of stock market terms are dedicated to its own section in the back as a reference to beginners just starting out and for basic traders who wish to graduate to the intermediate level. For further reference, a list is included for the Standard & Poor’s 100 Index and the NASDAQ 100 Stock Index.
No matter how intelligent you are, day trading is a risk. Why? Because it involves competition and emotion. That’s why so many people have historically compared it to gambling. While trading is similar to gambling, it requires much more than pure instinct and luck. Day trading requires knowledge of the industry, diligence, the ability to absorb, decipher and react to the continuous tides of information encumbered with the internal conflicts of emotional pride, fear, despair, greed, and loss. If the prospects of winning are still a challenge and appeal to you in spite of the risks, then by all means, read on. Begin the journey of your day trading experience.
Tips to turn $1000 into $1,00,000, articles on stock market trading and investing. To get detail about the stock market and finance visit 2stocktrading.com.
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January 28th, 2008 by admin
Even the average person can now just turn on their computer and with the aid of an online stock broker start buying and selling stocks. This works so well because you can basically work from anywhere in the world.
This is the easiest way to trade stocks because you don’t have to hop into your car and visit a broker in order to get information and make the trade. There are some great online companies who will offer you advice and give you articles to read to make the process of buying and selling so much easier. Discovering how to trade stocks online does require you to learn some important rules before investing heavily. The first thing you need to learn is to investigate the online company first.
There are probably many people who have given reviews of these companies online. If they have already gone through the trial and error process, you can definitely learn from their mistakes to see which ones are the most reputable. There are some great online stock trading sites that are absolutely wonderful, and there are some that are just out for your money. Do your homework and it will ensure that you won’t get burned.
Secondly you must have a trading method. Stop jumping from one method to another as you have a few losing periods. It’s a business.
The first thing you need to realize is that while you’ll save money over the traditional stock broker, there will still be some fees associated with trading stocks online. However, these fees are usually very competitive so you can find some great rates while you’re learning effective stock trading online. There are even some companies that offer a certain number of free trades per month. This can give you a great cost savings, especially if you plan on trading heavily.
These companies will often give you very detailed instructions on how to trade stocks effectively. They have a vested interest in your success because you will only keep working with them if you are finding great results. There may even be support personnel available to answer your questions at any time of the day or night.
This service can be especially helpful when you’re just starting out. Trading stocks can get quite confusing, so it helps to have people available to answer your questions along the way. You won’t have to worry about tracking down an individual broker when you trade online, which means you get help faster. The world of the stock market moves quickly, and trading online helps you to keep up with this pace.
Until you make it a stock trader the whole process is both massive and daunting. Take it easy. If this is the first day of your new career do not rush in. Study, read, ask, ponder, consider. Whilst trading stocks can be very lucrative at certain times it is by no means the “get rich quick scheme” many think it is. It’s a tough business where only the strong will survive.
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January 24th, 2008 by admin
Despite the widespread agreement, some participants in the debate remained skeptical. Indeed, prescient commentators of that era ocProzac Market ocasionally expressed the fear that the interrelationships of stockprice changes are so complex that standard tools like these cannot reveal them. That fear led to efforts to dispute the model by designing trading rules that could achieve above-normal returns by uncovering and exploiting these greater complexities.
Among the most primitive though most illustrative trading rules was Sidney Alexander’s “filter technique.” This is a strategy designed to discern and exploit assumed trends in stockprices that, in Alexander’s piquant phrase, may be “masked by the jiggling of the market.”
For instance, a “5% filter rule” for a stockwould say to buy it when the price goes up 5% (and watch it rise to a higher peak); then sell it when the price goes down 5% from that peak(and watch it fall to a lower trough); then short the stock(i.e., borrow it and sell it at the prevailing price, promising to repay with the same stock, to be purchased for the price prevailing at the time of repayment); then, when the price rises 5% from that trough, cover the short position. If this works, you get a gain on the initial sale plus a gain on the short position. More important, if it works, prices are following a peak-trough pattern. That means they are not random and the random walkmodel is contradicted.
Alexander’s initial results indicated that such a technique could produce above-normal returns. Subsequent refinements of Alexander’s workby himself and others, including Fama, however, demonstrated that relaxing or changing certain assumptions eliminated the abnormal returns, particularly the original filter technique’s failure to note that dividends are a cost rather than a benefit when stocks are sold short.
Alexander’s filter technique epitomizes the chartist or technical approach to stockanalysis and trading, under which a study of past prices (or other data) is used as a basis for predicting future prices. Indeed, Alexander’s filter technique is a conceptual cousin of limit orders and similar techniques prevalent in securities trading today. These techniques include conventional technical methods that rely on anomaly effects (the insider, month, weekend, and analyst effects) as well as the more unconventional methods (the hemline indicator, the Super Bowl indicator, and so on).
These and related philosophies such as “momentum investing” and “sector rotation” remain staples of Wall Street futurology. They are widely and increasingly used by traders and recommended by investment advisers and brokers. They are nonsense, as many students of the random walkmodel (and EMT) recognize based on the foregoing analysis.
They are nonsense not because of EMT but because they fly in the face of business analysis. “We shall dismiss these with the observation that their workdoes not concern ‘investors’, the trouble with all these tests of the random walk is that they are linear. They do not investigate the presence of nonlinear price dependence, something that in the early 1960s researchers simply lacked the computer horsepower to do.
The trading rule test, for example, is linear in that it operates in chronological time (or real time). Neither it nor the other old tests consider the possibility that market time may be better understood from a perspective that is nonlinear. Einstein demonstrated that time is not absolute but works in dozens of different ways depending on the context, including forward (or linear), backward, circular, slow, and erratic (nonlinear), and can even stand still.
Tips to turn $1000 into $1,00,000, articles on stock market trading and investing. To get detail about the stock market and finance visit 2stocktrading.com.
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January 24th, 2008 by admin
Wish to invest in stocks? “Later” is a bad excuse. There is nothing called the perfect time for investment, all you need to follow is some good fundamentals that has been laid down by many experienced traders. The best thing among stock market investment states is “hear to all, do for you”. Listening to every cliché is as important as different traders face different situations and they have their own say in the practical situations. However, no one knows at what time the advice may help in producing favourable returns. Though, it should be made sure that the tips and advice do not grab the individual thought and calculations. Learn to mold the advice to your own benefit is the main criteria.
To be precise with the buying and selling of stocks, buy on bad news and sell on good news is the rule that works most of the time. Wall Street news rules the movement of stocks. They are frequently changing and so make the share prices more fluctuating. But, flicking around depending on such news is not the key for trading in stocks. Make sure that you do not miss on the huge news hitting the stock market. Also, the mergers and introduction of IPO’s and other investment opportunities generally get a price hike in shares. Hence, the shares must be purchased seeking any news of that sort.
For long term investment, stop clinging on to other forecasts and expected market moods. Try and rely on your own analysis and research work that will not only pay you in long run but also, tends to reduce the chances of misses on the stock market. However, knowing your limits is essential. Take the investments as much as you can handle. Excess, that cannot be handled always tend to give the losses to stock investor.
Getting to the technical terms, stock market investment fundamentals include charting, fundamental analysis of the companies to be invested in and technical analysis of stock position. The graphs, calculations and charts of the current position of the companies work in favour of the trader. Getting the inbound market position of the company gets the real picture to the frame. The annual returns and profits of the year get the real value of the share and set its worth for its holding.
While investing in stock market, make sure that you keep a safe for the savings. It is not necessary to invest the entire amount you posses including the profits make. Profits definitely are to be re-invested, but taking a share for further savings is important. It not only balances the investments but also, takes due care of the money and put it at stake. Getting the savings store booms the confidence to have positive returns and forbids losing all the money in the stock market. As such, it is similar to factors that recover the cost of investment, initial invested amount, and here being the cost.
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