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Everything posted by EXPERTMARS

  1. Hi , Trading is extremely competitive .You have to devote a lot of time to learning and practice . Further you can also lose some money until you get your strategies and money management right . Trading on demo is vastly different from trading live . You have to trade live in order to get things right , to learn not to get carried away by your instincts ,emotions . Learning to trade according to plan is the most difficult part , markets are dynamics ,your plans do go haywire often. I think becoming a successful and consistent trader is one of the most difficult tasks in the world . It is said that you have to devote 10,000 hours to trading and practice and learning before you can become a successful trader . Many do not have that kind of patience. Ninad.
  2. Hi , Most probably the S &P 500 will be range bound in January . Thr best options strategy would be to create a Strangle position on SPY by selling out of the money calls and puts . Thanks, Ninad.
  3. While trading stocks traders often have a problem as to which stocks to choose in an index or sector to trade. It often happens to traders that one sector of the market is moving up but within that sector a trader may get into wrong stocks which underperform the sector. So it is very important to get into the right stocks within the index or sector in order to outperform the market. Relative strength analysis is an important tool which helps traders and investors to get into the stocks which most probably will perform the best within a sector or index. If a trader is bullish on the Transportation Index, then relative strength analysis helps a trader in choosing the right stocks within the Transportaion Index. Relative strength is defined as the measuring of one market against another over a specific period of time. Relative strength is an important concept in any bull or bear market. After all, if you've found the bull markets why not find the leaders? If an index is in a bear market you can pick stocks which are showing strength even when the overall market is declining. Not to be confused with the Relative Strength Indicator (RSI), relative strength analysis is simply dividing one market element by another. If this number is increasing, the one you divided it into is stronger; if this number is decreasing, the one you divided by is stronger. You can use this to compare a market sector to the economy in general, or you can pick a company and compare it to the sector’s performance. The attached charts show the comparison between the Dow Jones Industrial Average and Intel. We can easily see through this comparison that while the Dow has risen by almost 10% over the last one year, Intel stock has underperformed the index and has actually dropped 12% during the same period. Thus we can say the Intel stock is underperforming the Dow. An investor who is bullish on the Dow obviously will avoid Intel and will look at other Dow components. Let’s take a look at the next chart. The attached chart shows relative strength comparison between the Dow Jones Industrial Average and JP Morgan. While the Dow is up around 10% during the past year, JP Morgan has surged over 36%. An investor who is bullish on the Dow would have JPM in his portfolio and he would have been able to outperform the market . Relative Strength Analysis also helps investors in identifying the best performing sectors within the overall market. The final chart compares the Dow Jones Industrial Average with the Dow Jones Biotechnology index in Blue, Dow Jones Utilities index in Purple, Dow Jones Oil and Gas Index in Green and the Dow Jones Home Construction Index in White. The chart tell us at one glance that during the past one year the Dow Jones Construction Index has hugely outperformed the overall market , while the Dow is up 10% , the Dow Jones Construction Index is up over 96% during the same period , the Dow Jones Biotechnology index is the next outperformer and has jumped over 50% . The Dow Jones Utilities index has underperformed the Dow, while the Dow Jones Oil and gas index has registered a slightly lower growth compared to the Dow. How can you use this Relative Strength analysis in your trading? Depending whether you are going to trade on indices or on individual stocks, you can start at the highest level, comparing a sector index to the overall markets, as represented by the Dow Jones Industrial Average, S&P 500, Transportation Index, or whatever seems most appropriate. You can then see how the sector is performing, even applying simple tools like trend lines and moving averages to help you spot important changes in the trend. With this information, you can see which market sectors are outperforming or underperforming the overall markets. If you plan to take a long position, it would be better to be in a well performing sector. You could stop there, choosing a composite index or exchange traded fund and trading on the uptrend. The idea would be to invest in the sectors that are turning up, and to move out of the market sectors where the relative strength lines are turning down. Drilling down further, you could then compare the sector you have chosen to invest with individual stocks in that sector and you can then find the best performing stocks within that sector. By doing this, it’s easy to see which stocks have the greatest relative strength. These are exhibiting a strong uptrend, by being the strongest performers within a strongly performing sector, and therefore they are prime candidates for a trend following trading plan. Another way to use this information is to go for a cheaper stock where the relative strength index is just turning up, in anticipation that it will continue to improve. You should avoid stocks where the relative strength is going down. This procedure is called a top-down approach to the markets. You start at the very top, looking at the overall market, and you work your way down to individual stocks, so that you pick the best stocks in the best sectors. It’s a tried and tested way of being sure you are on the right side of the market. Using Relative Strength analysis, a trader an overcome his confusion about which stocks to get into. A simple Relative Strength analysis can help him to get into the right stocks at the right time.
  4. Yes the markets can be totally unpredictable. The current price is the reality. There is always a 50 -50 chance of where the price might move tomorrow or day after or week s or months from the present time.
  5. RANGE BREAKOUT STRATEGY Range breakout trading strategies are very effective in catching the short term price movements. This strategy is widely used by day traders . Range breakout trading strategy is often used by market participants to get early into a potential momentum move in stock or a security . Range breakout often leads to expansion in volatility and quick profits. I prefer to trade range breakouts in the direction of the near term trend using price action as confirmation to enter the trade. The range breakout setup consists of the following : 1) Price should be moving in a clear trend before a range or consolidation is formed . 2) A clear defined range or consolidation is then formed with no spike moves out of the range 3) A false countertrend move precedes the breakout (this is not necessary but a bonus if its there) 4) Price finally breaks out of the range in the direction of the trend . This is where you should buy . The above image clearly defines the range breakout strategy . If used wisely the range breakout strategy has a high risk/reward ratio and can be consistently profitable. https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcQ7vYuEx-cX_VDYWwHGP2Wkf4xE-lhIcU7fjdQp-eyYUN5PYLBBtQ The above image again is a classic range breakout trade . Range breakouts can be easily identified and has a high success rate .
  6. Hi , The fiscal cliff was resolved by not raising taxes , not excessively cutting spending, What his all means in short is that money printing will continue in full swing . The US debt will continue to grow . In February US will again hit the debt ceiling. There will again be the usual congress drama on whether to increase the debt ceiling. Again the discussions will go on till the last minute. Stock market will give a clear signal by starting a slide, that if debt ceiling is not raised it will crash . Finally the debt ceiling will be raised and markets will rally to all time highs . All this is not good for the dollar , dollar will slide, commodities, oil,stocks will all rise. Regards, Ninad.
  7. HI , FreeStockCharts is the best free charting software for US stocks . Premium features are available by subscription. Ninad.
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