Forex Trading Making Pip By Pip. Speedy Publishing
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Название: Forex Trading Making Pip By Pip
Автор: Speedy Publishing
Издательство: Ingram
Жанр: Маркетинг, PR, реклама
isbn: 9781634281706
isbn:
In addition to chart analysis, contrarian day traders will also use news and fundamental analysis to identify inflection points that symbolize a turn in the stock price. For example, if a company were to announce solid earnings and the price were to skyrocket upwards as a result of this news, a contrarian investor would wait for the momentum of the stock to wane, and then short the stock, purchase put options on the stock, or sell call options. Effectively, a contrarian investor is the theoretic opposite of a momentum trader. Identifying when the momentum on an investment will wane is the risky part of contrarian trading.
Chapter 5- Explain the Day Trading Strategy Known as Range Trading
You can only do range trading with a stock that is showing some movement or a lot of movement, going high and low almost randomly. What that shows is that there is a lot of interest in that stock. If a stock is not showing movement, that is, going up and down in price, you, really, can't do range trading with that stock. A "range" is from one target price to another or a spread, say, the range is from 6 to 15. The low range is 6 and the high range is 15. If a stock opens at 6 and jumps to 15, your range for the stock is 6 to 15.
You can do range trading when a stock shows that kind of activity since it shows an active interest in the stock. If a stock is staying flat at one price, there is no point in even trying to do range trading with it. When you have found a stock that has shown a regular pattern of trading following a range from 6 to 15, you can track that stock. If that range trading continues over a period of time, you can predict when that stock will be at a specific price since its range is from 6 to 15.
Your decision now will be based on what you hope to get by becoming a buyer in that stock. You can wait until the stock hits its lowest range price and buy in and sell when it hits its highest range price. However, while waiting, you might see that your tracked stock has hit a higher range than 15, say 20. Your stock has now broken out of its traded range. You need to figure out why that stock has jumped out of range. If your research into the tracked stock proves that the company whose stock is being sold has made some bigger profits or has discovered some new product, you can jump in and safely, hopefully, buy into the stock hoping to cash in on the new range that the stock will show in the future as the profits grow or the product gets sold to consumers.
Range trading can work, successfully, for someone who has a lot of money to invest and is looking to make a profit. Keeping a list of stocks that show a past performance of going up and down in price lets you buy in low and sell out high. Your profit is what you are looking to get by doing range trading. You can't do that with a stock that sells at 2 and keeps going up by 1 dollar each day, predictably. Your buying in at any price is your option but isn't range trading.
Buying from stocks that sell on the market much like a teeter totter is doing range trading. Your only concern is that you don't sell out when your stock doesn't go predictably lower but jumps higher and out of range, unexpectedly. However, those freak occurrences in trading are to be expected, at any rate. Your objective in range trading is getting in on the low range and selling when you see a profit that fits in with your planned strategy in trading with that stock.
Participating in range trading means spending a lot of time learning about your targeted stocks, which trade in a predictable pattern, or range from low to high, and from high to low in a range pattern in trading. You want to know if the company whose stocks are traded in that fashion is solvent. You also want to know what that company sells. If that stock is issued by a group that pays out dividends, you might have a clue as to when that stock will go lower and why it will go higher.
Many range traded stocks pay dividends. When the dividends are disbursed, the stock price drops. That encourages buyers to come into the stock as investors. Dividends are paid in a predictable fashion and the day trader should have some clue as to when a stock company is going to disburse dividends or interest, so to speak, to its investors. Usually, a day trader in range trading doesn't care about getting dividends and trades the stock hoping to make a profit by selling it at a higher range.
If he or she does care about dividends, the day trader doing range trading will hold on to his shares until he gets his dividends. He can opt to keep his shares and continue getting dividends or sell out at a higher range and get a profit. That positive scenario can always go in the opposite direction, of course, as day trading is much like playing roulette and the day trader could buy a stock at a low range and watch it go even lower.
Chapter 6- Explain the Day Trading Strategy Known as Scalping
Day traders have access to a variety of strategies; the one we will focus on in this article is known as Scalping. In the traders world scalping is in the category of "high frequency trading." A good scalp trader can make hundreds of trades daily. The following information will be invaluable for successful scalp trading.
The Theory behind Scalp Trading
Let’s first say that you'd be best served if you practiced this strategy offline before going live. Many trading platforms now allow the customer to trade offline until they feel confident to trade live. The only thing a scalp trader is trying to do is play between the bid/ask price. The pick-off is only a few cents, so scalp trades will take seconds or minutes, not much more.
Here's an example: Stock ABC has a bid price of 20 5/8, and a ask price of 20 3/4. The fraction on this is - 20.625 and 20.75, that's a .125 spread or twelve and a half cents. A scalp trader will try and buy 1000 shares at 20.68 and sell them at 20.71, making a profit of three cents, or $30.00 on the trade.
Pros: Better control, quick profits, limits risk, no positions open overnight.
Cons: More expenses (commissions, tools), requires margin account.
Tools
It's essential that you have access to stock charts and level II quotes. Since scalping involves trading in fractions, it would also be advisable to have a decimal/fraction chart available, or better yet memorize the common conversions.
Broker: You must have direct access to a broker. This means your broker must have instant execution for you to successfully scalp trade.
Stock Charts
The key to successful scalp trading is finding the right stocks to trade. Here are the three criteria for choosing the right stock:
1. You need a stock with high daily volume.
2. You need a stock that's stable - doesn't have wild price fluctuations.
3. You need a fairly tight bid/ask spread.
One stock you can model your selections by is GE (General Electric). Scalpers trade this stock all day long; it fits the three step criteria. GE is just an example; you will find many more stocks that will fit your trading needs.
Level II Quotes
This is a tool scalp traders use to look at block size and prices of trades in the system. This quote system is sort of the trades behind the prices you see on the stock ticker. You have to remember that there are people out there trying to do the same thing you are, and they also have access to the tools we're discussing here. That being said, level II quotes are useful in seeing what orders are out there and how they stack up on the bid and ask sides.
Setting-Up a Trade
There are a few strategies for scalping, but we will stick СКАЧАТЬ