Analyzing the Stock Market

In today's world, it seems that almost any topic is open for debate. While I was gathering facts for this article, I was quite surprised to find some of the issues I thought were settled are actually still being openly discussed.

The best method to foresee stock trends is through technical analysis. It is common practice in the stock market and allows investors and traders to predict stock fluctuations by studying charts and various indicators. Technical analysis is completely independent of any type of research on the company’s intrinsic value or the field and type of business they are in. Technical analysis only looks at past price and volume movements of the company’s stock.Investors who use technical analysis are usually short-term traders who only hold their position for short amounts of time until their desired price target is reached. It is not recommended to use technical analysis for long positions because it does not account for the work the business does. This typically means it doesn’t look at factors like company’s growth projections or future goals.

The whole foundation of technical analysis is supported under the idea that share prices move in patterns determined by how the market sells and buys stock as a whole. It takes the entire market as a collective person that has a resounding trading pattern. This is primarily based on market psychology and past market behavior. This also accounts for historical events like natural disasters or economic crises and how the company’s stock movements have reacted accordingly to each of these events. This study of the market is vital for any successful technical trader. The key to good trading for technical analysts is to know the best times to enter the market and how long to hold their position so to make a profit.

When a trader understands these patterns they can generally predict how share prices will turn and use this knowledge to their favor. This will tell them what items to add or remove from their portfolio. Generally if traders are wrong about their predictions they should keep fail-safes and have a viable exit strategy. This is primarily what stop losses are. Traders will have a minimum price of where a stock can reach before they exit to cut their losses.

The best time to learn about Stock Market is before you're in the thick of things. Wise readers will keep reading to earn some valuable Stock Market experience while it's still free.

There are many indicators when it comes to studying charts. The main and most common indicators are based on ‘Support’ and ‘Resistance’. Most stock prices fluctuate up and down, so when a stock is moving down is does not technically indicate that it is on a down trend and vice-versa if it is moving up. Stocks generally move in wave patterns and remain between their support and resistance. If a stock breaks either then it is said to have a new support/resistance and this price can be predicted. These are times when a lot of traders will have to choose to hold their positions or leave.

Charts

Technical analysis is strongly dependent on studying charts to track stock movements. Bar Charts are commonly used for beginner traders. A bar chart will generally consist of bars which show the opening and closing price and whether the price has fallen or risen.

Another, more useful chart is the candlestick chart. This is a Japanese form of technical analysis that has growing popularity in the west. It is said to be more accurate in predicting price movements compared to bar charts. Each candlestick shows the stocks opening and closing prices in the ‘candle’ and also shows the highs and lows of the day in the ‘flint’. Red or black candles indicate that the stock closed lower then it opened and white or green ‘candles’ indicate the opposite. Each of these candlesticks is an indicator of future movements. A small red bodied candle with small flints is a sign of a downward trend. A green bodied stock with short flint however indicates an upward movement is coming. There are many other candlestick indicators like shooting-stars and hang-mans that predict different movements.

Now you can be a confident expert on Stock Market. OK, maybe not an expert. But you should have something to bring to the table next time you join a discussion on Stock Market.

Stock Market Trading - Option Trading

When most people think of stock market trading, what comes to mind is usually basic information that's not particularly interesting or beneficial. But there's a lot more to stock market trading than just the basics.

Options trading is one of the best and most overlooked ways a trader can make use of a smaller investment to make larger profits. In stock market trading, using options as part of their portfolio, a trader can make money from the movement in company stock prices without actually buying stock. The trader’s portfolio will then have a much higher potential for profit.

As with any trading on the open market, option trading involves needing to research the financial prospects of a company as well as an analysis of what the future movement of the share price of a company will be for the purpose of buying the proper options. There are options available for the investor who believes the price of a stock will rise as well as for those investors who believe that the price of a company’s stock will fall, meaning that you can take advantage of any market movement.

Analysis tools used in general stock market trading can usually be used in options trading as well. However, it’s always difficult to precisely predict the ins and outs of a specific company’s share price, so developing your options strategy and trading plan can be tough. Sometimes the market analyzers and technical tools can be way off base. Though they are generally reliable, this does happen.

You can see that there's practical value in learning more about stock market trading. Can you think of ways to apply what's been covered so far?

Technical analysis, for many traders in the options market, is a great way to observe the short term and long term movements of a company’s share price for the purpose of developing option strategies for trading the issues. The stock pricing charts of a company can be combined with a number of trend lines and other indicators in the analysis for the purpose of assembling a chart of possibilities for the future price of a company in stock market trading.

Some such indicators are highly trusted in the market and available from many data sources. Such well-known indicators range all the way from moving averages, which mark average prices of stocks over prior periods of days, to the lesser known yet still reliable indicators such as the macd indicator, which will measure a pair of moving averages–one short-term and one long-term–and will figure a convergence point to signal the best times to buy or sell options.

Other types of analysis and information are available on the market to help you decide on the best path for your stock market trading endeavors, especially if you plan on dabbling in options. Technical indicators, when used properly and as a supplement with other information, can be a great way to make determinations about which companies may be the best to purchase shares or options in for the future.

Now you can be a confident expert on stock market trading. OK, maybe not an expert. But you should have something to bring to the table next time you join a discussion on stock market trading.