A Shockingly Simple Momentum Indicator For Stock Trading

Trend trading is the one of the best and most profitable trading strategy used by many traders. Infact, spotting a trend at the right time and riding it till the end can make you rich. When you are trading a trend, you are intereste din knowing how fast the trend is changing or what you may call moving whether it is moving up or down. When the rate of change of a trend goes up, it means that the price action is soon going to follow suit and rise as well!

Now first what is a momentum? You must have read about the momentum in high school physics.Momentum was the velocity multiplied by the mass of the object. Velocity was the rate of change. So when we talk of momentum in trading, we are talking of the rate of change of any security prices. Now. a simple way to calculate the momentum of any security price is to divide the closing price today by the closing price ten days back and then multiply it by 100!

This gives you the momentum indicator. If the prices didn’t go anywhere momentum indicator will be 100. If the prices went up, the momentum indicator will be greater than 100 and the prices went down, the momentum indicator will be less than 100. Now, a trend is expected to continue if the momentum indicator is greater than 100.

Momentum is a leading indicator. It tells you what is likely to happen in the future not what happened in the past. Momentum trading is done with some attention to the fundamentals. When key business fundamentals like the sales or profits are accelerating at the same time the security price is going up, momentum is likely to continue.

Now, investors can also use momentum in their investing decisions. Momentum investors are looking for securities that are rising in prices especially if accompanies by acceleration in the underlying growth. The knock on momentum investing is that instead of buying low and selling high, your goal is to buy high and sell even higher.

What a momentum investor is looking for is a security that is going to move big. But this move big is going to happen on a long term horizon instead of a few days. The expectation is to make money on the longer term. The thought is that if the security is starting to go up in price, it will keep going up in prices unless something dramatic happens to change. In the meantime, you can make a lot of money.

Now just like price momentum that we have been talking about above, we can calculate the earnings momentum. Earning momentum is the province of the investors. The investor looks at the quarterly earnings of the company to see if it is going up at a faster pace say from a steady pace of 10% a year to 12% or 15% and so on. If the earnings growth rate is going up what this means is that the underlying price is also going to accelerate.

Mr. Ahmad Hassam has done Masters from Harvard University. Get this 49 page Quantum Swing Trading Report plus the shocking Profit Button Report that applies no matter what you trade- stocks, forex, futures or options FREE. Read the story of Richard Samuels, a post office mailman with a head injury and how he made a fortune with these Neutrino Forex Signals.

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Know The Yield Curve Before Trading Interest Rates

Interest rates are very important for the economy as well as the businesses. No matter what business you do, interest rate changes can have an impact on your business. No matter what you trade-stocks, forex, futures, commodities, ETFs, options, bonds or anything else, you need to keep an eye on the interest rate changes. Now, there is not one interest rate in the economy. There are many. Some are short term while others are long term. A Yield Curve helps you understand the changes in the different interest rates in the economy!

When you look at a Yield Curve these interest rates are plotted on the vertical axis with the time to maturity of these financial instruments on the horizontal axis. There can be three different shapes of a Yield Curve. The Normal Curve, The Flat Curve and the Inverted Curve. Now as said before there are two types of interest rates in the economy; short term and long term. The return offered on the Treasury Bills is the short term interest rate while the return offered on the Treasury Notes and Bonds are long term interest rates. Let’s discuss these three different shapes now. On the Normal Curve, the short term interest rates are lower than the longer term interest rates as investors need a premium to invest long term. A Normal Curve represents normal economic activity where investors get rewarded for investing long term in the form of a higher long term interest rate on these financial instruments in the shape of a premium over the short term interest rates.

Now, most of the time you will come accross the Normal Yield Curve. But sometimes, you will find the Yield Curve to be Flat. When you find the Yield Curve to be Flat, it means that all the interest rates in the economy are equal. What this indicates is that economic activity is slowing down.

An Inverted Yield Curve is a leading indicator of an economy doing down into a recession. When there is a financial crisis like that happened in the early part of 2008, you will find the Yield Curve to be Inverted. Investors are shying away from investing in long term projects in the economy. When the economy starts to go into a recession, you will suddenly find an Inverted Yield Curve. On an Inverted Yield Curve, the longer term interest rates are lower than the short term interest rates.What this mean is that the economy is slowing down and investors are reluctant to invest long term thinking it to be risky.

If you want to trade interest rates short term than Eurodollars are the best instruments that you can trade. Eurodollars are well suited for small traders because of the low margin requirements. Eurodollars also tend to be less volatile and have a highly liquid market due to the large number of market participants. However, like any other futures contracts, Eurodollars position needs to be carefully monitored. Ten Year T Notes and T Bonds can be highly volatile. You can also trade options on these interest rates futures.

Now, when you trade these interest rate futures contracts, you need to keep an eye on the market constantly. Futures trading can be risky and in a matter of few minutes you might get wiped out in the market and get a margin call from your broker. Trading interest rate futures is no different than trading anyother futures contract. If you haven’t traded futures before, a good idea would be to first paper trade these contracts for at least two months so that you get a feel of how these futures contracts gets traded and how the market behaves!

Mr. Ahmad Hassam has done Masters from Harvard University. Know this shocking Dow Futures secret that can make you rich. Read the story of Richard Samuels, a post office mailman with a head injury and how he made a fortune with these Neutrino Forex Signals

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Doji Candlestick Pattern-Something Unique And Highly Profitable!

Candlestick Charting is one of the most powerful tools in the trading arsenal of any trader. Candlestick Charts apply to any market no matter what you trade-stocks, forex, futures, options, ETFs, commodities, bonds and others. With one simple glance on the chart, you can figure out the sentiment of the buyers and sellers in the market. There are many candlestick patterns that are used as trading signals. Some are simple while others are complex. Doji Candlestick Pattern is a simple pattern that is very easy to spot. It has no body. It is formed when the opening and the closing prices are the same. So, this pattern is all wicks with no stick. It literally looks like a Cross on the chart. So you can easily spot it. But it is very rare as the security opening and closing prices are seldom equal! Doji has some variations. We will discuss these variations in this article!

So for a Doji to be truly formed on a trading day, throughtout the trading day heavy buying or selling may take place but at the end of the day, the price should be where it had been at the start. In other words, the opening and the closing prices should be the same for a Doji to be formed.

It is a signal that the battle between the bulls and the bears had been a draw during the trading day when a Doji is formed with the opening and the closing prices equal. Soon, either the bulls or the bears are going to previal. In other words, a trend reversal is about to take place.

So how is a Dragonfly Doji is formed? It is formed when the security price opens. It is traded down during the early part of the day. At some point in the trading day, the price action starts to recover and climb. It eventually closes at the high which happens to equal the open of the day. Something unique! Now, a Dragonfly Doji is a unique variation to the Doji Candlestick Pattern. It is formed when the opening, the closing and the high prices are all equal. Something quite rare and unique.

In other words, the open, the close and the high for the day are the same for the Dragonfly Doji to form. So when a Dragonfly Doji Pattern is formed, the bears had been in control of the market at the start. But at some point in the trading day, the bulls become active and step in. Bulls start buying. This takes the prices up and at the end of the day, the security price ends up right where it had started.

The low on this pattern can be taken as the support level because this was the level at which the bears entered the market and started buying. Dragonfly Doji is considered to be a bullish candlestick pattern.

When a Bearish Gravestone Doji Pattern is formed, it is a signal that a prolonged downtrend is about to start in the market. The second important variation to the Doji is the Bearish Gravestone Doji. This pattern is formed when the open and close of the day is equal to the low of the day. This is something opposite to the Dragonfly Doji where the open, the close and the high were equal.

A Doji pattern is very easy to spot on the candlestick chart as there is no body just the wick. Open close and either low or high all three are equal and the candle looks more like a cross. When you spot the Doji, get ready for a trend change in the price action.

Mr. Ahmad Hassam has done Masters from Harvard University. Learn this powerful Fibonacci Retracement Method that pulls 500+ pips per trade FREE! Get this 49 page Quantum Swing Trading Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options FREE!

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Candlestick Patterns-Bullish Necklines, the Bearish Meeting Lines and the bearish Piercing Line

Trend is your friend. But how do you know it is really your friend. Trend can only be your friend if you know that the trend is going to continue or it is about to reverse ahead. Otherwize, trend trading is going to give you a loss. Candlestick patterns can help you anticipate whether a trend is going to continue or reverse ahead. There are many candlestick patterns. Bullish Necklines is one of them. It is a two stick trend confirmation pattern that tells that the trend is expected to continue. There are two type of Neckline Patterns, the In Neck and the Out Neck. When you spot the Bullish Neckline in an uptrend, it is a signal that the trend is expected to continue for sometime.

Necklines pattern is a two stick pattern. What this means is that it takes two days on the daily chart for this pattern to form. On the first day, there will be a long bullish candle indicating that heavy buying took place during the day. On the second day or what you call the signal day, there will be a bearish candle that can be long or short with a closing price almost close to the first day.

Now,there can be two types of Neckline Patterns depending on the closing prices on the signal and the setup days. In case, if the closing price on the first day is little lower than the closing price on the signal day, it is a In Neck Pattern. And if the closing price on the signal day is almost near the closing price on the setup day, it is an On Neck Pattern.

You might be thinking that this is not much of a difference. Well, this is true but nevertheless, you should be aware of this slight difference between the In Neck and the On Neck Patterns. Both these patterns are telling the same thing that the uptrend is going to continue in the near future. So even if you are not able to differentiate between the In Neck and the On Neck, don’t worry much. You must at least be able to identify that a Neckline Pattern has been formed.

Now, let’s talk about a trend reversal candlestick pattern; The Bearish Meeting Line. On the first day or what you call the setup day, you will find a long bullish candle.What this means is that heavy buying took place throughout the day. On the second day or what you call the signal day, you will find a gap opening. This is a Bearish Meeting Line Trend Reversal Pattern. What is means is that the trend is about to reverse itself soon! This gap entices the sellers to start selling that continues throughout the day. This will result in a long bearish candle on the second or what you call the signal day. This long bearish candle should have a close very near the open of the low of the day as well as the close should be very near to the close on the first or what you call the setup day.

In case of the bearish piercing line candlestick pattern, the setup day is bullish with long bullish candle. The signal day is bearish with an opening higher than the setup days high. What this means is that on the signal day sellers came rushing in, pushing prices down through the setup days opening price and below its midpoint.

This pattern usually occurs in the last stages of an uptrend and when it happens, it means that the trend is about to reverse itself. When this Bearish Piercing Line Candlestick Pattern is formed, it means that the price action has lost it’s momentum.

Mr. Ahmad Hassam has done Masters from Harvard University. Master Candlestick Charting with this 82 page PDF FREE Candlestick Guide! Read the Story of Richard Samuels, a post office mailman with a head injury and how he made a fortune with these Neutrino Forex Signals!

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Before Short Selling-Know These Shocking Facts

Many brokerage firms make it easy to sell short. When you place the order to sell a stock, the brokerage asks you whether you are selling shares you own or selling short. In case of short selling, the brokerage firm goes about borrowing the shares for you to sell. It loans the shares to your account and executes the sell order.

In some cases, the brokerage firm cannot borrow the shares as so many people have sold the stock short that there are no more shares to borrow. In that case, you will have to find another stock or use another strategy.

Now, day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts. Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down!

Now, you cannot straight away short a stock as there are mechanisms in place employed by msot of the stock exchanges that don’t want a massive shorting attack on a stock. There is the famous Uptick Rule that has been put in place to prevent that from happening. What the Uptick Rule means is that you cannot short a stock unless it moves up on the last trade. This rule has been placed to prevent a stock from being driven down to almost zero by short sellers. In simple words, once the stock starts to move down, you cannot short it. You will have to wait for its price to move up on the last trade, before your short selling order can be executed by the broker.

If you are wrong in your short selling decision, your loss can be catastrophic.How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

Know something known as Short Squeeze. Once that happens, almost all short sellers get desperate to dump their stocks and exit but when they try to buy back the stock, they get more hurt as the prices go even higher and higher on rising demand for the stock in the market. Now, don’t get caught in the market with short selling when good news spreads about the stock that you had shorted driving its price up.

As said before, companies, investors and many brokers hate short sellers. They think that short sellers had intentionally driven down the stock prices. So sometimes, they will spread rumors of good news to create a momentary short squeeze. Sometimes, a campaign will be started by the owners of a particular stock instructing their brokers not to loan out their stocks to short sellers. So if you have already shorted that stock, you might get a call from your broker to return that stock immediately. In such a case, you will have to immediately return the stock even if it doesn’t make any sense to you!

Mr. Ahmad Hassam has done Masters from Harvard University. Get your FREE COPIES of the HVMM Ultimate Day Trading System and the Universal Risk & Money Management Tool just now!Read this 49 page Quantum Swing Trading FREE Report plus the shocking Profit Button Report that applies no matter what you trade-stocks,forex, futures or options!

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