Knowing A Bull and Bear Market

By Mike Swanson

The terms bull and bear markets are used to describe the general trend of either increasing or decreasing stick prices. Of course stock prices fluctuate during the course of any trading day. The bear and bull market descriptors describe a trend over a longer period. Some analysts suggest the minimum time period is two months and the general price change needs to be plus or minus twenty percent.

A Bull Market is one where the overall stock market in rising in value. The swing to a rising market occurs after it has fallen a long way and things were looking rather negative. Take a look at gold stock picks for example. When the bull market comes after such a period investors feel they can make money.

When a bear markets occurs there is a period of constant stock price decline. The decline is not in one stock but in the bulk of the market.

Probably the most well known bear market was the decline after the 1929 stock market crash. Following this 90% of share values were wiped in less than five years.

Most bear markets work with the pattern where there is a large initial decrease in values which eliminates many of the speculators from the market. Then there may be a short period when prices rise and investors think the worst is over. This is then followed by a period when there is simply a sustained decline.

But after bear market comes a bull market. In a bull market there tends to be higher levels of trading. The key to making money is to buy a stock at lower price and sell it as it rises. But no one has a crystal ball and doing so is easier said than done.

Many investors forget markets are cyclical. It is possible to make money in both bull markets and bear markets but to do so requires some understanding of what sort of market you are investing in. - 23221

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Dow Futures (Part II)

By Ahmad Hassam

As a percentage of the total number of futures contracts traded, stock-index futures are by far the largest category of futures contracts traded. That dominance clearly speaks of the major role that stock-index futures play in risk management for the entire stock market. Stock index futures like the Dow Futures are traded for speculation as well as hedging purposes.

There are many advantages of trading stock index futures like the Dow Futures or the S&P 500 Futures (SP) or the NASDAQ-100 Futures (ND). Stock index futures like the Dow futures or the much broader S&P 500 futures are a better option than trading individual stocks. Some of these advantages are gains in the futures markets are taxed at a lower rate than the stock market capital gains.

Globex is a 24 hour electronic trading system for a wide variety of futures contract. If something happens on the stock market overnight when it is closed and you want to hedge your risk, you can trade Dow Futures on Globex. Many futures brokerages offer lower commission rates as compared to stocks.

You can use many trading strategies that combine futures with options to profit from the stock index movements. In case of trading index futures, you are betting on the direction of the Dow Futures contract value, in this case DJIA and not on the individual stocks that make up the index when you trade Dow Futures or for that matter any other stock index futures.

When you are trading index futures, you are blocking out a good deal of the noise that is often associated with the daily gyrations in the prices of the individual stocks. In trading stock index futures like the Dow Futures, you focus on the value and the general trend of the 30 blue chip stocks as a group when you trade the Dow Futures. Similarly when you trade S&P 500 futures contract, you are focusing on the 500 stocks included in the S&P 500 index as a group not as individual stocks.

Stock indexes are basically moved by any information that relates to the sector represented by these indexes. Stock index futures like the Dow Futures are guaranteed to move in response to the release of periodical economic indicators. You can simply speculate with the futures contract like the Dow Futures just by using technical and fundamental analysis. You can setup positions with both futures and options as you wait for the news to hit the wire.

Stock indexes move when economic news of fundamental nature is released. For the past many years, the monthly NFP employment report which is issued the first Friday of every month at 8:30 AM EST has been an excellent mover for stock index futures like the Dow Futures.

You just need to find one or two stock index futures with which you're comfortable -the ones that enable you to implement your strategies. You don't need to trade every major index futures contract in the world to be successful. Just focus on one stock index futures contract and become its specialist or expert. You can become a successful futures trader in sometime with this approach.

The best way to trade futures contracts is to become a specialist in one type of the contract like the Dow Futures or the S&P 500 Futures or NASDAQ-100 Futures. The more you know about a particular type of a contract, the better off you are.

You can get an idea when the Dow Futures contract is likely to turn around by using technical analysis. You can use your knowledge of technical analysis to figure out how many days the Dow Futures contract tends to spend rising or falling using Bollinger Bands or Moving Averages. So by becoming a specialist in trading Dow Futures you can make a lot of profit daily from the daily movements in DJIA. This way you can become a Dow Futures swing trader. Every time profiting from a turn in the DJIA! - 23221

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Trade Dow Futures. Learn Swing Trading!

Tips For Trading Ascending Wedges Long With CFDs

By Jeff Cartridge

The ascending wedge can be traded very successfully on the long side entering the trade as the stock breaks out to the upside. This is not how you would normally trade this pattern though as the text books will tell you to trade it when it breaks down. The pattern forms when the two boundary lines that contain the price movement converge to a point. The top line slopes up, and the bottom line slopes up even steeper to meet the top line.

Ascending Wedges, Unexpected Returns

Most ascending wedges would be expected to break down but, in fact 68%, break out to the upside making this pattern tradable on the long side. And what is more 48% of these breakouts are profitable and on average the profit per trade is 0.94% over a period of 9 days. The ascending wedge is not the best chart pattern when it breaks to the upside, but applying some filters makes this pattern attractive to trade.

Improve Your Trades

A break to the upside works better in strange market conditions. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The stock and the sector should be in a down trend or a consolidation for the best results. Profitable entries tend to occur when there is a pull back in the share and sector in a market up trend.

Ascending wedges that breakout late in the pattern, produce inferior results. A breakout is better if it occurs before the pattern gets 80% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 6% when compared to the stock price as well as avoiding patterns that take more than 44 days to form.

Avoid ascending wedges where there are two consecutive closes at the same level prior to the breakout. These are often signs of an illiquid stock. The pattern works better if the low is less than or equal to the previous day prior to the breakout. Ensure that the volume is supportive of the breakout, i.e. volume as the stock rises is greater than volume as the stock falls.

Trading Ascending Wedges Can Be Profitable

You can improve your trading results by using a series of filters that have been outlined here. This select group of ascending wedges delivers an average profit of 1.89% in 8 days and is profitable on 52% of the trades. Overall this makes ascending wedges attractive to trade.

Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23221

About the Author:

Jeff Cartridge is a private trader and created the website LearnCFDs.com Ways to Make Serious Money With A Small Investment

How to Lower Your Trading Risks In Penny Stock Investing

By Malcolm Torren

In any business, the worst thing that can happen is going broke. Needless to say, anyone would do whatever they can to prevent it from happening. If you run out of your investment funds, the stocks and shares just keep moving on and never stop. Of course you won't be able to operate anymore because you have no money to spare. That couldn't be difficult to understand, right? So that this horrible vision of bankruptcy will not happen, it is important that you set your limitations in penny stock investing.

Nothing can be more obvious than that. No matter how cheap the stocks are, it is important to keep your reservoir full as well. The stock market trend is not predictable. You share can sell high today and you could lose it tomorrow. What if that loss was the last investment money you have? Sad story but this can happen to anyone who is not setting clear goals for themselves. This article talks about some random guidelines on how to keep your savings intact.

- Don't go beyond your budget. This is common sense. You can't spend any more than what you only have. But what this means exactly is that if you are into penny stock investing, don't pour in all your savings. Set aside a budget for your investment to bank roll. A reasonable margin would be not more than ten percent of your personal funds. Any profit made, you can always add it to your savings. But don't go above the 10% mark unless you can really afford it.

- Know the loops in penny stock investing. In this same way as setting up a business, you have to understand the dynamics and the operations. This will lead you to better understanding of the trade. With it, you can make decisions with better precision, not accurate but better.

- Get to know the risks involve. Known to everyone in the trade, penny stock trading ranks the highest in risk scale. The stocks lack liquidity. Fraudulent exercises are very possible in this arena. You could lose your money like bubbles bursting in air. But good investors are natural risk takers. They understand it like it's at the back of their hands. With this mindset, you can set your investment funds better.

- Learn when to say yes and no. Don't get carried away if you stock price goes up. It can go down just as fast. So it is important to learn some timing strategies in penny stock investing. This should save you from losing more money and keep your savings steady.

- Investment is different from gambling. If you lose the bet, you can't have it back. So you bet another. Although stock market trading behaves somewhat similar, it's not exactly the same. Investment aims for profit. When you get your share, you bank roll it for more profit. And you're not the only one benefiting it. Gambling is just for entertainment. Penny stock investing is for serious money makers.

This list can go on. But no matter how sensible and persuasive these tips are, it's really up to you. It's your penny stock investing money. You have full authority over it. Small cap trading can make you smile a lot if you stop betting your money and start thinking of it as investment. - 23221

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Be careful with penny stock pick scams. Know more about penny stock investing.

China Stocks May Be The Best Buy

By Mike Swanson

China is a rapidly expanding economy that has weathered the current economic recession reasonably well. Options for investing in China are numerous but as a foreigner the markets and the culture are likely to be completely unknown. So where to start to find stocks to invest in?

The government will not allow a national company to be bought out by foreign investors and setting up your own company can be difficult. Instead joint-venture operations with a Chinese company are the only way to access the enormous market. But these deals are not without their own risks as a number of overseas investors found out last year with a baby formula tainting scandal that brought down a number of large investors.

Another option is to invest directly in Chinese companies. With a growing level of consumerism and the largest domestic population in the world opportunities for growth abound. Areas that are seeing enormous growth are wireless telecoms and construction. While this is an investment area you need to keep in mind there are a number of restrictions on foreigners purchasing Chinese shares.

Private Equity funding works but some private equity firms have chosen to avoid China. They have found that having to rely on local partners has meant they have not had the information they require or in the time frames they would like.

Property is booming in China. Growth rates simply have not stopped and construction can be seen everywhere. Many investors have focused on Beijing and Shanghai, the two main cities, but when there are other cities in China with populations of over 20 million each there are no shortage of opportunities. A continuing trend of rural drift to the cities is supporting the need to accommodation.

However you decide to invest in China it must be remembered it is not an entirely free market. While growth and consumer demand are increasing the level of power the Chinese government has not disappeared. - 23221

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