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Stock Trading & Investing system
Day Trading Techniques
There are many techniques to find good potential instrument for Day Trading
in the market. In this section I show you some well known techniques for trading.
Moving Average - day trading | stock trading system
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Moving averages helps to know the direction and strength of existing market
trends and can help to determine when a market trend change has taken place.
The most popular moving averages are the 10- and 50-day averages.
For long term investment strategy 100 days and 200 days moving averages working
good to know long term market trend and also it working as a good resistance
and support. A price close below a moving average line is a warning of a
potential trend change.
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If price is above its 10- day and 50-day moving averages, that many technical
analysts considering as a strong buy member for investment in the market.
Moving average as a curving trend line providing support during sell offs in
an up trend and resistance to bounces in a down trend and the breaking of a
moving average line can carry the same meaning as the breaking of a trend
line means a change in short-term trend. Some of the longest and strongest
up trends and down trends are established when the 10-DMA crosses up through
the 50-DMA (Moving average). This is a proven trading system to picks share
so many trader giving more weight age on MA for day trading and investing in
the market.
Day Trader needs to use smaller time span like 10 and 50 hour for day trading.
Long term investor or 401k investing 3-week moving averages and 10-week moving
averages of weekly data are the good indicator.
It's a good idea to use your favorite another technical indicator like:
Average Directional Movement Index (ADX)
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Stochastic Oscillator (STO)
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Commodity Channel Index (CCI)
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Rate Of Change (ROC)
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Percentage Price Oscillators (PPO)
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Relative Strength Index (RSI)
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Chalking Money Flow oscillator (CMF).
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On Balance Volume (OBV)
with Moving Average (MA)
to know market condition is oversold or overbought. When we use two or three
technical indicators and in the case of positive divergence or negative
divergence, it giving a real good return on investing, and this the ideal
condition for low risk high return, try different time frame and find out
which is a better pair for you. This is a successes and rewording strategy.
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Moving average convergence divergence (MACD) stock trading system
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This is another technical method, to learn about MACD please visit Learning
center. The MACD lines are moving averages, one faster than the other
(red or fast line and the white or slow line). When fast line crosses the
slow line, it can represent the earliest indication of a possible change in
trend. Early indication of the trend change helps you to buy or sell in
advance for investing or day trading. Increases in the MACD (Moving Average
Convergence Divergence) histogram represents the bullish momentum is
strengthening and declines in MACD (Moving Average Convergence Divergence)
Histogram represents bearish momentum is strengthening.
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All crossover of histogram above or below the center line indicates shorter
moving average crossing above or below the longer moving average and that’s
a buy or sell signal. A lower peak in the MACD against higher highs called
negative divergence and typically it's our Sell signal. A higher peak in the
MACD against lower lows called positive divergence and typically it's our
Buy signal.
MACD positive divergence is an ideal condition to enter in the market for
day trading or investment in the market. However, the When MACD lines cross
over each other frequently that represent as they trying to establish the
new trend, so its often best practice to wait for a stronger confirmation.
When the lines cross over the center line, it indicates that a trend has
been established and may be sustained for some time.
This is also a proven stock trading system so many trader giving more weight
age on MACD for stock trading in the market.
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Breakout Stock investing | day trading
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Breakouts are some of the most common and interesting techniques to play for
day trading or long term investment in the market, but you must be selective
in choosing them. Down side (Bearish) Breakout can also be potentially good
rewarding choice for stock trading.
Properly identified breakout may offer good return on investment within short
time frame like one to seven trading sessions. It's a good choice for trade in
the market, and also for long term investment in the market.
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For successful stock trading system to get best reword on your investment you
can consider share that are breakout with high volume in your portfolio. Before
to consider breakout to play, it is very important to know why suddenly change
demand (demand increase or supply increase). Here are some Reasons for Breakout
- Surprise Quarterly result
- Company declare upside revision for earning expectation
- Share making new highs often get noticed by media
- Industry related events
- News, new products, new management
- Momentum
Consider to enter on only the best Breakout candidates. Many Breakouts just
peak through the new high or point of resistance and head back down.
Potential Entry Points
An additional check point before choosing a Breakout is to make sure that
continues its upward (or downward for the bearish play) trend in the next
trading session, also check short term moving average is moving toward the
breakout direction.
overall market conditions play an important role in determining the significance
of a Breakout stock trading. A stock breaking out in an up market that more
likely to go upward. A share breaking out in a down market may struggle to go
more up but a share that does may explode upward when the down market turns
around.
Potential Exit Points
Your exit rule depends on risk tolerance. You may want to consider a
trailing stop loss as your exit strategy or you can keep stop loss at
some level below then previous days low and move it up with price moves up.
With Breakouts, one of the best exit strategies is a closer pivot point;
you can consider 50MA, 100MA, 200MA and also watch for Fibonacci number.
Volume/Price Moves
Only the share choose those breakouts with high volume, I like at least 250%
of average volume and that finished the day near the top of the day. Volume
is a very important factor to consider Breakout stock trading or investing.
This is also a proven stock trading system so many trader love breakout for
portfolio investing or stock trading. Some of them taking rest for some days,
and going back to test Breakout point before they continue to climb
upward | downward. Stop loss: Stop loss is a very important to protect your
asset so set a stop loss some level below the Breakout days low.
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Peak Plays
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This is a one of my favorite technique to trade in the market.
Some of the peak plays are short term plays only, so Peak Plays require that
you take quick decision and move very quickly getting in and out. Peak play
is best for day trading. You can play with peaks itself or the pullback. This
is a more risky strategy then other theory but it gives a good return on your
investment, only things
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Important is keep tight stop loss. Here are some possible reasons for Peaks:
- Earnings reports or forecasts change
- Upgrades by broker | financial institution
- Merger and merger speculation
- Splits
- Rumor
If you are quick enough to take right decision and if there are still enough
buying interest | pressure then you can ride on the trend.
Potential Entry
If you believe a peak can be sustained for your quick stock trading, consider
trying to get in at the open, or you can buy in pullback.
Potential Exit
With the continuation Peak Play you should consider getting in and out
the same day - sometimes within an hour, it is best for day trading. Historical
data shows that many stocks may start topping and maybe even pulling back soon.
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Gap Plays
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Gaps is a one more good techniques for investment in the market, Majority
technical analyst recommend to gaps play, because it is a market tendency
to fill up gap within short time period.
Gap Play is another proven stock trading system so many trader love gap for
day trading | stock trading. Its little more riskier then other techniques
for investing and day trading because usually gap happened due to some
strong news. For investing in the market it’s a best choice, only you
need to verify with technical indicators.
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Potential Gap plays:
To play gaps you need to identify strong resistance or support and
market major trend. Once you know trend you can
play gaps for day trading. If market trend is up and there
is a down side gap, and as soon as it hit support you can enter long
because within short time period that come up to fill up gap.
Same way if market trend is down and there is an up gap, in this
case when price hit resistance zone you can enter short
for stock trading or day trading in the market.
It's an advisable to avoid gap that are in major trend direction
because many time that to fill up its taking long time and if you
playing for day trading you can loose your money.
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Sell the losers and let the winners run
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How to identify share is loser or winner?
With compare to market movement if price loosing more then its normal
fluctuation then we need to evaluate that share again.
If the recent news or events has more long-term implication then it's a
time to book the loss and picks another for day trading or stock investing.
Here some reason to book loss on your investing :
- Company reported lower sales
- New tax difficulties due to government policy change
- New legal problems
- Any other more costly situations which effect earnings.
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Any situation that has a negative Outlook on the longer term picture of
earnings or growth can turn a share into a loser. Winners are shares
who showing consistent income growth and earnings growth, and company
development with new or existing markets on new products or service.
For successful day trading | stock trading system to get good reword on your investing
it is advisable to consider average up for winner in your portfolio and
also you can consider that for day trading in the market.
The share stay winner up to the time it's product stay winner in the market,
the day it loose ground, share turn into looser. Winners should be stay winner
until the fundaments which make them winners stay growing or the
price jump too much then the earnings (check P/E). If the growth of earnings does
not increase with the price, that can easily turn into a loser.
Losers stock should be sold and forgot until they stabilize and begin to
build the fundamental strength to become winners. For successful stock
trading system you need to consider to sell loser form your portfolio
and also you need to avoid that from day trading in the market.
Check the above chart, that indicating steady income growth and earning growth
quarter to quarter and again year to year steady growth. A company who's income
and earning growth steady that always stay winner. In above chats you see that
in last two quarter income and earning growth little down or near to pick that
indicating it's a time to book profit because fundamental like income and earning
loosing the ground. Once income and growth start negative move, price can start
to loose quickly and turn into looser. In this case for stock trading or
investing you can go short.
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I shown here many techniques to picks share for stock trading in the market
you can check it with RL.
Remember there are a risk in investment, may be it not suitable to all. Before to
do any trade’s contacts your broker or adviser. To learn more about investment
visit another page. On that base develop your own rules and stick with your
strategy to trade like professionals, I am sure your next trade is successful
with good reword. Visit every day and look for new breakout or penny stock that
can save your lot of work!!! Basically penny stock trading system almost same,
you can apply all theory for that.
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