One fault that many traders possess is the fact that they rely far too heavily on technical indicators to make their trading decisions. This can be an easy mistake to make, especially because you can still make consistent money the whole time you are doing this. If you look at your profit number, it could be easy to miss the fact that you were making a mistake at all. To put it another way, you can rely on technical indicators your whole trading career and be profitable. However, if you do this, you are not being as profitable as you could be, and this is why it’s a mistake to do so.
Let’s illustrate why technical indicators are not enough through an example. The Walt Disney Company (DIS) dropped 3 percent in price on a limited trading day on the Friday after Thanksgiving. Continue reading
One question that many people new to trading ask is: can a diversified portfolio save me from a bear market? To rephrase this in another way, can I still make money while others are losing it?
The answer is yes, but with some strong caveats. For one, you can’t make money doing the same thing that everyone else is doing while they are continuing to lose money. It makes sense when you see it like this, but so many people do not take this simple fact into account. When you apply this to investing over the long term, that becomes difficult to do. Most successful investors have a similar long term strategy: find an ETF, mutual fund, or set of individually picked stocks that mirror the S&P 500, and then hold them for a long time. If you are doing this while the S&P is going down, guess what? You’re going to lose money.
Now, before we go any further, remember that although you will lose money over the short term, you will most likely gain over the long. Continue reading
Usually, if the monthly jobs report is better or worse than expected, the day after its release is a busy day in the stock market. The report that was released on April 3rd was worse than expected, and stocks responded in kind the following Monday by dropping. 126,000 jobs were added to the economy, which seems good, but only until you consider the fact that it was expected that there would be 245,000 jobs added within the U.S. in total. It was the worst month seen on the job front in over a year, but it wasn’t felt right away in the S&P 500. This index actually went up almost 14 points on Monday, April 6th, indicating that poor job reports wasn’t going to slow down the growth in the U.S. economy.
Short term traders might have lost out on this because a lot of what was predicted to happen didn’t come to fruition. What this doesn’t take into account, though, is the fact that there can be a long term impact upon bad news like this. And it can go well beyond the stock market and into other marketplaces. For example, it’s predicted by some that the poor jobs report will actually be good for the price of oil. It’s a cause and effect type of reasoning. Continue reading
On Monday, January 5th, the bears had their first big day of 2015. Each of the major U.S. indices fell, some as much as 1.8 percent. The S&P 500, which had been up more than 10 percent at the close of 2014, fell 1.83 percent on the first “real” trading day of the year. The big reason for the drop has originally been cited as being because of the major drama going on with oil. The commodity once again fell, this time by about 5 percent.
Another drop, especially one of this size, was quite unexpected, and it set off a chain of panic amongst investors and traders around the world. The psychology might not make sense at first; falling oil prices should be good for the economies that do not rely heavily upon oil production–such as the United States. It should be good for the economy as a whole and the companies that do business there. In this light, the major indices dropping in value are nonsensical. But this doesn’t mean that it didn’t happen. Prices did drop, and they did it steadily. Even if you don’t understand why it’s happening, you can still take advantage of the momentum and execute short term trades to take advantage of it. Binary options create the perfect opportunity for the average person to profit in situations like this. They’re cheap, for one. Many brokers let you trade for as little as $25 per trade. An initial deposit of $500 into a broker account would let you trade immediately. Even with a success rate of 80 percent–something that should be easy on a day like today–can yield huge results.
Ten trades of 15 minutes each with an 80 percent success rate would be two wrong and eight right. Continue reading
If you’re like most short term traders, you’ve probably thought about trading Bitcoin, but never have because the market seems to be completely unpredictable and therefore not worth spending time studying.
First, realize that Bitcoin doesn’t act like a currency, and it doesn’t act like a stock, either. Right now, it seems to be acting like something completely new (which it is), and like a completely different type of market that what has ever existed before. If it had to be placed into an existing category, it would probably act most like a commodity, but since it is a form of payment, like a credit card or an e-wallet, this isn’t exactly correct, either. In other words, if you’re going to trade Bitcoin, you need to treat it unlike anything you’ve ever traded before. Continue reading
There’s been a lot of talk about interest rates lately. The chairwoman of the Fed, Janet Yellen, has said that there needs to be some serious talks about this in the near future, but as of yet, they have not happened. If and when they do, there will be some serious changes in the U.S. economy. Right now, predictions say that this will likely happen in mid-2015.
The big question is: how does this affect traders? And, of course, the follow up: what can they do about it?
Let’s look at each question one at a time.
The job market is getting stronger. It’s way better than it was three years ago, and back to where it was around 2008. That’s good news, but there’s still room for improvement. Hiking up interest rates needs to wait until then, just because more jobs equals a stronger economy, and that means that the government can profit more when rates are up. But rates won’t just go up there. Continue reading
Warren Buffett is renowned as one of the most brilliant and intuitive investors in the world. And when he gives investing advice, it is smart to listen. Recently, he has spoken about what the best course of action is for the average investor: a low cost index, preferably one that closely follows the S&P 500.
There are two main points to take away here. The first is that the S&P is his strongest and most reliable long term choice. There are tons of funds of all sorts out there, and tens of thousands of investment choices. Some are good, but only a few are worth investing in. The S&P is one of the best year after year.
The second point is that he emphasizes the “low fee” part. The difference of just a fraction of a percent can mean thousands of dollars each year. And current research shows that higher fees do not equal higher returns. Higher fees simply mean that it is costing you more money to participate in that fund. Continue reading