Category: Blog

Stock trading tips and explanations for Most Excellent Investor members area.

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Why Does Technical Analysis Work?

The Psychology Behind Technical Trading

Markets are based on willing sellers interacting with willing buyers. The seller  offers something of value and  the buyer is willing to give up something of equal value to obtain what the seller is offering. In the stock market the value placed on stocks (the thing offered between sellers and buyers) is based on the beliefs, needs, and wants of the seller versus the beliefs, needs, and wants of the buyer. The price of stocks fluctuate because the beliefs of buyers and sellers differ at any point in time and at any given price of a stock.

Beliefs

Sellers of a stock usually believe the price of the stock will soon drop so they want to sell and take profits or minimize further loss. Buyers believe that a stock price is going to rise so they are willing to buy at the current price with hopes that their belief is true.  Sometimes the beliefs of buyers and sellers can be the same but their time horizons can be different. For instance in the long-term both buyer and seller may believe the price of a stock will rise, but the seller may not have the desire to wait long-term so he or she sells to the buyer that is willing to wait.

Technical Analysis Can Identify Sentiment And Thus Price Movement

Time, price, and volume used in combination are the key metrics that most indicators are based on to calculate whether it is fear or greed that drives the market, or a particular stock, at any given time.  We won't discuss any specific indicator here except to say that even when trading stocks based on their fundamentals (expected earnings, etc) technical indicators are a good way to identify how fast or slow the price will move to meet the expectations based on the fundamentals.

The technical indicators used to produce the watch lists on this site are calculated daily at the end-of-day when all price and volume for every stock is definitively known.  With our watch lists in hand at the beginning of the trading day our members can develop a trading plan that can help them compete with the high frequency trading programs in finding and executing profitable trades..

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The Case For Online Trading

About Online Trading

The invention of the Internet has brought about many changes in the way that we conduct our lives and our personal business. We can pay our bills online, shop online, bank online, and even date online!

We can even buy and sell stocks online. Traders love having the ability to look at their accounts whenever they want to, and brokers like having the ability to take orders over the Internet, as opposed to the telephone.

Most brokers and brokerage houses now offer online trading to their clients. Another great thing about trading online is that fees and commissions are often lower. While online trading is great, there are some drawbacks.

A Word Of Caution

If you are new to investing, having the ability to actually speak with a broker can be quite beneficial. If you aren’t stock market savvy, online trading may be a dangerous thing for you. If this is the case, make sure that you learn as much as you can about trading stocks before you start trading online.

You should also be aware that you need to have a "computer" with Internet access attached to you - your smart phone. You want to always have the ability to get online to make a trade. If necessary you need to be sure that you can call and speak with a broker if your internet connectivity is compromised. This is true whether you are an advanced trader or a beginner.

It is also a good idea to go with an online brokerage company that has been around for a while. You won’t find one that has been in business for fifty years of course, but you can find a company that has been in business that long and now offers online trading.

Bottom Line

Again, online trading is a beautiful thing – but it isn’t for everyone. Think carefully before you decide to do your trading online, and make sure that you really know what you are doing!

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Can You Time The Stock Market?

Why You Can’t Time The Stock Market

Can you time the stock market? In a word “No”, say the institutional experts. Although the consensus is that you can’t time the stock market that doesn’t stop individual stock traders from trying, and often times failing.  In time they fail because no one can know the individual goals and circumstances of every participant in the market for all stocks, or for even a given stock.

Can you beat the market?

“Yes” say many, many expert stock traders.  Often times many do beat the market. Why? How? Because successful stock traders are able to identify the moves that the big investors in the market are making and then move with them, and can get out before them.  This takes a vigilant daily effort on the part of stock traders. Because this daily effort can be exhausting sometimes even experienced traders get burned by taking short cuts, or skipping a step in their method of finding stocks, determining entry/exit strategies, and executing those strategies.

How Do You Streamline The Effort To Research Stocks?

It takes a computer of course. Computers perform operations millions of times faster than the human mind reads and calculates so a computer can take into account more correlating facts to determine the true trend of price and volume movement for all stocks in the market. The calculations and comparisons can be made for daily trends, day ranges of trends, and combined trends. There are multi-million dollar trading programs that operate in the stock market everyday. But most individual stock traders can’t compete with these high frequency trading programs on a minute-by-minute basis. But individuals can compete on an end-of-day overnight basis.

Most Excellent Investor Analytics Can Beat The Market (And High Frequency Trading Programs)

The superior performance of our watch lists can be seen here. The daily calculations for the analytics on this site are performed at end-of-day when the markets are closed.  The high frequency trading programs lose their advantage over individual traders when the time frame for calculating trends and indicators is expanded beyond nano seconds. The trading analytics for identifying trends and indicators for potential price moves are best determined when all moves can be included in the calculations. That happens at end-of-day when the complete data set of volume and price moves for every stock traded in a day is known definitively. Next to be considered is how to access these stock trading analytics in an easily digestible manner. That is what this site and its memberships are all about. We make the end-of-day calculations for a universe of over 3,000 stocks and grade them with our proprietary programs and make the research available to our members via daily watch lists and online screeners. Subscribing members can then use the watch lists created from these analytics to prepare a trading plan for the day.

One Dollar Trial

In the span of a few days a stock trader can determine if the analytics on this site reveals actionable trading opportunities that are worth following on a daily basis. That is why each of our memberships starts with a $1 fourteen-day trial. Give our analytics a try for fourteen days by signing up for one of our subscriptions and see whether or not your stock trading gets upgraded.

Happy trading!