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Safe High Return Investments Los Angeles- Holidays And The Markets
Posted by: | CommentsSafe High Return Investments Los Angeles- Holidays And The Markets
The infamous stock market crash of’29 took place in October. Then anther stock market crash took place in October’89. October is the month in which the most famous crashes historically took place. You must have across the word the January Effect so many times. Do you believe in the January Effect? Markets are all about people buying and selling. What you believe is what you see in the markets. The party starts in December and continues in the early part of January with some hangover effect. So what is the January Effect?
New Year is the end of a year and the beginning of a new year. This is what makes the January Effect so special. There is usually a rally in the stocks in the first few days of January. There are various reasons behind the rally. Most of the people are trying to pay their taxes at that time of the year. The companies are trying to show a good performance at the end of the year by cleaning their balance sheets. The January Effect can be quite a rally but much depends on the strength of the economy, how good December was and is there any catalyst to move the markets. There is usually a significant rally in the early part of January that actually sets the tone for the rest of the month and sometimes for the rest of the year. New Year is party time. People are in exuberant mood. Everyone wants to forget the past year and start the coming year with high hopes and good expectations. This is what is so special about the January Effect. So what is this January Effect? January Effect actually starts in the mid December and tends to favor small stocks. The most profitable period as measured statistically has been found to start from December 31st and end around February 28th with an average rate of return of 6.6% on smaller stocks.
Now, you must know this fact that the January Effect is not guaranteed every year. The best example is the year 2007 when the market became bearish and didnt start to look to bottom out until March 2008. Now January Effect may happen or may not happen but the turn of the month that is the last day of the month and first five days of the next month form a very good seasonal pattern.
Turn of the month is a very good seasonal pattern that actually holds up more often than not. So if you buy stocks at the last day of the month and hold them for the first five days for the next month, chances are you are going to make some profit. This can be a good swing trading strategy. At the end of the fifth day you move your money back into the money market funds.
This system works because the pension funds tend to put new money to work during the holidays and the overall tendency of the market to rise improves. You can do the same on the holidays. Move your money in on the day before the holiday and sell it on the day after the holiday.
Holidays are good for your mood. Everyone is happy to escape the drudgery of their daily routines. People want no worries in the holidays. People start to feel happy when the holidays approach and buy stocks before they run off to celebrate Christmas, the fourth of July, the Labor Day and so on. After the party the reality sets in the stocks are usually sold off. The holidays and those times when people traditionally take vacations often lead to higher prices. Fewer traders lead to lower trading volume which in turn tends to exaggerate price moves.
Thats because these days fall within the most bullish time period of the year, winter! The three days before the New Year Eve and the first three days trading days after the New Year are your best holiday bet for making money. You must learn these patterns in the market that you can use to make good profits when the end of the month comes and when the holidays come. Nothing is guaranteed. But if you follow these patterns you will definitely find something in them.
Mr. Ahmad Hassam has done Masters from Harvard University. Try This 1500 Pips A Day Forex Signal Service! Know These Candlestick Patterns! You are welcome to reprint this article – but get your own unique content version here.
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Never Trade Without A Stop Loss
Posted by: | CommentsThe market is always ebbing and flowing. Its like the waves in an ocean. The market goes in one direction. It has a correction. Then it continues back in its trend direction. It has another correction and so on. Even in sideways or choppy market, there are ups and down in the price action.
It is like the continuous ebb and flow of the tides. You must learn to ebb and flow with the tides in the market. Setting stops on the key levels of price support are crucial. These key support levels represent significant market realities occurring with enough trade volume to warrant a stop loss level.
There is a continuous ebb and flow in the market. Even in case of a perfect trend this ebb and flow is superimposed on the trend. How do you reduce the possibility of getting stopped out of a perfectly good trend by the normal ebb and flow of the market? The market will continuously fluctuate. The answer lies in the current price, volume and volatility of the market.
What should be the role of the stops in your trading? The stops need to protect you from risk but they also need to allow the market freedom to fluctuate. Meaning stops should reduce your risk but not your profits. You will need to ensure that your trading system and approach take these factors into consideration so as to allow your stops to ebb and flow with the markets.
To choose a random exit that does not include the crucial information the market is giving you at any time is ignoring what the market is telling you. If you know how to listen to the market, the market will tell you where to set your stop loss.
Never ever use an arbitrary dollar amount like, I will get out of the trade when it goes against me $200. You need to learn how to identify the correct stop loss based on the market dynamics. Then learn to adjust your trade size to manage your dollar loss.
The value of having the stop loss in place prior to entering the market is that you can unemotionally determine the best exits possible for the different types of risk like the trade risk, the market risk, the liquidity risk, the margin risk, overnight risk and the volatility risk. A stop loss protects you from these risks.
The position of your initial stop should be based on the rule of 2% risk on your trading account. For some advanced traders it is sometimes beneficial to risk more than 2% of their trading account on a single trade. However, the amount these traders risk must be carefully calculated depending on their proven historical performance statistics.
One of the greatest challenges for any trader is to finally come to the point where he/she firmly believes that a sound money and risk management program is vital. Placing stop loss correctly is an important part of the money and risk management program. Remember the saying that there should be some method to your madness. Learn the yin and yang of trading.
Mr. Ahmad Hassam has done Masters from Harvard University. Try This 1500 Pips A Day Forex Signal Service from heaven! Learn These Candlestick Patterns! Don’t reprint this exact article. Instead, reprint a free unique content version of this same article.