Posts Tagged ‘stock market’

06.02.2013 Post in Trading

Before answering this question, it is necessary to give definitions of the terms. Stock trading means buying and selling securities on stock exchanges. One of the purposes of the trades is gaining speculative profit. Today most of online trading on global stock markets is conducted by retail traders.

In order to trade stocks, a trader opens and replenishes his trading account with a brokerage company, which provides access to markets. A broker holds agreed commission from his client’s trading account for its services.

Depending on the size of the deposit, the expected schedule, and personality traits, a trade chooses and then tests his trading strategy on a demo account. It involves transactions of a given size on a particular stock market, with certain trading instruments and conditions of closing positions.

Trades on stocks are carried out on special software – trading platform, which sends the order to a broker to buy or sell an asset. A trading platform has all the necessary functions for trading. In addition, it enables you to track stock quotes and analyze the current market situation through various software applications (indicators, oscillators).

For successful stock trading you should understand the way financial markets function, have the skills of technical and fundamental analysis, as well as experience in demo account trading. Trading requires constant self-monitoring and self-improvement, but finally can result in a job satisfaction and a significant income.

07.03.2012 Post in Trading

countCharles Dow is often considered as the founder of the technical analysis. Jointly with his companion he implemented the famous Dow Jones industrial average, created one of the leading world financial information agencies and began the publishing of the comprehensive financial data. Moreover, he wrote several articles concerning the financial market.

The suggestions described in these publications were later summarized. Today they are known as Dow theory. This theory became fundamental for the modern technical analysis. Though Dow described the processes occurring at the securities market, his theory is applicable to the other financial markets.

Charles Dow paid a lot of attention to the well-known principles as directed character of the price changes, cyclical character of the market processes, the interrelation between the trading volume and exchange rates etc. The theory is based on 6 tenets

1. The market has three types of movements

    Dow confirms that trends can be subdivided into primary (long-term) trends, secondary (intermediate) trends and minor (short-term) trends. Each type of trend is in turn an upward or downward. The upward trend means that each high and low is higher than the previous one. In the downward trend each high and low is located lower than the previous one.

    The primary trend may last from less than a year to several years. The secondary trend serves as a correction and usually lasts for over 3 months. The minor trend is defined as lasting for less than three weeks reflecting the short-term market fluctuations.

    2. Market trend has three phases

      Phases of the long-term trend are: an accumulation phase, a public participation phase, and a distribution phase.

      During the first phase provident investors with significant capital make trade operations that appear to be against the general opinion of the market. The second phase begins when active and technically oriented traders take part. These traders are intended to follow the market trends. The phase is accompanied by the strengthening of the trend and price changes. Then begins the third phase: the public is fully involved in the market resulting in agiotage. Thanks to the experienced investors begins the new accumulation phase.

      3. The stock market averages must confirm each other

        According to Dow, the industrial and transportation averages must confirm the current trend and provide signals of its reversal with slight divergence in time.

        4. The market discounts everything

          Everyone knows the expression “the price accounts everything”. Charles Dow supposed that the market responds very quickly to any information. Any factor that can affect the demand or supply is immediately reflected in dynamics of price and averages.

          5. Trends are confirmed by volume

            moneyThe increase of the trading volume takes place when the prices are moving within the main trend. Otherwise the price changes do not reflect the real market opinion.

            6. Trends exist until definitive signals prove that they have ended

              A trend will be changed in any case, but if the signals of price changes are not clear, this fact can be considered as a signal of temporary corrective movement, but not as a sign of a trend reversal.

              Thus, it is evident that some part of these assumptions is applicable to the Forex market. The ideas of Charles Dow are relevant even now despite more than 100-years history and the fact that the modern analytical tools emerged.

              Added by Kristina Leshkevich,
              InstaForex Clients’ relationship manager

              29.02.2012 Post in Trading
              Charles Henry Dow

              The history of the index began in the XIX century. It was implemented in 1896. At that time there were only few instruments for analysis and description of the processes that took place at the stock market. Therefore, a question concerning the elaboration of these instruments became more and more urgent. The evaluation method of market trends proposed by Dow and Jones became the real innovation and significantly simplified the life of most businessmen. Firstly, index took into account 11 large US companies (9 of them were railroad companies). It was calculated as simple average of their stocks value. Despite the fact that more than 100 years have passed and accounting method has undergone significant changes, the Dow Jones index remains an important benchmark for global investors even now. Today it includes over 30 leading American companies.

              Edward Jones
              Edward Jones

              Charles Dow (1851 –1902) and Edward Jones (1856–1920) were friends and companions. Both of them were gifted as journalists and businessmen. Together they worked in the sphere of financial news. In 1882 Dow and Jones started their own business in New York. Their office was located in the basement of the confectioner’s shop where they began publishing the small financial news bulletin under the title Customer’s Afternoon Letter. This bulletin became popular very soon; the number of printed copies was increasing; investors appreciated the benefits of the given information, though at that time this information could be defined as insider.

              In 1889 the partners published the comprehensive edition of The Wall Street Journal created for financial and commercial circles. It was focused on providing the breaking and reliable news. The Wall Street Journal is that very edition which has been publishing the Dow Jones index since 1896. The edition is still considered as confident and today the number of printed copies exceeds 2 million. For a long time the newspaper did not have a real counterpart. The contemporary counterpart of the WSJ is famous Financial Times of London.

              the_wall_street_journalIn fact, there are some other Dow Jones indices (transportation index, utility index, composite index, etc.) that characterize the different economic fields. But only the industrial index is considered as the most popular serving as a barometer of the stock market. This index is fundamental for institutional and private investors. And this is quite reasonable, as the 100-year practice confirmed that this function is accomplished properly. The index comprises the mature and reliable companies with 1/5 of the market value of all American stocks.

              Dow Jones index was appreciated not only as an impartial indicator of the US stock exchange market, but also as one of the country’s economy in general.

              Added by Kristina Leshkevich,
              InstaForex Clients’ relationship manager

              10.02.2012 Post in Trading

              Once we have got some spare money, we start considering profitable investment methods. There are several alternatives to choose from: bank account, trust management, real estate, financial markets.

              Depositing to a bank account is frequently preferred by investors as it is risk-free. Investing in a bank account does not require any special skills of capital management, it is very simple: you just go to a bank, leave your money on an account and watch your deposit accumulating interest. But yet there are a series of restrictions to remember about. Firstly, interest rates hardly run over inflation, which means that you gain almost no return as such. Secondly, as a rule, high interest is accrued on large deposits. But unfortunately, you might not have a sum with many zeroes at the end. Thirdly, such deposits are typically uwithdrawable either totally or partially; apparently, it is not convenient.

              investAnother variant of investment is open-end funds based on the trust management principle. This way of investing funds carries more risks than the abovementioned one: no profitability is guaranteed, moreover, you could not receive the investment back. In addition, in case with open-end funds, an investor cannot influence the process of money management: after the shares are purchased, your money is managed by someone else, not you. The liquidity of shares is low too. In case with trust management, you have a strategy developed exclusively for you and you are still able to influence the process. Mind that the minimum capital of a customer is to be over 1000 USD. Both open-end funds and trust managers charge a certain commission for their work.

              Forex offers trust management service as well within the framework of the PAMM system. The minimum deposit required is 1 USD and the return can be withdrawn at any moment.

              Real estate is also a rather favourable sector to invest in. However not everyone can afford such an expensive purchase. Real estate items can be leased or sold at much of a profit. Profitable dealing with real estate takes profound knowledge of the housing market, thorough search for tenants or buyers, negotiating, consulting with specialists and months of waiting for an increase in housing prices.

              Entering Forex requires less money than purchasing a real estate item. As for the working process, it is plain. Trades of any volume are carried out promptly anytime. There are sellers and buyers in various parts of the world every minute.

              And the last way of investment we are going to dwell on is the stock market where securities are traded. “Securities” is a term used to loosely describe stocks, bonds and derivatives etc, i.e. documents that represent evidence of ownership of a certain asset. On the stock market profit is only gained when the rate is on increase. Margin trading is not held here which means that you cannot use a leverage to make trades more effective. Trading hours on the stock market are determined by those of a corresponding stock exchange.

              Liquidity of currency operations is higher than liquidity of those with securities. Unlike stock exchanges, Forex has no specific location and is open 24 hours a day.

              There are other investment alternatives of course. Your choice depends on your financial resources and analytical skills. Investment in Forex appears to have many advantages, including high liquidity, continuous trading process, enticing minimum deposit required, leverage, profits on both a bearish market and a bullish one.

              It is worth noting however that the rest of investment ways, except for bank account, imply some risks. That is why, it is so important to develop your skills of market analysis and capital management.

              Added by Denis Minenkov,
              InstaForex Clients’ relationship manager