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What is the Rising Wedge (Bullish) Pattern?
The Rising Wedge pattern forms when prices seem to be spiraling upward, and two upward sloping trend lines are created with the price hitting higher highs (1, 3, 5) and higher lows (2,4). The two pattern lines intersect to form an upward sloping triangle. Unlike Ascending Triangle patterns, however, both lines need to have a distinct upward slope, with the bottom line having a steeper slope. This pattern is commonly associated with directionless markets since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. However, there is a distinct possibility that market participants will either pour in or sell out, and the price can move up or down with big volumes (leading up to the breakout). Continue reading...
What is the Rising Wedge (Bearish) Pattern?
The Rising Wedge pattern forms when prices appear to spiral upward, with higher highs (1, 3, 5) and higher lows (2,4) creating two up-sloping trend lines that intersect to form a triangle. Unlike Ascending Triangle patterns, both lines need to have a distinct upward slope, with the bottom line having a steeper slope. This pattern is commonly associated with directionless markets since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. There is a distinct possibility that market participants will sell out, and the price can move down with big volumes (leading up to the breakout). Continue reading...
What is the Falling Wedge (Bullish) Pattern?
The Falling Wedge pattern forms when the price of a security appears to be spiraling downward, and two down-sloping lines are created with the price hitting lower lows (1, 3, 5) and lower highs (2, 4). The two pattern lines intersect to form a narrow triangle. Unlike Descending Triangle patterns, however, both lines need to have a distinct downward slope, with the top line having a steeper decline. Continue reading...
What is the Falling Wedge (Bearish) Pattern?
The Falling Wedge pattern forms when prices appear to spiral downward, with lower lows (1, 3, 5) and lower highs (2, 4) creating two down-sloping trend lines that intersect to form a triangle. Unlike Descending Triangle patterns, however, both lines need to have a distinct downward slope, with the top line having a steeper decline. This pattern is commonly associated with directionless markets since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. However, there is a distinct possibility that market participants will either pour in or sell out, and the price can move up or down with big volumes (leading up to the breakout). Continue reading...
What is the Broadening Wedge Ascending (Bearish) Pattern?
The Broadening Wedge Ascending pattern forms when a security price progressively makes higher highs (1, 3, 5) and higher lows (2, 4), following two widening trend lines. This pattern may form when large investors spread their buying over a period of time. When initial buying occurs, other market participants react to rising price and jump on the bandwagon to participate. Then value investors begin to sell, believing the price has risen too much, which spurs the original large investor to resume buying again. Once these activities stop, the price may break out in either direction. Continue reading...
What is the Broadening Wedge Descending (Bearish) Pattern?
The Broadening Wedge Descending pattern forms when a security price makes lower lows (1, 3, 5) and lower highs (2, 4), forming two downward sloping lines that expand over time (kind of like a pointed down megaphone shape). This pattern may form when large investors spread out their selling over a period of time, and the Breakout can occur in either direction. When the initial selling occurs, other market participants react to falling price and jump on the bandwagon to participate. Then the value investors begin to sell, believing the price has not fallen enough, which spurs the original large investor to resume selling again. Continue reading...
Top Stock Chart Patterns
Chart patterns are shapes that sometimes appear in the charts of securities prices. Some of them may prove useful to you. Some frequently discussed chart patterns include Head and Shoulders, Double/Triple Bottom/Top, Cups and Saucers, Flags and Pennants, and others. Generally, it can be useful to compare and connect the troughs to each other and the peaks to each other to see if there is a trend confirmation if the breadth is narrowing, or if a reversal might be imminent. Continue reading...
What is the Rising Flag (Bullish) Pattern?
The Rising Flag (or Bullish Flag) pattern looks like a flag with a mast. It forms when rising prices experience a consolidation period, and the price moves within a narrow range defined by the parallel lines through points (2, 4) and (3, 5). After the consolidation, the previous trend resumes. This type of formation happens when the price of a security is expected to move in a rising trend line, but some volatility along the way creates a consolidation period. Continue reading...
What is the Rising Pennant (Bullish) Pattern?
The Rising Pennant (or Bullish Pennant) pattern looks like a pennant with a mast. It forms when rising prices experience a consolidation period, and the price moves within a narrow range defined by the converging lines through points (2, 4) and (3, 5). After the consolidation, the previous trend resumes. This type of formation happens when anticipation of an uptrend is high, and when the price of a security consolidates within a range. It indicates growing investor interest in a potentially explosive uptrend. Continue reading...
How to use the Broadening Wedge Ascending (Bullish) Pattern in trading
Once the price breaks out from the top pattern boundary, day traders and swing traders should trade with an UP trend. Consider buying a security or a call option at the upward breakout price/entry point. To identify an exit, compute the target price for this formation by adding the height of the pattern to the upward breakout level. Pattern height is the difference between the breakout price (the highest high within the pattern) and the highest low. Continue reading...
How to use the Broadening Wedge Descending (Bullish) Pattern in trading
Once the price breaks out from the top pattern boundary, day traders and swing traders should trade with an UP trend. Consider buying a security or a call option at the upward breakout price level. To identify an exit, compute the target price for by adding the height of the pattern to the upward Breakout level. Pattern height is the difference between the highest high and the lowest low. The upward Breakout level is the highest high. Continue reading...
What is the Rising Wedge (Bearish) Pattern?
The Rising Wedge pattern forms when prices appear to spiral upward, with higher highs (1, 3, 5) and higher lows (2,4) creating two up-sloping trend lines that intersect to form a triangle. Unlike Ascending Triangle patterns, both lines need to have a distinct upward slope, with the bottom line having a steeper slope. This pattern is commonly associated with directionless markets, since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. There is a distinct possibility that market participants will sell out, and the price can move down with big volumes (leading up to the breakout). Continue reading...
What is a hedge fund?
Hedge funds are private investment groups that attract high net worth individuals (and in some cases institutions), and use investment strategies that may be riskier than would be suitable for the average investor. While the name "hedge" implies that the fund serves a defensive purpose, today’s hedge funds use wide array strategies, and more often than not the goal is total return. The strategies used are often speculative, contrarian, or alternative compared to most investment options in say mutual funds or traditional long-only asset managers. Continue reading...
What is delta hedging?
Delta hedging is the process of reducing exposure to potential loss resulting from price fluctuations in the security underlying his or her options positions by bringing the delta – or price relationship between options and their underlying securities – of a portfolio to zero, or closer to it (a position called ‘delta neutral’ or ‘delta hedged’). This is accomplished by purchasing financial instruments which counterbalance each other's exposure to price fluctuations, often adding short or long positions in other options or the underlying securities themselves. Continue reading...
What is a Buying Hedge?
Hedging against future price risk was the main reason Futures contracts came into being. If an investor or a business knows that they need to acquire an asset or security at a future date, they might go ahead and agree to a price and have it in writing on a Futures contract. A futures contract means that an item has been sold at a stated price, and only awaits settlement at a future date. This will protect them from the risk that the price will move unfavorably in the future, and it will allow them to balance books and plan a budget with more certainty. Futures contracts are standardized and traded on exchanges. Continue reading...
What kind of hedge funds exist?
Hedge funds can employ many strategies and focus on virtually any kind of investing style or market. They also have the flexibility to change their strategy as they see fit. Morningstar and other services will group hedge funds into categories and provide benchmarks based on their average performances. As of 2016, there are over 12,000 hedge funds, and over half of those are required to report to the SEC. Continue reading...
What is a Swap?
A swap is an over-the-counter agreement between institutions to "swap" one thing for another, usually the cash flow related to interest-bearing instruments. Given the negotiable and over-the-counter nature of swaps, there are many permutations and manifestations of this concept. The most common is the interest rate swap, in which the counter-parties agree to pay the interest due on principal amounts which are not exchanged. Continue reading...
What is the Three Rising Valleys (Bullish) Pattern?
The Three Rising Valleys pattern forms when three minor Lows (1, 3, 5) arranged along an upward sloping trend line. It often appears at the end of a declining trend – an indication that buyers are overtaking sellers, which ultimately pushes the price higher. This type of formation happens when investors shift into buying mode following a consolidation period. Once the price breaks out from the top pattern boundary, day traders and swing traders should trade with an UP trend. Consider buying a security or a call option at the breakout price level. To identify an exit, compute the target price level by adding the pattern’s height (highest price minus the lowest price within the pattern) to the breakout level (the highest high). When trading, wait for the confirmation move, which is when the price rises above the breakout level. Continue reading...
How can I invest in hedge funds?
Fund managers are allowed to accept up to 35 non-accredited investors, but for the most part you will either need to satisfy the “accredited investor” requirement of the SEC to invest directly in a hedge fund. Otherwise, there are now hedge fund indexes and ETFs that track and mimic hedge fund strategies that are accessible to everyone. You should know now that the minimum initial investment requirement to participate in a hedge fund can be quite large, such as upwards of $1 million. Continue reading...
What are the pros and cons of hedge fund investing?
Hedge funds are sometimes the highest-earning investment vehicles, and sometimes they do that much worse than everything else. They have a high buy-in, low transparency, and limited liquidity. There are also other advantages and disadvantages worth mentioning. A good hedge fund can provide you with an excellent diversification of your investable assets and give you exposure to the best and brightest money managers in the world. Continue reading...