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Day trading with RSI
Relative Strength Index (RSI) is a momentum oscillator developed by Welles Wilder. In the RSI, the average gains and average losses over a specific time period (such as 14 days) are divided to calculate the Relative Strength, then normalized into the Relative Strength Index (RSI), which is range bound between 0 and 100. The RSI typically fluctuates between values of 70 and 30, with higher numbers indicating more momentum. According to this indicator, a security with an RSI over 70 (out of 100) can be considered overbought, while a security with an RSI under 30 (out of 100) can be considered oversold. Continue reading...
What is intraday trading?
Intraday trading means opening and closing a position, or buying and selling (or short-selling and covering) a security within the same trading day. Intraday traders are active during market hours, buying, selling, shorting, and so forth, to capitalize on the movements of the markets during the day, and they primarily trade positions which are opened and closed during the same day. Intraday traders use technical indicators to find inefficiencies or price fluctuations that they believe will correct. Continue reading...
What are Actively-Managed ETFs?
At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...
What are Pivot Points?
Pivot points are quick-reference tools used in intra-day trading that give the trader benchmarks and perspective while short-term price movements happen. Pivot points are set by taking the high, low, and close price levels of a stock market index or individual security for the previous day or week and basing support and resistance levels from there by multiplying those numbers by simple factors. These multiple might be very simple, such as 2x or 3x, or using Fibonacci numbers, which is still a simple calculation if you have the Fibonacci numbers. These are meant to be very quickly generated on a piece of scratch paper, and because of their simplicity, they were a favorite among floor traders. Continue reading...
Best Day Trading Guide
Day traders, by definition, trade on a very short-term time frame, seeking to generate profits by opening and closing positions hour-by-hour and having the majority of their positions closed by the end of the day. Short-term profits and income are the goals with most day-traders, and the term is used more and more for “amateur” traders who trade from home and treat it as their primary occupation without being part of a brokerage firm. Day trading has become more and more prevalent for independent, non-affiliated investors who trade from their computers at home for hours a day. Continue reading...
What is a pivot point?
A pivot point is a technical indicator used by traders to determine overall market trends over various windows. This indicator used to be solely the average of the high, low, and closing prices of the previous day, but modern trading utilizes different versions of this concept for day trading and short term analysis. In many cases, pivot points are now quick-reference tools used in intra-day trading that give the trader benchmarks and perspective as short-term price movements happen. How the trader calculates the pivot point depends on whether the point is going to be part of a chart with a scope of several minutes or the present day or present week. Continue reading...
What are Fibonacci Clusters?
Fibonacci lines, retracements, and extensions are used by chartists to identify possible future support and resistance levels, as well as areas where there may be reversals. Investors can use this information to put hedges or speculative bets in place, if they believe that, like many naturally occurring systems in nature, the market behavior will exhibit some fractal-like forms that can be measured with Fibonacci sequence numbers and the Golden Ratio. Continue reading...
What is a market-on-close order?
A market-on-close order is used to execute a trade at the last possible moment before the market closes for the day. This may be an order to sell or buy. Market-on-close orders are instructions to execute a trade just before the market closes for the day, at the best price available at the time. The exchange will actually settle all of the market-on-close orders at the same price. Why would an investor enter this kind of trade order? Continue reading...
What are Fibonacci Extensions?
In Fibonacci line analysis, chartists attempt to predict how far a trend will go in a single direction, despite some minor pullbacks that do not break the overall, stronger trend (behavior known as retracements). Trends can be upward or downward and still experience this phenomenon. Fibonacci extensions are estimations of the next high after an initial push and retracement, using Fibonacci sequences as guidelines. Some investors believe that, like many naturally occurring systems in nature, mark... Continue reading...
Why Does the Price of a Stock Change?
Stock prices change based on the law of supply and demand. Ultimately, as with the price of any good or service, the outstanding supply and consumer demand will define its value in the marketplace. Indeed, the efficient market hypothesis states that the price of a LINK will already reflect all known information about it and what investors are willing to pay for it at the time, based on that information. Continue reading...
What are Breakouts?
Breakouts are events where a stock or index suddenly changes the magnitude and direction of its trading range and a new level of support and resistance is defined. A stock or index might bump up against the same support or resistance level for some time, or experience a time of consolidation and horizontal movement before the price breaks the upper limit of resistance and a new high is attained. Sometimes prices consolidate or hit resistance levels as the markets and investors wait to see what some news will be about the condition of the economy and so forth. Once there is good news, investors might take it as the “go-ahead” sign, and the price will breakout from the previous range. Continue reading...
What is a Dividend ETF?
Dividend ETFs invest primarily in preferred stock and stocks that pay regular dividends. Strategically, they tend to be either Dividend Appreciation or High Yield. Dividend ETFs are equity dividend funds that seek income from preferred stocks, common stocks. As of 2016 there are over 130 Dividend ETFs, and that’s up from about 29 in 2011 and 45 in 2012. This has become a popular strategy, obviously, and they all seek to distinguish themselves from the pack. Continue reading...
What is an ETF? Definition
ETFs are very popular and useful investment vehicles that offer affordable diversification and professional portfolio management. An ETF is a basket of securities that is designed to ‘mimic’ the performance of an index, sector, or category of securities. For example, the ETF with ticker SPY is designed to track the performance of the S&P 500, and the company that creates the ETF (in this case Barclays iShares) builds the ETF simply by purchasing the 500 stocks in the S&P 500. Investors can purchase shares of the ETF as a means of gaining instant access to all 500 stocks in the S&P 500, thus tracking its performance. Continue reading...
What is a market-on-open order?
Traders can enter time-specific trade orders in the form of opening or closing orders, which are only to be executed as close to the opening or closing price as possible. Market-on-open orders are looking to buy or sell immediately after the market opens, at the opening price. Market-on-open orders are instructions for a broker or floor trader (even though we don’t see those much anymore these days) to buy or sell shares at opening price of the stock being traded. Continue reading...
What Qualifies You as a "Trader," and How Do You Report Income and Expenses?
If you buy and sell securities, you may qualify for tax status as a ‘trader,’ which importantly may qualify you for certain business tax breaks. The rules governing this status can be confusing, however, making it difficult to determine whether you qualify as a trader, investor, or dealer. Let’s take a closer look at the qualifications for traders as defined by the IRS, as well as how to report income and expenses if qualified. Continue reading...
What is short interest?
Short interest is a term used to describe how many short positions are open for a given security or market at a given time. It is often expressed as a percentage of the total securities outstanding and is used for the short interest ratio. This serves as a gauge of bearish market sentiment, since short-sellers are expecting price action to trend downward. The short interest ratio (SIR) provides a context for the quantity of short interest outstanding by stating this amount in relation to the average daily trading volume. Continue reading...
ETFs vs Mutual Funds -- What's the Difference?
The better choice might be different for each investor. There is no clear-cut answer to this question, since it will depend on an investor’s unique situation and what’s being offered. If you intend to trade actively, ETFs might be a better choice since they have prices that update minute-to-minute during the day and their trades settle more quickly. If you are just buying and holding an index (see ‘index investing’), an ETF will give you the cost effective means for doing so. You may be able to buy into an ETF with lower initial requirements than a mutual fund, since you can buy one share instead of possibly having to meet a $1,000 minimum initial investment requirement for a mutual fund. Continue reading...
What are Bear Market Funds?
Bear market funds are designed to profit when the market or sector they follow declines. Bear Market Funds make money in declining markets, as opposed to Bull Market Funds. If you’re bearish on a sector, industry, commodity, the market, or anything else that’s tradable, rest assured that you’ll find a Bear Market Fund for it. There are also 2X Bear Market Funds, 3X Bear Market Funds, etc…, which use margin, short-selling, and derivative instruments to acquire large leveraged positions. Continue reading...
What is Dividend Drag?
When an ETF is not able to offer a quick, automatic dividend reinvestment option to clients, it can sometimes take a week or more to get the dividends back into the market. In a rising market, this lag can cause the reinvested amounts to purchase higher-priced shares than they would have been otherwise. This drags the performance of the fund down, compared to an index or more efficient fund. The structure of ETFs prevents them from immediately reinvesting dividends, and they often do not offer what is known as a DRIP, or dividend reinvestment plan, which is built into many pooled investments like mutual funds (and other ETFs). Continue reading...
How Can I Establish a SIMPLE IRA?
A SIMPLE IRA must be established by an employer with fewer than 100 employees. An employer can establish a SIMPLE IRA if they have no more than 100 employees who earned $5,000 or more during the preceding calendar year. The employer cannot have any other type of qualified retirement plan going while a SIMPLE IRA is in effect. SIMPLEs should be established between Jan 1 and October 1 of the first year of the plan, unless the business started after that. Plans can be set up relatively quickly and can even use automatic enrollment if employees are given the ability to opt-out. Continue reading...