Updates from April, 2012 Toggle Comment Threads | Keyboard Shortcuts

  • Trader Lyn

    Trader Lyn 3:07 pm on April 4, 2012 Permalink | Log in to leave a Comment  

    How to ride the trend with a simple Moving Average 

    Stocks are either trending up, trending down or rolling sideways, understanding the direction of the stock’s movement and applying the right indicators will help us to become more successful traders.

    Let’s talk about an up trending stock, what indicator is more appropriate to use
    I personally use moving averages on trending stocks they work the best for me in a rising stock price.

    Let’s have a look below on the chart.

    The setting I use is a 55 Day, 21 Day, 5 Day moving average.I find that we can ride a stocks climb all the way to the top and exit as it reverses or closes below the 55 Day Moving average.
    In April 2009 we enter in November 2009 we exit with a nice gain.
    In March 2010 we enter in May we exit with a nice gain.
    In October 2011 we enter in June we exit with a nice gain.
    In February 2012 we enter and are still in the trade as the price is still above the 55 Day Moving Average.
    Now if you’re wondering about the big drop in price on the chart it’s a STOCK SPLIT why do I love stock split companies because  when I first started trading them 12 years ago it’s like a self-fulfilling prophecy a good growth company with strong earnings will eventually be driven back to the original price…yes my ah ha moment if you watched it is repeating itself.
    A stock trading at $77 a share is very expensive to buy 100 shares our investment is $7,700 but with an option we can control the same 100 shares for the next 2 years with only $1,000 deposit now that’s the power of leverage.
    The strike or the agreed price we have chosen here is the 80 strike.
    Let’s assume in the next 2 years the price goes back to the original price of $120 what is our call option worth well that’s easy to work out we realise the gain from $80 to $120 that’s $40 increase  x 100 shares it’s worth $4,000. That’s a 300% return.
    If we purchased the shares our return is 50% not  a bad return we wouldn’t complain as an options trader I ask where else could I be using my money wiser.
    In this example I have an extra  $6,700 to invest somewhere else.

     
  • Trader Lyn

    Trader Lyn 9:33 am on February 17, 2011 Permalink | Log in to leave a Comment
    Tags: option, profit, , , strike price, vertical spread   

    Trading with Options can be safer than shares…. 

    Have you wished you could profit from a stock price rise without owning the shares?

    Then let me show you a way, using options, which will limit your losses and carries less risk than owning the shares outright.

    How would you like to rent that option out at the same time, receiving additional income, and reducing the amount you have at risk even more?

    Let me introduce you to a “Vertical Spread”.

    It’s a bull-call spread option trading strategy, so when you think that the price of a stock will go up moderately in the near term, you can reduce your risk.

    To construct a Bull call spread you buy an at-the-money call option and sell an out-of-the-money call option, of the same expiration month. It is also known as the “bull call debit spread” as a debit is taken upon entering the trade.

    The maximum gain is reached for the bull call spread options strategy, when the stock price moves above the higher strike price of the two calls, and it is equal to the difference between the strike price of the two call options minus the initial debit taken to enter the position.

    To put it simply, a Vertical Spread is an options trading strategy with which a trader makes a simultaneous purchase and sale of two options of the same type that have the same expiration dates, but different strike prices. The widening or narrowing of the difference between the option premiums on the two positions, determines the profits.

    The formula for calculating maximum profit is given below:

    •    Max Profit = Strike Price of Short Call – Strike Price of Long Call – Net Premium Paid – Commissions Paid

    •    Max Profit Achieved When Price of Underlying >= Strike Price of Short Call

    The bull call spread strategy will result in a loss if the stock price declines at expiration. The maximum loss cannot be more than the initial debit taken to enter the spread position.

    The formula for calculating maximum loss is given below:

    •    Max Loss = Net Premium Paid + Commissions Paid

    •    Max Loss Occurs When Price of Underlying <= Strike Price of Long Call

    Bull Call Spread Example

    If you believe that XYZ stock trading at $42 is going to rally soon, you buy a March 40 call for $300 and sell a March 45 call for $100. The net investment required to put on the spread is a debit of $200.

    If you bought the equivalent of 100 shares your investment would be $420.

    The stock price of XYZ begins to rise and closes at $46 on expiration date. Both options expire in-the-money with the March 40 call having an intrinsic value of $600 and the March 45 call having an intrinsic value of $100. This means that the spread is now worth $500 at expiration. Since the debit was $200 to enter the trade the net profit is $300.

    If the price of XYZ had declined to $38 instead, both options expire worthless. You will lose the entire investment of $200, which is also the maximum possible loss.

    If you owned the shares at $42 and it is at $38.00 you would incur a $400 loss so using the option has reduced your loss.

    To find out more about this strategy, join our 3-hour vertical spread training webinar, including 4 weeks of follow up live-trading sessions, starting on Wednesday 222nd February.

    This is an excellent opportunity to expand your knowledge and have another strategy available to make you a more profitable trader. We hold these training webinars only once a year and run them live to keep the information current and relevant to the market right now. This is great strategy for a conservative trader with limited funds. You will learn how to create a trading plan using the strategy that suits your risk profile. Visit https://www.stockcourse.net/wl?3i9=7t16325 to learn more.

     
  • Lyn Summers

    Lyn Summers 4:58 pm on November 15, 2010 Permalink | Log in to leave a Comment
    Tags: , , learning, money, portfolio, Stock Course, , , stop loss, trading coaching, trading journal, , ,   

    5 Tips for New Traders 

    So often when people hear I trade the Stock Market, they say “that’s risky”, or “that sounds very hard” and I can understand why. To an outsider the Stock Market can appear to be a big scary place, where you can lose all of your money in the blink of an eye- and, this is true if you don’t know what you are doing.

    I have been trading the markets for over 10 years now, however it has been a long journey and one which is constantly making me learn and grow each day. After leaving school in grade 9, I began work cleaning and continued this for the next 10 years. After hearing about the Stock Market through a friend, I was instantly drawn to trading.

    I immediately immersed myself in learning everything I could, studying and learning with experts and brokers. I followed their wins, their losses, examined their mistakes and their strategies. It was one of the most exciting times in my life.

    For 11 years now I have been trading the Markets.. have I lost money on trades? Yes, of course, but what most people don’t know, is that like anything in life, you must learn the rules and processes, or strategies as we say before jumping in- you can choose a strategy according to your level of risk and minimize losses by learning how to protect yourself.

    5 Tips for new traders..

    1) Get Educated.  I cringe when I hear of people who have put their money on the line without getting educated first. As they say ” pay for education or pay with pain”..and I have found this motto to be true time and time again. It is so important to learn what you are doing. You wouldn’t take a boat out into the ocean if you didn’t know how to drive it? or better yet without life jackets on board? So why risk your hard-earned money without 100% certainty in the decisions you are making. I have spend thousands of dollars, and countless hours learning from expert traders and brokers for over 10 years now, and to this day I am still constantly learning! One of the best decision I made was to travel to the US and complete a trading course. I also spent 4 weeks with an office of brokers and followed what they were doing. As there was nothing like this in Australia at the time, a few years later, with too many friends asking me to teach them how to trade, I began teaching and sharing my experience with others. Whoever you decide to learn through, I certainly recommend this is a vital part of becoming an expert trader and effective money management.

    2) Know your risk level and find your trading style . There is no point trading CFD’s if just the thought of it gives you nightmares. Each person has an independent level of risk that they feel comfortable with, and this is an important part of determining your trading personality. Find out what sort of trader you are? Do you want to day trade options? Or hold long-term leaps? What sort of time do you want to commit? Do you want to trade full time or part time?  Ensuring you diversify your portfolio accordingly is critical.

    3) Have realistic expectations When setting goals for anything, it’s important to be realistic. You want to set the bar high enough that you’re challenged to meet them, but not so high that they seem unattainable. Setting reasonable goals will keep you motivated and won’t have you feeling “behind” if you don’t meet your objective.With a portfolio of $5,000 you can’t expect to turn it into $100,000 in a year trading Stocks alone. Also, don’t be fooled into thinking that trading doesn’t take time- it does, especially in the beginning. You simply  cannot expect to spend 5 minutes a day and walk away straight off the bat. The bottom line is that it t is your money and you need to put the effort in and take responsibility.

    4) Paper Trade.. this one is probably one of the most critical steps in starting out at a trader. While you might be eager to rush in and make money, if you can’t master it on paper than why risk it?

    4) Keep a Trading Journal- Mental stops tend to get blown. Writing your trading plan motivates you to uphold your commitment. It will greatly increase your odds of reaching the goals you’ve set. Measuring your progress will keep you on your toes to alert you of possible needs to adapt your strategy. You may want to do a weekly review of your progress, with more intensive check-ups monthly and quarterly.

    5) Pay attention to your emotions. Mastering your emotions is one of the most difficult parts of trading. And most of the time you don’t even know it is affecting you. Most people say ‘Trade without emotion” or get rid of fear and greed. But in actual fact emotions are always going to be there, and you need to learn to deal with each one as it comes up. First, recognising the emotional states you are going through is important, write down what you are experiencing and why. If you find an emotional state such as excitement, or fear, is causing you to deviate from your trading plan, then you need to stop and take a breath before you jump in. For more articles on Trading Psychology go to: http://www.learntotradeshares.com/category/trading-psychology/

    It is my passion now to share my knowledge and experience with others. Through my company Stock Course I run weekly coaching webinars and market updates, so I can teach others to trade from the comfort of my own home in Sydney Australia.

    If you have a question about trading, you can email me at lyn.summers@stockcourse-team.net,  you can also get a copy of my E-Book at  http://www.stockcourse.net/welcome 

    Thanks for reading,

    Lyn Summers (More …)

     

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