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How Do ETFs Work? 27 Oct 2022 11:00 PM (2 years ago)

An exchange-traded fund (ETF) is a type of investment fund that tracks a particular index, commodity, or basket of assets. ETFs are traded on stock exchanges, and they typically have lower fees and expenses than traditional mutual funds. ETFs are also more flexible in terms of how they can be used by investors.

The Benefits of ETFs

There are several benefits to investing in ETFs. First, ETFs offer investors a convenient way to gain exposure to a wide range of asset classes and markets. For example, there are ETFs that track indexes such as the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite. There are also ETFs that track specific sectors such as energy, healthcare, and technology. In addition, there are ETFs that track commodities such as gold and silver. Second, ETFs tend to have lower fees and expenses than traditional mutual funds. This is because ETFs are generally more passive in nature and do not require the same level of active management as mutual funds. Third, ETFs offer more flexibility in terms of how they can be used by investors. For example, ETFs can be traded throughout the day on stock exchanges, and they can be bought and sold in a variety of ways.

Fourth, ETFs can provide investors with a way to hedge against specific risks. For example, there are ETFs that track the VIX, which is a measure of market volatility. There are also ETFs that track the price of gold, which can be used as a hedge against inflation. Fifth, ETFs can be used to gain exposure to foreign markets. For example, there are ETFs that track the MSCI EAFE Index, which is a broad measure of the stock markets of Europe, Australia, and Asia. Sixth, ETFs can be used to access alternative investments such as real estate and commodities. For example, there are ETFs that track the Bloomberg Commodity Index, which includes a wide range of commodities such as oil, gold, and silver. Seventh, ETFs can be used to implement various investment strategies. For example, there are ETFs that track the S&P 500 Dividend Aristocrats Index, which includes companies that have increased their dividends for 25 consecutive years. Finally, ETFs offer tax advantages in some cases. For example, ETFs that track indexes are generally taxed at the capital gains rate, which is lower than the rate for traditional mutual funds.

The Risks of ETFs

There are also some risks associated with investing in ETFs. First, ETFs are subject to the same risks as any other investment, such as market risk, liquidity risk, and credit risk. Second, because ETFs are traded on stock exchanges, they can be subject to short-term price fluctuation due to supply and demand imbalances. Finally, some ETFs are more complex than others, and they may be subject to additional risks such as derivatives risk. Investors should carefully consider these risks before investing in any ETF.

In addition to these risks, ETFs also have unique risks that investors need to be aware of. For example, because ETFs are traded on stock exchanges, they may be subject to market manipulation and other fraudulent activities. In addition, ETFs that track a particular index or sector may be more volatile than the overall market. Investors should research an ETF before investing to make sure they understand all the risks involved.

ETFs can be a great way to invest in a variety of assets, but it’s important to understand the risks before investing. With any investment, there is the potential for loss, so investors should always research an ETF before investing.

How to Invest in ETFs

There are a few different ways to invest in ETFs. The most common way is to buy ETF shares through a broker. Investors can also buy ETFs through a mutual fund, exchange-traded note, or unit investment trust. Another way to invest in ETFs is to participate in a exchange-traded fund’s initial public offering (IPO).

When investing in ETFs, it is important to consider the fees associated with the investment. Some ETFs have high expense ratios, which can eat into your investment returns. It is also important to consider the liquidity of the ETF. Some ETFs trade infrequently, which can make it difficult to sell your shares when you want to.

The Different Types of ETFs

There are many different types of ETFs available to investors. Some of the most common types include equity ETFs, bond ETFs, commodity ETFs, and currency ETFs. Equity ETFs track stocks or stock indexes, bond ETFs track bonds or bond indexes, commodity ETFs track commodities, and currency ETFs track foreign currencies.

Each type of ETF has its own set of benefits and risks. Equity ETFs, for example, may offer the potential for high returns (i.e. growth stocks), but they also come with the risk of loss. Bond ETFs tend to be less volatile than equity ETFs, but they may not offer the same potential for returns. Commodity ETFs can offer exposure to a wide range of commodities, but they may be subject to volatile price swings. Currency ETFs offer the potential for exposure to foreign currencies, but they may be subject to currency risk.

Investors should carefully consider their investment objectives and risks before investing in any type of ETF.

The Pros and Cons of ETFs

As with any investment, there are pros and cons to investing in ETFs. Some of the main pros include the convenience, flexibility, and low costs associated with ETFs. Some of the main cons include the risks associated with ETFs, as well as the fact that they can be subject to short-term price fluctuation. Ultimately, whether or not investing in ETFs is right for you will depend on your individual investment goals and objectives.

Some of the main pros of investing in ETFs include the convenience and flexibility that they offer. ETFs can be traded on major stock exchanges, and they offer investors the ability to invest in a variety of different asset classes and sectors. ETFs also have low costs associated with them, which makes them an attractive option for many investors.

However, there are also some risks associated with investing in ETFs. ETFs can be subject to short-term price fluctuation, and they may not always perform in line with the underlying index or benchmark. Additionally, ETFs are not without risk, and investors could lose money if the market or sector declines. Before investing in ETFs, it is important to understand the risks and potential rewards associated with them.

The post How Do ETFs Work? first appeared on Invest Internals.

How the Stock Market Works 27 Aug 2021 11:42 PM (3 years ago)

The stock market has been around for well over a hundred years, but surprisingly a lot of people know very little about it.  Some of that can be due to fear, not of learning, but just the sheer complexity of what goes on in a daily basis. It is also viewed as very risky by most people, which is totally understandable – it is if you don’t know what you are doing. Thankfully in the last 10 years or so the internet has helped out investor education by leaps and bounds. Its now quite easy to research the subject, although you might get more information than you can handle.

The basics of the market seem fairly simple enough. You have companies that issue shares to the public, and by owning a share of stock, you have a partial interest in the company that issued the stock directly proportional to the shares you own. Once the shares are sold to the public, they trade freely from person to person based on supply and demand. Some people think the share price will go higher in the future and buy shares, and others think that the share price will go lower in the future, and sell shares of the company. This is where the simplicity ends.

The first complication is with the word “future” as used above. Each person’s expectation is different. For one person, future might mean the next 3 months. For someone else, it might mean 1 year, and for others it might mean 5 or even 10 years. This affects the amount of shares they trade with (investment size) and how they place the order. In addition to this “future time”, each individual has investment goals, and each stock trade is a small part of the overall investment goal.

The second complication is that the actions of people looking to buy or sell shares is affected by outside sources. What do I mean by this? Well there are related companies to the one you might be looking at. What if you were thinking about buying some shares in automaker A, but another company, automaker B came out with very poor earnings and the price is down sharply. This outside news (its not directly about A at all, but a competitor) will most likely affect the price of A. The most likely scenario is A will go down also, because of fear that what happened to B will happen to A. BUT — that is not always the case. What if B had bad earning BECAUSE A is doing such a stellar job they are grabbing more customers for their cars? In this case A would go up on B’s demise. This type of cross action (usually called correlation or anti-correlation) can actually be several levels thick, none of which have a definable barrier. Meaning you have economic news that says new home are weak, company C, who makes air conditioners is down (because of perceived less demand from new homes), but then company D comes out with earnings that are very good, and company D supplies parts to company C and others like it.  What is going on now? You can see how confusing it can get quickly to determine the “future.”

This same scenario plays out with economic news on a daily basis. Economic news reports on the health of the overall economy, which in turn each company trading in the stock market is a part of. Each individual will assess the news in their own way, and this affects decisions also about not only what to buy or sell, but how much and when. While the rising price of oil does not really directly have anything to do with software sales, indirectly it does. As people and corporations have to spend more on gasoline, shipping costs and other indirectly related costs, they have less money to spend to buy new software. This type of interaction happens all the time, at any one point there may be 5-7 factors (or even more) that are affecting people’s judgement on the value of a particular stock. The price movements from day to day come from the side that has the most conviction for that short period of time.

A third, and not last, complication in understanding the stock market is the simple fact that share prices in the short term may have absolutely nothing to do with the viability or earnings of a company. Share prices can rise very quickly or sell down very sharply despite news or research to the contrary. Big players (mutual funds, hedge funds) often need to purchase or sell huge amounts of stock, often times equating to millions, or tens of millions of shares. Sometimes their agenda to buy or sell has little to do with recent news or prospects for a company.

Take this example. Fund A owns 10 million shares of XYZ communications. Fund A has been an investor in XYZ for over 5 years, and has an average cost per share of $6.00. XYZ is currently trading at a share price of $40.00 and all recent news is positive, as is all the news for others that are related. Fund A decides to allocate the money in XYZ to a few other, newer investments and decides to sell the stock. They don’t care about news, they want out to take their profits. So in doing so, the stock of XYZ sells down to $25.00 over the course of a few weeks, puzzling all the other investors who now think there may be something wrong. This leads to more selling. Ultimately the price of XYZ goes to $15.00 before the selling is done. Now if you knew that fund A was the only seller that caused most of the decline, and they were not selling due to the appearance of a problem, it would be easy to load up on cheap shares. However, the actual intentions of buyers and sellers are never known, creating more uncertainty.

All of this goes on every day in the stock market, on a grand scale. These are by no means the only things that affect price action in stocks, they are but a small amount of the factors. Understanding some of this can make everyone a better investor. This information is but the tip of the iceberg when it comes to understanding price movements and the stock market, and is a very broad generalization.

The post How the Stock Market Works first appeared on Invest Internals.

US Treasury Securities 4 Aug 2021 2:04 AM (3 years ago)

Just like debt issued by companies or cities, the federal debt of the United States is bought and sold on freely trading markets known as the US Treasury markets. When investors go to buy debt, they don’t go buy it from Uncle Sam, and in fact, it may be many days or weeks before a newly created US Treasury Security even makes it into private hands.

The Lifecycle of US Treasury Securities
On behalf of the government of the United States, the US Treasury issues what are known as Treasury Bonds or Bills to the marketplace of preferred banks known as the “primary dealers.” To become a primary dealer, a bank must be a large banking institution with a size and scope large enough to be one of the many member banks of the Federal Reserve System.

These member banks, or primary dealers, are required by law of the United States to buy US Treasuries at each Treasury auction. This means, that no matter how much debt is for sale at any given time, all of it must be absorbed by the primary dealers who participate in auction-style bidding for the Treasury debt.

Bids are placed on Treasuries based on the interest rate, with primary dealers bidding down the interest rates they’re willing to accept to buy a particular Treasury bond. After the firms submit their interest bids and their desired quantities, the US Treasury reviews the bids and accepts the lowest interest bids until all bonds and bills from that particular auction are sold. Typically, the Treasury auctions no more than $60 billion of debt per week; however, depending on the amount of debt maturing at that particular time, or the necessity to fund newly crafted Federal budgets, the Treasury may auction $100 billion in debt or more. Consider also that after having paid off old debts, the Treasury may auction off a new Treasury security to continue financing operations.

How Ordinary Investors Buy US Treasury Securities
While ordinary investors cannot purchase US Treasury Securities at the primary dealer auctions, individual investors do have ample opportunity to invest through a number of different retail investment vehicles. Traditionally, it is the case that the primary dealers, having already satisified their demands for government debt, find it attractive to create their own mutual funds, exchange-traded funds, or other investments for individual investors. Alternatively, primary dealers may choose to instead pass the debt onto the private markets where individual investors can bid among other smaller banks for access to US debt.

For most investors, purchasing US debt through the Treasury makets isn’t exactly a winning proposition. For one, US Treasury bills and bonds are issued in denominations of $10,000, thus requiring that investors put up a whopping $10,000 just to buy one Treasury bond. Well, given that most investors don’t save $10,000 per month, or maybe not even per year, amassing such investment capital isn’t only unmanageable, but also impractical.

As a result, one of the best ways to access the US Treasury market is to participate in one of the following investment products:

• Treasury Securities or Fixed-Income Investment – brokerage firms and investment management companies of all types offer plain-vanilla funds that invest in a myriad of different US Treasury securities to produce a long-term safe haven for investment capital.
• Mutual Funds – Mutual funds based on US Treasury Securities are another popular investment as the investor can choose to automate their savings (apply a certain amount to the fund per month) as part of a routine retirement savings plan.
• Exchange-Traded Funds – Due to a groundswell of new exchange-traded funds, investors wishing to access the US Treasury markets can buy into a number of funds that offer different exposure to different maturity dates. A short-term fund, for example, would buy into US Treasury Securities with a maturity date of 1-5 years, while mid-range funds seek 5-10 year bonds, and long-term funds may buy anywhere from 10-20 years, or even occasionally purchase the 30-year “long bond.”
• Money Market Funds – The most liquid of the four investments, money market funds achieve returns that are in-line with short-term US Treasury products. Generally, investment managers purchase US Treasuries with maturities of less than one year, and pass on the benefit to investors of being able to access their money at any time. Take into consideration that having access to your funds immediately does come at a cost, as money market funds usually provide returns substantially lower than other Treasury products.

All told, US Treasury Securities are highly-liquid, safe, investment vehicles that provide an average rate of return of 5-6% per year, depending on current economic conditions and US debt loads. As a historical guideline, expect to earn lower yields during economic downturns (when investors appreciate better the safety of US Treasuries) and higher yields during economic booms (when investors prefer investments with higher risks, but higher returns.)

The post US Treasury Securities first appeared on Invest Internals.

Day Trading System 3 Aug 2021 11:04 PM (3 years ago)

I am often asked about day trading systems. Generally exactly what I’m referring to are stock index systems (E-minis & & S&P s etc). I do not have much favorable to say about these types of methods. I do not think I am being unfairly biased; I’ve invested over 15 years investigating all kinds of trading systems.

Day trading appears to please the want for action and enjoyment in numerous traders. Often I think these traders are not looking to generate income however keep constant adrenaline pumping through their body! From my perspective, I can not think of even one day trading system from five years ago that is still doing today, that is right NOT ONE! Maybe a few have had occasional “& ldquo; return & rdquo; periods, however I m discussing 5 years of strong performance. A well respected trading system designer who developed some popular short term index trading systems has supposedly informed a few of his clients that even he thinks they only stand for 2 or 3 years at finest (he’s currently got rid of one from his offering and slashed the cost on another). Frequently, the day trading systems that still look excellent hypothetically are not reasonably factoring in slippage and commission costs that consume up performance. I’ve seen’some vendor s factor in no slippage! When extraing sensible slippage the systems go from looking fantastic to looking bad.

It is logical that nowadays trading systems might break down. The exact same thing that can trigger them to look so compelling coincides thing that breaks them down.

When working with one market (S&P s) or sector, it becomes simple to “& ldquo; optimize & rdquo; efficiency. Traders can & ldquo; force & rdquo; the computer to show them phenomenal performance just from pure curve-fitting of that past data on that one market or sector, however when dependant on the marketplace qualities of simply that one market or one sector what’s going to take place when that market sector modifications? It reminds me of the study that revealed that the drop in the S&P in 1987 must have only been a when in a several hundred year event based upon the existing data, yet it happened in the first couple of years of the index trading! Markets change constantly and traders need durable systems.

On the various other side of the spectrum, let’s look at trend following techniques.
They are not almost as “& ldquo; attractive & rdquo; as day trading. Traders could undergo extended drawdowns or flat periods prior to making money, but consider this; Richard Donchain developed some basic trend following rules promoted back in the 1960′& prime; s. Those approaches still work today, more than 30 years later on!

I’m not saying I would trade those Donchain methods now. I think there are far much better reward-to-risk systems and strategies offered (such as ours), But it strikes me as significant that longer-term trend following approaches made popular in the 60′& prime; s still work today. Yet, I can not think of one day trading system from even 5 years ago that is still working today. Does that say something? I invest my own money in the commodity markets with approaches that would be thought about mid to long term trend following, but, I do not invest even one cent in day trading approaches.

Now, all that being stated I do have something positive to state. My research has revealed that brief term (not day trading) systems can have reduced relationship to longer-term systems. So the right, short-term system could help ravel the performance of a suitable longer term system. Even if, that short-term system is low by itself, it might possess a synergistic result when properly combined, however if that low relationship is the result of a curve fit system that is specific to break down, then there is no gain.

I do continue to dedicate time and research to short-term systems. Perhaps at some point I will have something that I believe is worth launching. There are MUCH MORE individuals thinking about a short-term index trading system than almost any other individual commodity trading system. Owning an excellent short-term system would be in my finest interests, but so far I’m not encouraged that I should dedicate any of my own money to those approaches because of the constraints I described above. I do not desire to launch something then have to embarrassingly eliminate it a few years later! I’m scared I’ve seen others experience this already. Personally I’m adhering to trading systems that have actually worked for a long time, and exactly what I think will continue to work.

The post Day Trading System first appeared on Invest Internals.

Trader Linda Raschke: Tips On Day-Trading the S&P 500  26 Jul 2021 11:04 PM (3 years ago)

The S&P 500 futures market is a trading arena unto itself, which can accommodate many different trading styles, according to Linda Bradford Raschke, a well known trader, lecturer and president of LBR Group, Inc.

“Not only does this market display a different daily profile than the other futures markets, but it has a much longer “length of line” (intraday swings), which offers more trading opportunities, she said. “Additionally, there is a wealth of information provided by many internal indicators on the equities market that some professionals like to monitor.”

Below, the longtime trader provides some tips on trying to be a successful S&P 500 day trader. “However, let me also say that the majority of the professional S&P day traders I know tend to specialize in just one pattern or trade just one style. This is definitely a market where overtrading can be a temptation.”

“Swing Trading” Concepts

The principles of “swing-trading” involve applying basic technical analysis to the secondary fluctuations which occur in a market, said Raschke. “We can apply these principles to all timeframes and all markets, but they work particularly well with the S&Ps, so a brief summary is first in order.”

Swing trading is following the price action and learning to anticipate the market’s most probable course of action. “We learn to determine the immediate trend by observing whether upswings are greater or lesser than downswings. In a simplified model, we look to enter on retracements in the direction of the trend. An early sign of a trend reversal is a ‘test’ of a most recent extreme price level which usually forms a higher low (or lower high).”

A trend reversal is confirmed when the upswing leg exceeds the length of the downswing (or vice versa). If a trader enters a position on a “test” looking for a trend reversal, but does not get this confirmation, he should exit the trade or pull his stop up close to his entry price, said Raschke.

There are also periods of market rest, consolidation or low-volatility range contractions. These patterns provide an opportunity for traders who like to trade “volatility breakouts”–a methodology in which one waits for the market to tip its hand with a powerful thrust and then jumps on board in the direction of the movement. “This too, can be a form of swing trading, as we are playing only for the market’s next immediate move and not making any longer-term valuation judgments.”

“When a trader practices the principles of swing trading, he learns to develop a conceptual roadmap in his head. In the S&P market, it is particularly important to learn to think in terms of concepts because there can be so much distracting intraday noise.”

Some more examples of concepts, in S&P 500 trading, are: mid-morning trends tend to carry into 11 a.m. Central Time, plus or minus 15 minutes. The best average intraday trends tend to last 45 to 90 minutes before having a countertrend reaction. The earlier a trend starts, the earlier it “peters out.” There is often an opportunity to play off a reversal of the move into 9 a.m. Central Time, plus or minus 15 minutes. The markets tend to be more emotional at the beginning of the day, when a good move counter to the initial opening swing can occur.

“If you learn to think in terms of concepts, you can master the markets instead of becoming a slave to the charts,” said Raschke.

Time-of-Day Tips

On average, there are only two to three “great” S&P 500 intraday “legs” or swings, said Raschke. “Most professionals catch only three or four really great trades a week, if that. Most trades will often be very small wins and losses. So don’t be too harsh on yourself if you feel that you are missing the majority of the movement. Overtrading suckers one into seeing only the trees and missing the forest.”

Traders tend to be creatures of habit, and thus it is easy to compile market tendancy charts. There are several key patterns which have held constant over time, she said. “One common pattern might be the market rallies or sells off into noontime. At this point, a large percentage of the floor traders and brokers in New York go to lunch and a countertrend correction begins. When the late stragglers get back from lunch, the morning direction tries to reassert itself again.

“If the afternoon rally or sell-off starts too soon, it won’t be able to sustain itself through the end of the day. It will die out around the bond close. However, if there is an afternoon ‘shakeout’, usually between 1-1:30 p.m. Central Time, then the market can finish in a trend mode into the close.”

Raschke said not to fade a move into the last hour of the day, “for there is no time to exit gracefully if wrong. The odds suggest a better entry price the next day on the probable morning follow-through. Moves on Friday tend to end at 2 p.m., not 3 p.m. Central Time, as too many traders prefer to flatten out or even up before the weekend.

“On many days there occurs what I call the 2 o’clock jiggle. Right around the time the bonds close, there is a great 10-15 minute scalp trade. I believe it occurs as an emotional reaction to how the bonds go out. The trade usually lasts for no more than 10 to 20 minutes, but is fun to anticipate.”

Sometimes a good selling opportunity occurs around 1 p.m. Central, she said. “In fact, it is amazing how many good turning points occur on hourly readings, for example, 9:00, 11:00, 12:00. It think this is because people are more conscious of time at these moments, creating a slightly sobering effect.”

About the Author Jim Wyckoff has been involved with the stock, financial and futures markets for more than 20 years.  He was born and raised in Iowa, where he still resides.Wyckoff became a financial journalist with Futures World News for many years, cutting his teeth as a reporter on the futures trading floors in Chicago and New York, where he covered every futures market traded in the United States at one time or another.Not long after he began his career in financial journalism, he began studying technical analysis. By studying chart patterns and other technical indicators, he realized this approach to analyzing and trading markets could level the playing field between “professional insiders” in the markets and individual traders. His extensive studies of technical analysis and knowledge of markets led to several positions, including chief technical analyst at several well-known companies.  He says his mission is not just to generate profits for traders but to also provide them with educational and insightful information because, in the fascinating business of trading, one never stops learning. Wyckoff received a Bachelor of Science degree at Iowa State University, graduating in 1984 with a major in journalism and a minor in economics. He and his wife have two children, a son in high school and a daughter in college. When he’s not analyzing markets and educating traders, Wyckoff says he loves adventures, from driving a Jeep across the highest mountain pass in the continental United States to extreme winter camping in the Boundary Waters to hiking in the jungles of South America.

The post Trader Linda Raschke: Tips On Day-Trading the S&P 500  first appeared on Invest Internals.

Dow Jones Breaks Overhead Resistance 18 Jul 2021 11:13 PM (3 years ago)

The upward momentum of the Dow Jones breaks overhead resistance and closes near its high for the session.(See chart below). I am not surprised but it is not what I expected. This is unusual behavior but as I mentioned, the market can do what it wants. For many, selling into resistance, on strength, is OK. You may or may not get the exact high but you will get a good price as you close out your positions. In trying to anticipate a market turning point to establish new short positions, in this daily market before it happens, is not always the best approach. I have done this on occasion in my own day trading, anticipating the likely path of price, but it is usually best to let the market confirm and tell you what it will do.

At this point, as mentioned in my last blog posting, being objective and open minded, the current momentum is still up on the daily as well as the weekly, and monthly. A break down will first be seen in the daily but until that happens, the path of price is still up even though it is surpassing some good established resistance. It is best not to argue with the market.

At key market turning points, it can be very tricky to catch the top. With that said, I have an updated chart of the Dow with the same notes as I have been writing all along the way. You can see the most recent comments from three sessions ago, about the current trend. You will see the comment, “IF”. That is a big word in that it is conditional. If this, than that. If, something happens to trigger the selling, you will see a lot more of it. If the momentum remains intact, the path of price is still up, just as it is.

In the monthly chart there is room enough for price to move up to the 16,000 level and still be at the extreme high of that chart pattern. Is it possible for prices to move higher than that? We would have to say yes. Would I be surprised if they do significantly, yes also, but that is just my opinion. I could be wrong at any time, because that is just the way it goes and apart of being a trader. We don’t or won’t always get it right.

We as traders should only move on the market when the price has confirmed it’s intentions. Taking a preemptive strike can work but when establishing a new position, but it is best to wait for confirmation. That is what my method would say anyway. I know others will often do different and that may not be wrong for them, but may be how they take on risk. We don’t pick market tops and bottoms to establish new positions, but are happy with a piece or pieces in the middle.

With that said, let me bring up today’s NQ emini futures trading in the late morning. In looking back at it, I will point out an example of just what I was talking about.

In the bigger short move about 8:30 West Coast, that was a 9 point move on the last portion of the original entry. I took on only 2 ticks of draw down after the entry and closed the last on the original entry, just one tick off the low of that move. That is an example of covering into weakness, which would be the same as selling into strength if long.

I would not try and buy that spot to establish a long position, but others in their method may try and do just that. It is different. My method pointed to that area exactly and that is what I call a “trade to target”, but covering some along the way is a conservative approach. I did add on, before I started to cover any, which can bring on more risk, but good trade management had me covering all the position if it turned against me for a still healthy gain.

You can see what a I call a “market turning point” just after that low mentioned and that would be a safer place to get long, not because of the indicator, but the method first. Price and what makes up the possible trades is always first and the basis for our trades, The  indicators do a nice job to confirm, but is never the basis for the trades themselves. That is very important, for us anyway.

I hope you all have enjoyed the commentary and examples on the market action. I will be back to pick up where we left off soon. Best trade to you, Vince

The post Dow Jones Breaks Overhead Resistance first appeared on Invest Internals.

Financial Spreads Research Report 14 Jul 2021 11:23 PM (3 years ago)

Although the Financial Spreads website is relatively new to the market, the technology, pricing and service is provided by London Capital Group which is authorised and regulated by the Financial Services Authority and a member of the London Stock Exchange.

Financial Spreads aim to provide highly competitive prices with tight spreads on top of a simple, friendly and efficient service.

At FinancialSpreads you can trade a wide variety of markets including shares, stock market indices, commodities, forex and more. For each market Financial Spreads:

* Regularly assess our markets and are constantly keeping our spreads tight
* Add Automatic Stop-losses (please note that stop-losses are not guaranteed)
* Commit to a simple, friendly and efficient service
* Provide the same high level of service that we expect when we trade

In short, Financial Spreads provide a high quality service.

Ethics

It is often the case that some business models don’t work because they pitch The Trader vs. The Operator. It becomes a punter vs. the bookmaker situation. That is fine if you want a bet on the football but not when you are investing.

Financial Spreads want you to profit. That is why some of the best ways to help you maximise your wins and minimise your losses are presented. These tight spreads allow for greater profit and the automatic stop losses (stop losses are not guaranteed) are there for when your investments don’t go according to plan.

Why FinancialSpreads?

Trading with FinancialSpreads, as opposed to other spread betting companies, means:

Tight Spreads – (better value for money)
Low Margin and Overnight Financing
Wide Range of Products
Responsible Trading with Automatic Stop Losses*
24 Hour Trading
Treating Customers Fairly

Low Cost Dealing and Tight Spreads

FinancialSpreads was launched with the intention of provide all customers with the best service and some just about the very best value spreads in the market. The main cost to financial spread betting clients is the spread (the difference between the sell and buy price of a product). The wider the spread, the more costly it is for you to trade.

Low Margin Requirements

Margin is the amount of money you need in your account in order to open a trade. We offer exceptionally low margin requirements across all our markets, meaning you deposit only a small percentage of the total notional value before opening a trade. For example, the Min IMR for the FTSE Rolling is 30, meaning for a £1 trade you need a minimum of just £30 in your account to open it.

Wide Range of Products

FinancialSpreads.com offers you thousands of different products including shares, commodities and metals, currencies and indices. We quote Futures contracts as well as Daily and Rolling Daily contracts. You can make a trade on a variety of these products in just one currency.

Responsible Trading with Automatic Stop Losses*

Spread Betting is a high-risk activity, but FinancialSpreads want you to enjoy your spread betting experience. Every trade you open will have a mandatory/automatic stop loss* attached which is designed to help mitigate losses when you open a trade.

*Stop losses are not guaranteed, so are subject to slippage.

24 Hour Trading

Many of the markets can be traded 24 hours a day including the major currency pairs and US indices.

Flexible Orders

FinancialSpreads offers you a totally flexible stop loss facility meaning you can amend or revise stops to suit your needs. You can also create an opening order (with a stop loss and limit attached) to open a new position at a different level to where the market is currently trading or a limit order to close a position when you’ve reached your desired profit.

Professional Browser Based Trading Platform

It is not necessary to download any software in order to access either our demo platform or the live trading interface. This means that you should be able to access your account from anywhere in the world that has an internet connection.

Free Charting Package

The FinancialSpreads website provides a FREE real-time, streaming charting facility which features both charts and diagnostics on all of our spread products. These sophisticated charts represent the FinancialSpreads prices which are derived from the underlying markets. A thorough tutorial is available from the trading platform which walks you through how to use the charting package.

Small Minimum Stake

With FinancialSpreads you can trade from as little as £1 per point across all the markets we offer.

Learn to Spread Bet

It is not expected that you leap into spread betting without any help, so FinancialSpreads provide you with comprehensive, online learning tools such as our online Demo Account (which mirrors our live trading environment, other than the variety of products and the need to deposit funds) and User Manual.

Customer Support

Don’t think just because our spreads are better value you’ll get a lesser service – our customer support is second to none. If you want to speak to our knowledgeable and friendly Customer Support team do not hesitate to call &tel; or email &email;

We believe that FinancialSpreads stands out from the competition as the obvious choice for beginners and professionals alike. We are committed to quoting amongst the best prices in the industry and feel certain that this, coupled with our customer service policy, will keep you coming back for more.

Our customers are our most valuable asset and consequently we want your experience with us to be as harmonious as possible. We pride ourselves on our openness and relish client feedback, so if you have any problem or query please call or email us. We are at your service.

The post Financial Spreads Research Report first appeared on Invest Internals.

Free Online Stock Trading 8 Jul 2021 11:29 PM (3 years ago)

In the past, if you wanted to trade stocks you had to use a licensed stock broker to handle the buy and sell order for you. There were always significant costs associated with the transaction, sometimes upwards of $50. Newer investors who did not have a lot of up-front cash would be limited to just a couple of trades per month before of this cost. If you had big dreams of your investment strategies, they would take longer to achieve because of the higher cost associated with buying and selling. This is why free online stock trading has become a new favorite past time among even amateur stock traders.

When the internet came into existence, a lot of businesses dramatically changed. One of these businesses was certainly the stock trading industry. Now that the internet has opened a whole new world for stock traders, no longer do you have to rely on a stock broker. By using free online stock trading sites, investors save a ton of money and they can go online 24 hours per day to access Wall Street and their account information. In fact, you can make your trades at any time of the day or night.

Now, if your stock broker is on vacation or at a training event, you do not have to wait for him to get back home and have time to call you back. Instead, you can get online 365 days out of the year, 24 hours a day and make your trades. If you decide, after seeing something interesting on a financial TV show, that you need to make a trade at 2am then you are able to get right online and do it. Your trades are done instantaneously as soon as you click your mouse. Instead of having to wait for your stock broker to have time for you on his long list of things to do, you simply click a button and your trade is completed within a few seconds.

Some of these free online stock trading websites offer a certain number of free trades each month before charging for anything. Unless you are already a big time trader or have a lot of money you need to invest, you will be just fine. Once you get over a certain amount, there may be a small fee involved for each trade for that month. However, it is still a lot better than paying a stock broker a fee for each trade you make.

These websites also tend to provide a lot of training opportunities for new and even experienced investors. You can research and learn a lot of valuable tips about stock trading, as well as get investment advice. You might find research tools that can even help you to make good decisions based on facts about the stock you are thinking of buying. After all, it only helps these sites when you do well and make money because you will then come back to make more trades later!

The Difference Between Paid and Free Online Stock Trading Services

Once we get used to paying for something-like trading stocks- it makes us wonder what we are going to lose by using a free option. This works the same way with almost anything that you may have gotten used to paying for. It works the other way around as well. Is there something you have always gotten for free (like e-mail) and have the choice of paying for it? Now the question is, what extra benefits am I receiving.

Believe it or not, with a free service you are not losing very much. Many times the free service is under a few conditions, a minimum account balance, a minimum or maximum number of trades every month. Or a monthly fee to offset trading costs. For example, if you are making 100 $10 trades, a $50 monthly fee with ‘free trades’ is a good deal. The point is, it exists but look into the fine print. You aren’t necessarily losing anything and you aren’t necessarily being scammed, but look into the conditions which need to be met in order to receive your free trades.

Usually in these different levels of accounts (free, paid, pay per trade, flat fee, etc) there may be a difference in the amount of information the site provides you regarding the stocks. This extra information is usually not needed, it can be found elsewhere, but can be a nice bonus, or may be packaged more conveniently for you than to have to look everywhere for it.  You may get to be on a bonus newsletter of some sort as well. Usually higher paying, or higher balanced customers get preferential treatment of some way.  But don’t let them fool you, if you want the free account, you do not need those extras to make your trades, just do your due diligence with other sites, books, and your own strategy.

You don’t need the perks, find your strategy by playing with free online stock trading sites and follow your strategy, do not try anything you haven’t tested, no matter what some guru, expert, pro millionaire says. Just because it worked for them doesn’t mean it will work for you. Test before doing anything, don’t worry about missing out on anything, you will find your own winners.

As you can see, most of the differences are cosmetic, informational, or numeric limitations. If you only do several trades a month you will need a much different plan that someone who does hundreds. Look into all of the plans and figure out which suits you best, it may very well end up being cheaper to get a paid plan than a free one. Do your research!

Practice Trading Stocks With Free Online Stock Trading

Trading stocks can be scary. In essence, it feels like betting, you are paying a certain amount of money for a ’stock’ which will either become worth more or less. In a worst case scenario, it becomes worthless and you have lost all of the money. In a best case scenario, the stock triples and you can sell it with a profit. But how can you tell when the stock will do either?

There are many different theories on this, but testing for yourself is the best way to find out. Do not test with your own money unless you are loaded and willing to lose money. Test on a free online stock trading site. These sites allow you to ‘purchase’ stocks with fake money and track them for you as they are doing in real life. Test out some of your own theories and see how they work. If you make millions in the game, then try it a bit in real life.

Don’t start out with tons of money, just $50-$1000 whatever you can afford. You might surprise yourself with your picks and earnings. But make sure it is money you can lose, because you are new at this and could possibly make a mistake.

This can be a fun and rewarding way to learn about using the stock market. Many of the free online stock trading sites have competitions where you can win prizes or money by making the most amount of money over a certain period of time.

You can learn from your peers. Many of these sites have social capabilities where you can see what your peers are buying and selling. This can help reassure your choices, or make you question them. Find someone who is doing very well and follow them, see what choices they make and why. Don’t copy them, but review their strategy and see how it might fit in with yours.

Using these free online stock trading sites can help you clearly define your market strategy and allow you to enter the real market confident and ready. You know that you may lose money, but you are prepared for it. You understand loss and gain, you need to understand important stock trading concepts prior to buying for real such as buy and hold, selling at certain percentage gains, dollar cost averaging, etc.  Make sure that you have seen all of these terms being used and understand  their use and their meanings. Become familiar with all of the basic stock market lingo and theory before touching a stock. Beware of penny stocks too. These can be fun to play with on the free online stock trading sites, but I would not touch them with real money until you were experienced with a few years of trading and making money.

Remember, you don’t need to be a millionaire day trader to make money in stocks. Buy and hold is a wonderful strategy that makes many people rich over time, play with this and the other theories, perfect it and then make some real money!

The post Free Online Stock Trading first appeared on Invest Internals.

How Much Capital Does A Day Trader Need 27 Jun 2021 11:35 PM (3 years ago)

Working Capital needs come out of your firm’s requirement to meet cash needs. This is of course not the type of business finance and funding that you need when you acquire assets such as equipment.

How then can the Canadian owner and business manager determine the amount of cash flow needs, as well as the best way to solve the problem… i.e. a solution!

The way to do that is to spend some time on whets known as your ‘ trading cycle ‘… aka ‘ cash flow cycle ‘.

It’s all about understanding how your payables arise and how the products and services you purchase translate into either inventory or direct to sales. And here’s the secret – the speed, or total time it takes for all that to happen in effect determines your cash flow and working capital funding needs.

To make the actual calculation work you need to look at turnover in your receivables, inventories (if applicable) and payables. Payables are of course ‘ cash outflow ‘but still very important in our calculation.

Most business owners or financial managers probably intuitively know how long it takes them to collect their sales receivables . The days of sales you have tied up in receivables is calculated by taking your average A/R balance and dividing it by your average daily sales. Hopefully every business owner has quick access to that data… if he or she doesn’t we suggest… there’s a problem!

Not every company has inventory, but if your firm does the amount of additional product you have to carry translates into extra cash need.

Remember also that those two asset categories, receivables and inventory are your main borrowing collateral in working capital funding. Also note that typically with a standard bank arrangement you can typically borrow 75% of your total receivables and (hopefully) some type of percentage against your inventory.

One of the alternatives to traditional bank financing in Canada is asset based lending – here it’s important to note that typical a/r advances are 90% of total a/r, and a healthy borrowing base against inventory . (Every company and industry is a bit different when it comes to inventories).

It’s a truth in Canadian business that if your business is growing it needs money. And don’t forget that a lot of businesses also have to juggle seasonality of sales and buildups in A/R and inventory. Think of it this way – Receivables Eat Cash! Thats one reason why high growth companies that seemingly are making money are in huge negative cash flow problems that need to be addressed.

How does the Canadian business owner address these challenges? The solutions are readily available:

Receivable Finance
Inventory Financing
Supply chain finance
Asset based lending
Tax Credit Monetization

Speak to a trusted , credible and experienced Canadian business financing advisor when it comes to determining both what your working capital and business finance funding need is, and .. where to get that problem solved!

The post How Much Capital Does A Day Trader Need first appeared on Invest Internals.

How This Correction Will Play Out 21 Jun 2021 11:48 PM (3 years ago)

What Our Model States

Our model states that the U.S. stock market is not in a bear market. We do not define bear markets as declines that exceed 20%.

U.S. bear markets can only be caused by two things.

1. Fundamental problems in the U.S. economy.
2. A U.S. stock market bubble.

Despite Friday’s weak jobs report, the U.S. economy is still strong. Hence, a bear market like the one from 2007-2009 will not unfold. In addition, the U.S. stock market has not reached bubble territory yet. Thus, a bear market that’s caused by the deflation of a stock market bubble will not occur.

However, our model has been predicting a significant S&P 500 correction since the end of March 2015. We define a significant correction as either a big correction or a long consolidation.

Our model’s prediction is based on one simple premise: significant corrections always follow significant rallies. Here are some historical examples.

The above chart illustrates a multi-year rally from the end of 1962 to the beginning of 1966. A big correction that lasted many months followed the multi-year rally.

The above chart illustrates a quick but massive rally from 1982-1983. (This rally followed the long correction of 1980-1982.) A long consolidation that lasted many months followed this massive rally.

The above chart illustrates a multi-year rally from the end of 1987 (post-October 19 crash) to the middle of 1990. A big correction that lasted a few months followed this multi-year rally. Note that this correction was also driven by a U.S. real estate market bust.

The above chart illustrates a short but furious rally from 2003 to 2004. This rally marked the first leg of the 2003-2007 bull market. A long consolidation that lasted many months followed this big rally.

The above chart illustrates a short but furious rally from 2009 to 2010, just like the one from 2003 to 2004. (The first rally in every bull market tends to be short and furious because stock prices are extremely undervalued by the end of the bear market.) A big correction followed this big one year rally.

Neither a big correction nor a long consolidation has been completed as of September 6, 2015. As a result, we are sitting on 100% cash. Here is our plan of action.

1. If the S&P 500 makes a new high after Thanksgiving, we’ll buy stocks. Or…
2. If the S&P makes a new low (i.e. falls below 1800), we’ll buy stocks.

Thoughts on the Stock Market

Our model tells us that a big correction or a long consolidation will be completed sometime in the next few month(s). But our model does not tell us specifically whether this will be a big correction or a long consolidation.

Although we follow our model 100%, it’s worth estimating the odds of each scenario playing out.

As you know, the S&P 500 and other indices crashed on August 24, 2015. Here’s what happens to the S&P after it falls more than 5% from yesterday’s close $.

1. August 8, 2011: The S&P bottomed 2 months later.
2. May 6, 2010: The S&P bottomed 2 months later.
3. August 31, 1998: The S&P bottomed 1 month later.
4. October 27, 1997: The S&P bottomed the next day.
5. October 13, 1989: The S&P bottomed the next day.
6. October 16, 1987: This was one day before the infamous October 19 1987 crash.
7. September 11, 1986: The S&P made a marginal new low by the end of September.
8. May 28, 1962: The S&P bottomed 1 month later.

As you can see, the S&P’s bottom was never in when this signal came out. The market always made a lower low after it crashed more than 5%, historically speaking.

*While this study is worthwhile, we do not use short term indicators like this in our long term S&P 500 model. Short term indicators can be easily broken by quants, even if the indicators have a 100% historical success rate. So while it’s extremely likely that the S&P will make a lower low in the near future, perhaps this time it will buck the odds. Quants have killed the effectiveness of many short term indicators.

Many investors have been discussing the 7 year economic cycle.  This cycle states that an economic expansion can continue for up to 7 years before economic woes emerge. If this theory holds true, then the U.S. economy will start to deteriorate before mid-2016. In fact, U.S. economic data has already begun to deteriorate, as was evidenced from Friday’s disappointing jobs report.

Perhaps the continued deterioration of economic data can push U.S. stocks lower. Who knows. We do not use economic cycles in our long term S&P 500 model. However, any factor that confluences with our model is worth noting, so perhaps the 7 year economic cycle will play out this time around.

The post How This Correction Will Play Out first appeared on Invest Internals.