Friday, 25 January 2008

Is Stock Trading Full Time Profession ?

Trading should be profitable and time efficient. Enjoy the endless news and different opinions from so called analysis. P.E ratio, eps, roe and all other complex terms to understand the potential of the company, company management structure, expansion plans, product development, etc. are all pieces in a complex and often very puzzling profile for any company you may be studying.

Stock trading full time kya ? Market analyzation can take the stress out of over indulging in market babble and deliver a far more profitable time/ROI ratio.
The bottom line is that there are an plenty of market forces that will move the price of a stock. Market forces can be measured, represented, and evaluated using indicators so the trader can move with advantage in any market trend.

Therein lies the importance of mathematical based systems for trading that objectify the evaluation of stock choices, quantify the historic patterning of an individual stock pick, and remove the traders anxiety over what forces may be playing the most significant role in their stock portfolio's movement.

Here are a few that can be used for purposeful trading.

Fibonacci Numbers and the Golden Ratio

Fibonacci numbers were originally developed well before the world even knew what publicly traded stocks were. The application of Fibonacci numbers and the Golden Ratio to stock prices revealed that stock markets trends tended to be more geometric than most researchers first realized. The premise is that human nature is predictable, and that the resulting changes in the stock prices are attributable to this expected behavior.

This is an interesting concept, but it was adapted to the stock market, not developed for it. Some stock trading systems may incorporate portions of this tool, but there are other indicators that should be accounted for in order to successfully predict future trends.

Elliot Wave

Elliot waves were developed to classify price fluctuations as either impulse waves or corrective waves. They are a simplified way of graphing actual stock price fluctuations. Elliot waves can help you identify trends and predict stages of a stock cycle. Just like any other investing tool, they are not always correct, but they can improve your ability to forecast market fluctuations.

Investors can benefit by using this tool, but it should be supplemented with additional tools to provide a more complete picture of expected stock price trends. Elliot wave charts are useful, but they do not fill the need for stock trading systems.

Bollinger Bands

Bollinger Bands were developed by John Bollinger as a way for measuring volatility in stock prices. One moving average serves as a baseline average. A higher band serves as the upper range of stock price, while a lower band likewise serves as a lower range. The greater the range between the bands, the more volatile the stock price is.

Bollinger Bands are a simple way for identifying risks and opportunities within stocks by giving a somewhat clearer indication of what the likely ranges for change will be in the future. This system has had some successes and provides a simple method for predicting stock price behavior.