Archive for September, 2007

Technical Indicators

September 26th 2007 Posted to Learning Options

There are six main technical indicators that I use to analyze stock charts.  Those indicators are defined below: (Click on the hyper links for more detail at wikipedia.org)

  1. 5 day SMA – Simple Moving Average.  The 5-day simple moving average is calculated by adding the closing prices for the last 5 days and dividing the total by 5.

  1. 20 day EMA – Exponential Moving Average.  Applies weighting factors which decrease exponentially. The weighting for each older data point decreases exponentially, giving much more importance to recent observations

  1. Accumulation/Distribution Index - a cumulative total volume technical analysis indicator created by Marc Chaikin, which adds or subtracts each day’s volume in proportion to where the close is between the day’s high and low

  1. MACD - Moving Average Convergence / Divergence, is a technical analysis indicator created by Gerald Appel in the 1960s. It shows the difference between a fast and slow exponential moving average (EMA) of closing prices

  1. RSI – Relative Strength Index, is a financial technical analysis oscillator showing price strength by comparing upward and downward close-to-close movements.

  1. Stochastic – Stochastic Oscillator, Transaction signals can be spotted when the stochastic oscillator crosses its moving average. There are two Stochastic indicators the Fast and Slow.  The Slow indicator is smoother and creates less false signals

Next I will discuss reading charts. 

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Aren’t Options Risky?

September 25th 2007 Posted to Learning Options

A lot of people think that options are very risky.  In reality if you do your homework, like you should before you buy any stock or options, they are no more risky than buying stock.  In fact in most cases it is less risky because you are using leverage.  You can control more shares with a lot less money.  Just like stocks you should know your exit point and set a stop or a trailing stop.  Once you understand basic options you can move on to trading spreads.  With spreads you can limit your risk a lot more and in some case you can even repair or adjust a trade that goes the wrong way.  If you own stock you can use options to protect you from a down turn in the stock price.  I will discuss all this and more in up coming blogs.

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Why a Stock Blog

September 21st 2007 Posted to Learning Options

I have been trading stocks for over 20 years, with moderate success.  Recently I went to a seminar and learned more about stock options.  The company that put on the seminar wanted $21,000 for one of there low end courses.  I came home and started looking for a good course that I could afford.  The one I decide to take is by no means cheap but it was a bit more affordable and I think will help me make some money.  In this blog I will tell what I have learned and how my trades are going.  Enjoy!!

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