Different Momentum Indicators and Effects, October Trading Blogs

Friday, October 30, 2009

What is October Effect?

October effect is the belief that the market tends to decline in the month of October. Today this is considered only as a psychological expectation of traders rather than an actual phenomenon. Statistics over the years shows that October is just like any other month. An opposite phenomenon is observed in the month of January known as January Effect, which is more common and is related to tax paying.

Thursday, October 29, 2009

In Neck and On Neck Candlestick Patterns

Both In Neck and On Neck are bearish trend continuation candlestick patterns indicating a continuation of an existing bearish trend, after a bullish day. Both are two candlestick formations, comprising a long bearish and (preferably) a short bullish candlestick.

Wednesday, October 28, 2009

QStick Momentum Indicator

QStick or Q-Stick is a momentum indicator developed by Tushar Chande. It is a simple indicator used to identify the trends over a period of time. QStick indicator shows the numerical value of a trend. It is calculated by taking the moving average of the difference between opening and closing prices for a period.

Tuesday, October 27, 2009

Trading Agriculture ETFs

Agriculture Exchange Traded Funds or ETFs are ETFs that enable traders to profit from ever-changing agriculture commodity prices. They are becoming increasingly popular and are growing in number. Investing in agriculture ETFs is considered a good way of diversifying the portfolio as agriculture commodity prices often move independent of stocks and exchange indexes.

Monday, October 26, 2009

Trading Entry and Exit Points

Market timing is all about finding the right points to enter a trade at the start of a trend, namely, entry points; and the right points to exit the trade at the end of the trend with maximum profit, namely, exit points. Entry and exit points are important in all forms of trading, but are most important in short-term trading, when traders want to capitalize on a relatively small price movement.

Friday, October 23, 2009

ETF Sponsors and Creation Units

ETF sponsors are financial firms that create and manage exchange traded funds. Now there are a number of ETF sponsors offering different types of ETFs that track different products and markets; examples include iShares, PowerShares, State Street, etc.

Thursday, October 22, 2009

Cup and Handle Formation

Cup and Handle formation, or the Cup with Handle formation, is a bullish continuation chart pattern. The formation was discovered by William O'Neil and introduced in his 1988 book 'How to make Money in Stock'. Cup and handle formation is very popular among investors, and that is one reason for the success of the pattern; because traders buy in high volumes creating the bullish breakout at the end of the formation.

Wednesday, October 21, 2009

Chande Momentum Oscillator or CMO

Chande momentum oscillator or CMO developed by Tushar Chande shows the momentum of the underlying security. CMO is similar to Relative Strength Indicator, Rate of Change indicator and Stochastic Oscillator but differs from them in many ways. It uses the data of both up days and down days, uses no smoothing of data and does not hide any short-term movements; but like other oscillators it is ranged between +100 and -100.

Tuesday, October 20, 2009

What is Reflation?

Reflation is the intentional practice of a government to reverse the existing deflation. Today the word is also used widely to describe the first phase of recovery after a recession. Reflation is a complex process and involves many steps which aim at increasing a country's economical output. Usually a reflation policy includes,

Monday, October 19, 2009

NobleTrading Newsletter, October 19, 2009

The Week Ahead: Markets recoiled Friday after an unexpected drop in October consumer sentiment and a reported $1.4 trillion budget deficit. In addition, Bank of America's $1 billion loss and GE's reduced bottom line versus a year ago did not help. Watch the PPI report along with the housing starts number on Tuesday. Jobless claims are due on Thursday along with September's Leading Economic Indicators from the Conference Board. Existing home sales are released on Friday.

Friday, October 16, 2009

What is Stock Replacement Strategy?

Stock replacement strategy, as the name suggests, is a strategy to mimic the returns of trading stocks through derivatives. The strategy aims at profiting from a stock, without directly trading the stock. In stock replacement strategy, traders use options (especially deep in-the-money options) and futures on the stock. For example, traders can buy deep in-the-money options having delta close to 1, then a $1 rise in stock price will also cause a $1 rise for the option.

Thursday, October 15, 2009

Bullish Deliberation Candlestick Pattern

Bullish deliberation is a bullish trend reversal candlestick pattern indicating the possible reversal of an existing downtrend. The pattern resembles three black crows pattern, but the latter is a bearish candlestick formation. Bullish deliberation is a three candlestick pattern, formed of all black or colored candlesticks.

Wednesday, October 14, 2009

Money Flow Index or MFI

Money flow index or MFI is a momentum indicator used to gauge the strength of a trend by analyzing the price and volume associated with a security. It is similar to Relative Strength Index or RSI, the difference is it also considers volume, whereas RSI only considers price. MFI measures the strength of money flow in and out of the security and is a comparison of positive and negative money flow. The formula is,

Tuesday, October 13, 2009

Trading ETF Options

Like futures contracts on exchange traded funds or ETFs, options contracts on the same are also available. Currently there are around hundred ETF options available for traders. ETF options can serve the dual purpose of limiting the downside risk of holding the ETFs and maximizing profitability. They also allow traders to buy or sell specific ETFs at a point of time in the future.

Monday, October 12, 2009

NobleTrading Weekly Newsletter, October 12, 2009

The Week Ahead: A Labor Department report shows there are 6 unemployed people for every 1 job opening which is the highest level recorded since this data began 9 years ago. In addition companies looking to hire is also at historic lows. Bond markets are closed for Columbus Day on Monday. The FOMC Minutes from September are released Tuesday. Retail sales and import price data come out on Wednesday. The CPI and jobless claims arrive on Thursday and Industrial Production numbers on Friday.

Friday, October 9, 2009

Trading Technical Corrections

Technical corrections are common market phenomena in which the price of a stock (or any other instrument) sharply declines (often to the next short-term support level), and often stocks are revalued with respect to their performances and market expectations. Most technical corrections last for a short-period, the original bullish trend is expected to continue, and thus is considered a very good buying opportunity. However, trading in technical corrections is a very risky strategy because of unpredictability of market movements.

Thursday, October 8, 2009

Bearish Deliberation Candlestick Pattern

Bearish deliberation is a bearish trend reversal candlestick pattern indicating the possible reversal of an existing uptrend and the start of a new downtrend. The pattern resembles bearish advance block pattern and three white soldiers pattern (which is a bullish formation). Bearish deliberation is a three candlestick pattern, formed of all bullish (white or colorless) candlesticks.

Wednesday, October 7, 2009

Relative Momentum Index Indicator

Relative Momentum Index or RMI is a momentum indicator developed by Roger Altman and is used for finding oversold and overbought levels. RMI was created by modifying the Relative Strength Indicator or RSI, one of the most popular momentum indicators. RMI effectively shows overbought and oversold levels as RSI does and it also reduces the inconsistent oscillation of the index between those levels (which is its major advantage over RSI).

Tuesday, October 6, 2009

ETF Evolution - A Quick Update

Ever since the introduction of the first exchange traded fund (ETF) in 1993, the ETF market has stayed a highly active and attractive market. The market is evolving so quickly; now the market is so much diversified and liquid. Here is one quick update.

Monday, October 5, 2009

Weekly Stock Trader Newsletter, October 5, 2009

The Week Ahead: The unemployment rate creeps up to 9.8% with over 7 million jobs lost since December of 2007. The U-6 unemployment rate now tops 17%. The Fed's expected to keep rate hikes on hold for a while. Watch the consumer credit report on Wednesday, and the kick-off to earnings season for the third quarter with Alcoa (AA) reporting first. Chain store sales figures are released Thursday along with wholesale trade numbers and the weekly jobless claims. The week ends with the August trade balance report.

Friday, October 2, 2009

What is Risk Repricing?

Risk repricing, or risk based repricing, is a market process similar to price corrections; but here correction takes place according to the risk of holding a security. Risk repricing usually occurs in/at the end of a long bull or bear market. Strong market movement in one direction can lead to poor estimates about the risk of holding a stock or bond. As risk should match return, an eventual repricing occurs which can be noticed by widening or tightening of the spreads.

Thursday, October 1, 2009

Bearish Side by Side White Lines

Bearish side by side white lines is a bearish trend-continuation candlestick pattern indicating the continuation of an existing downtrend, even after two bullish days. This is a three candlestick formation comprising one bearish (black/colored) and two bullish (white/colorless) candlesticks. Bearish side-by-side white lines pattern is a very rare formation.