Establishing Risk Tolerance

Risk is the principle driver of market returns. Without it, no investor would ever make enough money to hold their interest in the market for very long. Those who avoid risk in general are more apt to invest their money in bonds and perhaps mutual funds where the risk is diffused among several different investments. Read More…

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Stock Trading – Assessing Company Valuations

When determining a company’s viability as a stock buying (or short selling) opportunity, investors and traders utilise two basic systems:

  • The absolute valuation model, which depends upon corporate financial records to determine a fair price for the company’s stock. This method, while the more accurate, requires much time, effort, and financial knowledge to be performed properly. Its use is therefore limited to the most major of investors, reducing its effect on the market.
  • The relative valuation method, which compares the value of a company’s stock against its peers based upon various performance ratios. These include price to earnings (P/E), price to sales (P/S), price to book value (P/B), etc.

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The trading stop loss in action

The stop loss is designed to be an emergency exit, removing the stock trader capital before a loss can become catastrophic. It’s purpose is to liquidate an open position at a pre-determined level, limiting the loss to an amount the trader is willing to bear.

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IRESS Market Technology for Share Trading

IRESS Market Technology Limited (IRE) is engaged in the technology of shares trading and wealth management. The company creates, markets, and supports trading and information platforms. The flagship product, IRESS, provides users with market data, analysis tools, order routing, and management of portfolios, risk, and orders. Operations are located in Australia, New Zealand, Canada, South Africa, and Singapore.
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Head and shoulders Patterns – Stock Trading

A back-testing study conducted by trader Tom Bulkowski analysed the charts of 500 global equities in the 1990s, and found 431 confirmed head and shoulders pattern formations, which delivered the expected trend reversal in 406 of those instances. That’s a 93% average, good enough odds for most bettors.

This is the reason so many traders have entry orders ready and waiting just beneath the neckline of a potential head and shoulders chart formation. These orders are triggered when the price action falls from the peak of the final, right shoulder to the neckline and down. The opening of so many sell orders drives the price even lower, initiating the predicted downtrend in a self-fulfilling prophecy and completing the head and shoulders. Read More…

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