Posts Tagged ‘wealth building’

Know The Yield Curve Before Trading Interest Rates

Thursday, March 11th, 2010

Interest rates are the most important financial variable for the market and the economy. No matter what market you trade, you need to keep close watch on interest rate changes. Whether you trade currencies, stocks, futures, options, commodities, ETFs, bonds or invest in mutual funds or if you are real rich in a hedge fund, the return can be seriously affected by the interest rate changes. A Yield Curve is very important in finance. It gives you the picture of different interest rates in the economy. A Yield Curve is infact a relationship between the different interest rates and the time to maturity of different treasury bills, notes, bonds in the economy. When you trade the interest rates, you need to keep an eye on the yield curve!

Now as said before there are two types of interest rates in the economy; short term and long term. The return offered on the Treasury Bills is the short term interest rate while the return offered on the Treasury Notes and Bonds are long term interest rates. When you look at a Yield Curve these interest rates are plotted on the vertical axis with the time to maturity of these financial instruments on the horizontal axis. There can be three different shapes of a Yield Curve. The Normal Curve, The Flat Curve and the Inverted Curve. Let’s discuss these three different shapes now. On the Normal Curve, the short term interest rates are lower than the longer term interest rates as investors need a premium to invest long term. A Normal Curve represents normal economic activity where investors get rewarded for investing long term in the form of a higher long term interest rate on these financial instruments in the shape of a premium over the short term interest rates.

The second type of yield curve that you will come across is the flat curve where the short term interest rates are equal or almost equal to the longer term interest rates. When you spot a flat yield curve, this is a sign of an economy that has started to slow down.

However, when the economy starts to go into a recession, you will suddenly find an Inverted Yield Curve. On an Inverted Yield Curve, the longer term interest rates are lower than the short term interest rates.What this mean is that the economy is slowing down and investors are reluctant to invest long term thinking it to be risky. An Inverted Yield Curve is a leading indicator of an economy doing down into a recession. When there is a financial crisis like that happened in the early part of 2008, you will find the Yield Curve to be Inverted. Investors are shying away from investing in long term projects in the economy.

Many investors and traders trade interest rates by investing in Eurodollars. Eurodollars are short term futures contracts that have a low margin requirement meaning retail traders and investors can also trade Eurodollars. Eurodollars have a highly liquid market meaning you can get in and get out without paying a large spread due to the large market in them. They also have less volatility. However, you can also trade the 10 year Treasury Notes (T Notes) and the Treasury Bonds (T Bond) that have a maturity period of higher than 10 years. However, T Notes and T Bonds have a much higher volatility as compared to Eurodollars.You can also trade options on these interest rate futures contracts. Some people trade the volatility. So, you have to know what you want before you trade these instruments!

Trading interest rate futures is no different than trading anyother futures contract. If you haven’t traded futures before, a good idea would be to first paper trade these contracts for at least two months so that you get a feel of how these futures contracts gets traded and how the market behaves! Now, when you trade these interest rate futures contracts, you need to keep an eye on the market constantly. Futures trading can be risky and in a matter of few minutes you might get wiped out in the market and get a margin call from your broker.

Mr. Ahmad Hassam has done Masters from Harvard University. Know this shocking Dow Futures secret that can make you rich. Get this 49 page Quantum Swing Trading Report, FOREX-4 PACK Training Kit and the Profit Button Report that applies no matter what you trade-stocks, forex, futures or options FREE.

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A Guide To Stock Market Today

Thursday, March 11th, 2010

The stock market today is more volatile than ever. Many investors got burned badly in the last few years as the market plunged into recession and that makes them skittish.

Since no one has figured out how to predict the future, stock market values are based on past histories.

For quite sometimes, it can be quite accurate; however, in the short term predicting changes in the stock market is next to impossible to do with 100 percent accuracy..

Investors really have to know something on human psychology and understand what may happen in the market. Many investors are often overly optimistic when the market is good and then they start to become greedy.

Here are the things you should be aware of the stock market today:

* Warren Buffet, one of top investors, has started investing their own money in the market. That is obviously become a sign that indicate the market is at or near the bottom during this recession.

* 80 percent of the gains for depressed stocks come in the first year of a recovery. That means that if you wait until things have already turned around to buy in, you will have already missed the biggest opportunities.

* 300 companies on the S&P 500 are under funded by pension plans, so that the stock market today is obviously filled with companies that have huge debts.

The stock market today can seem a scary place, with such massive losses so fresh in the memory. However, the truth is the only thing you should be afraid of is waiting too long to get back in.

There are a lot of opportunities in the market right now. It is only requires a lot of studying on your part, to make sure that every investments you place are with the companies that have strength and are well.

Her name is Anne Durrell, originally comes from California. She has written several articles about online trading . Check out her other guide on stock market chart tips, and how to trade futures guide!

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Doji Candlestick Pattern-Something Unique And Highly Profitable!

Wednesday, March 10th, 2010

Candlestick Charting is one of the most powerful tools in the trading arsenal of any trader. Candlestick Charts apply to any market no matter what you trade-stocks, forex, futures, options, ETFs, commodities, bonds and others. With one simple glance on the chart, you can figure out the sentiment of the buyers and sellers in the market. There are many candlestick patterns that are used as trading signals. Some are simple while others are complex. Doji Candlestick Pattern is a simple pattern that is very easy to spot. It has no body. It is formed when the opening and the closing prices are the same. So, this pattern is all wicks with no stick. It literally looks like a Cross on the chart. So you can easily spot it. But it is very rare as the security opening and closing prices are seldom equal! Doji has some variations. We will discuss these variations in this article!

So for a Doji to be truly formed on a trading day, throughtout the trading day heavy buying or selling may take place but at the end of the day, the price should be where it had been at the start. In other words, the opening and the closing prices should be the same for a Doji to be formed.

When a Doji is formed with the opening and the closing prices equal, it is a signal that the battle between the bulls and the bears had been a draw during the trading day. Soon, either the bulls or the bears are going to previal. In other words, a trend reversal is about to take place.

So how is a Dragonfly Doji is formed? It is formed when the security price opens. It is traded down during the early part of the day. At some point in the trading day, the price action starts to recover and climb. It eventually closes at the high which happens to equal the open of the day. Something unique! Now, a Dragonfly Doji is a unique variation to the Doji Candlestick Pattern. It is formed when the opening, the closing and the high prices are all equal. Something quite rare and unique.

When a Dragonfly Doji is formed, bears initially decide to rule the market. But at some point the bulls step in and decide to buy again. When the bulls step in, they start pushing the price up. As the bulls dominate the trading day, the security price ends up right where it had started.

Dragonfly Doji is considered to be a bullish candlestick pattern. The low on this pattern can be taken as the support level because this was the level at which the bears entered the market and started buying.

The second important variation to the Doji is the Bearish Gravestone Doji. This pattern is formed when the open and close of the day is equal to the low of the day. This is something opposite to the Dragonfly Doji where the open, the close and the high were equal. When a Bearish Gravestone Doji Pattern is formed, it is a signal that a prolonged downtrend is about to start in the market.

When Doji Pattern does form, get ready for a trend change! As said before, this pattern is rare but very easy to spot on the chart.

Mr. Ahmad Hassam has done Masters from Harvard University. Learn this powerful Fibonacci Retracement Method that pulls 500+ pips per trade FREE! Get this 49 page Quantum Swing Trading Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options FREE!

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Forex Seminar Tips & Guide

Tuesday, March 9th, 2010

People who have desired to trade in the foreign exchange called forex trading without doubt know how complicated that marketplace can be. It really is much more complex versus regular stock exchange. Because of this many believe they should have a forex seminar, but don’t know what to consider.

For instance, investors-to-be may have already discovered that forex investment requires sharp instinct, a qualification of unmatched aggressiveness; the undeniable confidence in one’s self, and above all a significant feeling of discipline. This is almost all true, and thus a foreign exchange trader is actually hardly ever created, however rather a new forex trading investor is taught.

There are some that will attempt to sell you on a specific seminar simply by wanting to overwhelm you with an incredible magnitude involving material, sadly these types of tutorials often lack in quality.

Look at it this way, a plane lures since it is actually high-performance built to be able to fly, but you do not need to learn the way it is actually made in order to travel from one continent towards the next. No, you simply contact the local travel agency.

A fantastic forex seminar will teach you for a start the fundamentals of the frequent trading terms so you are not stymied by language that is part from the forex business.

Also, within a respectable forex seminar, they will cover not only finding profitable trades to be produced, but additionally how to execute them by thinking exactly as foreign exchange dealers do, and when it’s all done, you can then furthermore learn how to develop your personal investing style.

After this, the forex seminar may educate you on high income management. This means that you will learn the most effective contract measurement of your position. To put it differently the actual modifications made to how big is the particular deal for the set you intend to operate.

That requires the entry as well as exit charges, just what your collateral will be, and of course the utmost risk of the trade you are taking into account. After that you should learn technical research. This is when all of the graphs come in, and just how to apply things that are usually shown along with charts.

The mechanics associated with investing is going to be included extensively, so that you will certainly understand things like multiple signals, buying and selling ranges, Bollinger Bands, shifting averages, candlestick patterns, pivot factors, pip values, projection levels as well as Fibonacci outlines. Make inquiries if you are trained about many of these complex indicators ahead of signing up.

Asking them questions ahead of agreeing to take any kind of forex trading seminar is of extreme significance, when you do just before any schooling. You will constantly need to know the particulars from the seminar before investing some time and possibly money into this. Remember that not all forex classes are made equal, just like not every currency trading buyers are not either.

Anne Durrell comes from CA, US. She has written several articles on Currency Trading . You may want to check out her other guide on stock market ticker tips, and forex historical data guide!

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Before Short Selling-Know These Shocking Facts

Monday, March 8th, 2010

Short Selling Stocks is one of the favorite day or swing trading strategy. Many traders short stocks. Now many stock brokers make it very easy for the investors and traders to short stocks. Now a days, most of the trading is being done online. When you sell a stock, a message will ask you whether you are selling stocks that you own or you are selling short. With one click, you tell the broker that you are short selling. The broker than goes about and arranges the shares for you to short sell. These shares are a loan to your account.

Now, you cannot always short a stock instantly. Most of the investors work on rumors. In some cases,a stock gets so much shorted that there are no more shares of that stock left for you or your broker to borrow anymore. In that case, you simple will have to cross your fingers and see how the other short sellers do on that stock while you search for another stock to short!

Now, day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts. Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down!

You have to be careful about the uptick rule as stock exchanges have rules in place to help maintain an upward bias in the stock market. What this means is that you can only short a stock when the last trade was a move up. In other words, you can’t short a stock that is moving down.

If you are wrong in your short selling decision, your loss can be catastrophic.How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

There is something known as Short Squeeze. A short squeeze happens when the stock of the company that you have shorted has some good news that drives the stock prices high. Now if this happens, many short sellers might lose money and even get margin calls. When they get desperate to buy back the stock, its prices go even higher hurting them more.

Now many companies, brokers and investors hate short sellers and try tactics to bust them. Sometimes, they will issue good news or spread rumors of good news to create a squeeze. Other times, they can ask the stock holders collectively to tell their brokers not to loan out their shares. What this means is that short sellers have to buy back the shares and return them to the brokerage firm and close their short positions even if it does not make any sense.

Mr. Ahmad Hassam has done Masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options! Turn $200 into $100K in just 3 months with this Penny Stock Trading FREE Report!

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