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Detrended Price Oscillator
2009-09-23 14:41:00
Detrended price oscillator or DPO, as the name suggests, is an indicator which removes long-term price trends/cycles to identify short-term trend cycles and overbought and oversold levels. The idea is that a long-term trend consists of many short-term cycles and one can find good trading opportunities and turning points in trends by smoothing the long-term trend. Detrended price oscillator compares the closing price of a security with its moving average prices (n/2) +1 periods ago.DPO = Closing Price - Moving Average of (n/2) +1DPO is considered a handy trading tool as it effectively uncovers the hidden cycles of short term price ranges. The typical time period is 21 or 14 days. Moving Average of (n/2) +1 is represented as a line with value 0 (Zero) and DPO is represented as an oscillator moving above and below the line. Overbought and oversold levels are identified by comparing present DPO levels to past DPO (high and low) levels.DPO-IndicationsWith detrended price oscillator, buy ...

Gold ETFs Trading
2009-09-22 15:17:00
Gold exchange traded funds (ETFs) allow traders and investors to profit from ever changing gold prices. They passively track gold prices and thus the investor needn't invest money in physically buying/storing the precious commodity. Gold ETFs are getting very popular today. They can be of many types.They can hold physical gold bullion. The two big gold ETFs - State Street's streetTRACKS Gold Shares (GLD) and iShares Comex Gold Trust (IAU) - have tons of gold in their safe custody. They can track gold stocks/indexes. E.g. Market Vectors Gold Miners ETF (GDX) track holds stocks of gold companies.They can track derivatives. E.g. PowerShares DB Gold ETF (DGL) tracks Deutsche Bank Liquid Commodity Index - Optimum Yield Gold, which is composed of futures contracts on gold. Trading gold exchange traded funds is totally different from buying and selling physical gold or gold futures. Trades are done 'cash only' and, unlike futures, there is no delivery of the precious metal. The advanta...
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Weekly Stock Trader Update, September 21, 2009
2009-09-21 15:50:00
The Week Ahead: The money market mutual fund guarantee by the government ended on September 18 while the FDIC and FHA are running out of funds and may tap large credit lines with the Treasury. Leading economic indicators from August are due on Monday. The FOMC begins a two day policy meeting on Tuesday concluding with an interest rate decision by Wednesday afternoon, The jobless claims figures and existing home sales arrive on Thursday. Durable goods orders and new home sales are released Friday.Stock s to Watch: WR Grace & Co.(GRA) lifted strongly on the expectation that it will exceed previous forecasts for 2009 results as it pushes into price resistance in the mid 20's. Coventry Health Care (CVH) received a downgrade by Citigroup on a valuation basis having increased 50% this year. Zumiez inc. (ZUMZ), a clothing retailer, had strong back to school sales and received an upgrade by the Wedbush brokerage. Boston Private Financial Holdings (BPFH) closed on the sale of Gibraltar B...
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Investing after Panic Selling
2009-09-18 14:41:00
Panic selling or the madness of the crowd causes great decline in stock prices and might lead to investors losing their money. But it also creates opportunities for investors to buy stocks at lower prices and sell them later for higher prices. Investing after panic selling is a trading strategy which requires good planning, market timing, and courage as well as technical and fundamental analysis.Investing after panic selling is a risky trading practice and investors should be well equipped and educated. Here are some tips for investing after panic selling.The first thing is to make sure that there indeed is panic selling. Make sure that stock prices have fallen rapidly with high selling volume.Next, make sure that the panic selling is over. You should use fundamental and technical indicators to ensure that the high selling tendency is over. Trend lines, moving average indicators, chart patterns/formations and volume based indicators are good for this purpose. Confirmation of trend ...
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Bearish Tweezers Top Pattern
2009-09-17 18:39:00
Tweezers top is a bearish market reversal pattern usually indicating an intermediate-term reversal of an existing uptrend. It is considered a weakly reliable candlestick formation and has two or more candlesticks with ideal highs. Bearish tweezers bottom can be considered as a short-term double top formation. The formation is considered widely as an indicator of short-term resistance levels.The requirements of a bearish tweezers top candlestick pattern include,The market should be characterized by a significant uptrend.Two candlesticks are formed with ideal highs.With bearish tweezers top pattern, the colors of candlesticks are not important; but many traders consider the pattern more reliable if the first candlestick is a long bullish one and the second a short bearish one. The candlestick real-bodies are also not important; often the second candlestick can be a hammer or doji. The candlesticks also needn?t be consecutive.Bearish tweezers top formation occurs when a short-term top ...
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Stock Market Weekly Update, September 15, 2009
2009-09-16 17:54:00
The Week Ahead: The stock markets 6 month rebound has helped push consumer sentiment to a 3 month high. Tuesday is a key day for economic stats as business inventories, retail sales, and the Producer Price Index will be released. The August Consumer Price Index as well as Industrial Production numbers are on the calendar for Wednesday. Weekly jobless claims and housing starts are slated for Thursday.Stock s to Watch: Cliffs Natural Resources (CLF) lifted there 2009 North American coal and iron ore sales projections as the stock challenges its earlier May and June highs. Encana Corp. (ECA) Board of Directors approved a reorganization into 2 highly focused energy firms of natural gas and integrated oil. The stock reached levels not seen since last October. Crane Company (CR) reached new highs for 2009 and was upgraded by Barclays.Special Note: A review of the major indexes march toward there 4 and 3.3 year converging cycle lows due in 2010 discussed here in January indicates the market...
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Keltner Channel Trend Indicator
2009-09-09 14:52:00
Keltner channel is a popular indicator for analyzing trends and for finding trend changes. The indicator was introduced by Chester W. Keltner in 1960 in his book 'How to Make Money in Commodities'; Keltner named this indicator 'Ten Day Moving Average Trading Rule'.Many later traders have modified the Keltner channel trend indicator for getting custom results. The original one has a center line and upper and lower lines drawn using simple moving averages. The center line is a 10-day simple moving average of typical price,Typical Price = (high + low + close) / 3The upper line is the 10-day MA of highs on each day and lower day is the 10-day MA of lows on each day. The popular modifications of Keltner channel trend indicator include:Using different time periodsUsing Exponential Moving Average (EMA) for drawing the lines Using Average True Range (ATR) for drawing upper and lower bands As there are different types of Keltner channels available, they are interpreted in different ways....
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Stock Market Newsletter, September 8, 2009
2009-09-08 18:23:00
The Week Ahead: Unemployment continues an upward trend reaching 9.7%, but the pace of job loss slowed down to 216,000 in August. Healthcare reform will be top priority as congressional lawmakers return to D.C. on Tuesday. The Feds beige book of economic activity is released Wednesday with a scheduled primetime address by the President later that day. Jobless claims are due Thursday while wholesale trade numbers and import prices come out on Friday.Stock s to Watch: Bridgepoint Education (BPI) took a nosedive after a government audit of its Ashford University campus may get a Department of Education non-compliance notice for misuse of federal student aid. Cascade Corp. (CASC) showed a larger than expected Q2 loss but part of it was due to a non-recurring restructuring cost so the stock rose. Jazz Pharmaceuticals (JAZZ) continues a torrent rise as takeover speculation was noted by the Leerink Swann brokerage.Special Note: The current PE of 17 on the S&P 500 is historically overvalu...
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Trading the Earnings Calendar
2009-09-07 17:44:00
Companies listed in stock exchanges have to release and file their earnings reports every three months. The period in which most companies report their earnings is a period of high volatility. Many traders, especially short-term traders and swing traders, closely watch the earnings calendar to find good trading opportunities.The earnings period is noticeable with high price volatility, rumors, expectations and more news. This is the period when companies are highlighted in the media, criticized for their performances and comparisons are made.This is also the period when new growing or profitable companies and underachievers are identified and company stocks are valued on their merit. Trading the earnings calendar is a very difficult strategy to master as there is no surety that the stock price will go up with positive earnings reports or fall with negative earnings. The market expectation of a company, the comparison of a company's earnings with others or the industry performance, ...
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Initial Public Offering Procedure
2009-09-04 14:39:00
Initial Public Offerings (IPOs) are always considered good trading and investing opportunities. IPOs are also the key step, from which a company's financial info and growth potential are made available to the public. An initial public offering procedure is as follows:The very first step is the company registration. All public traded companies need to register with the concerned regulatory body; in the USA it is the Securities and Exchange Commission (SEC). The registration demands filing public offering and other legal documents. The company prospects are to be made publicly available. The prospects should include details such as present company financials, company management, stock owners, growth potential and potential risks.After the registration, the company needs to tie up with investment bank(s) for the distribution of their shares.The next step is the price setting. Both the company and the investment bank come together to set a price. The price can be of lowest IPO price (t...
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Bullish Tweezers Bottom Pattern
2009-09-03 15:34:00
Tweezers bottom, or kenuki bottom, is a bullish market reversal pattern usually indicating an intermediate-term reversal of an existing bearish trend. It is a weakly reliable candlestick formation consisting of two candlesticks with identical lows. Bullish tweezers bottom can be considered as short-term double bottom formation and is a good indicator of short-term support levels.The requirements of a bullish tweezers bottom candlestick pattern include:The market/security should be characterized by a downtrendTwo candlesticks are formed with identical lowsThe colors of the candlesticks are not important in this formation; but many traders consider the pattern more reliable when the first candlestick is a long bearish one and the second a short bullish one. The real-body of candlesticks is also not important; often the second candlestick can be an (inverted) hammer candlestick or a doji candlestick. The candlesticks needn?t be consecutive too.The bullish tweezers bottom pattern is for...
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Aroon Indicator for Trend Analysis
2009-09-02 14:58:00
Aroon is a relatively new indicator developed by Tushar Chande in 1995, which is used to analyze the direction and strength of trends. Aroon, a Sanskrit word meaning ?dawn?s early light,? represents the long-term or short-term trend existing in a stock or currency and also predicts trend reversals. It is an indicator comprising two lines Aroon-Up line and Aroon-Down line. Aroon-Up line measures the amount of time (in percentage) since highest price during the time period and Aroon-Down line measures the amount of time (also in percentage) since lowest price during the time period.Aroon-Up = (No. of Periods ? No. of periods since highest price) x 100No. of periodsMost traders use Aroon indicator for a range of 25 time periods; many others use 14 time periods. Aroon indicator is an easy to interpret indicator. There are four important values 0, 30, 70 and 100. Strong bullish trend is identified when Aroon-Up is at or near 100. Potential uptrends are indicated when the Aroon-Up line ...
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Trading ETFs Futures Contracts
2009-09-01 15:16:00
With the increasing popularity of exchange traded funds (ETFs) in recent years, the futures contracts on them are also becoming popular. Although traded much differently, ETFs futures also allow the traders to profit from the price volatility of tracking index or market. They were introduced into the market in 1997 and currently there are three stock index futures traded ? S&P 500 Depository Receipts (large-cap stocks), NASDAQ 100 Index Tracking Stock (top 100 financial companies listing on NASDAQ) and IShares Russel 2000 Index Fund (small cap stocks).Trading ETFs futures is completely different from trading ETFs.They are not traded in shares but as standardized units of 100 shares. They do have expiration dates on which the settlement is physically settled by delivering the underlying futures contracts.They are traded through futures account, not through securities account.Futures have inherent leverage on margin, often up to 15:1, allowing traders to control more money than th...
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Stock Market Trading Newsletter, August 31, 2009
2009-08-31 16:13:00
The Week Ahead: Consumer spending picked up but will they continue buying after cash for clunkers and home buying credits end? Watch auto sales on Tuesday along with construction spending and the ISM Manufacturing Index. On Wednesday factory orders are released. The ISM Non-Manufacturing Survey comes out on Thursday to gauge the service sector. The much anticipated August employment report arrives Friday ahead of the long Labor Day Weekend.Stock s to Watch: Shares of Williams Sonoma (WSM) reached an eleven month high after a Goldman Sachs upgrade due to cost cutting that will lead to much improved margins. Kansas City Southern (KSU) hit ten month highs after a Morgan Keegan note that the company is poised for a better second half. Netezza Corp. (NZ), a data storage firm, beat Q2 earnings estimates despite being only half of last years level. Finally, Trubion Pharmaceuticals (TRBN) signed a pact with Facet Biotech (FACT) to develop a leukemia drug.Special Note: Has the market reached ...
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What is Panic Selling?
2009-08-28 14:50:00
Panic selling, as the name suggests, is the wide scale selling of instruments such as stocks. This leads to a sharp decline in the prices of the stocks and usually marks the start of a downtrend. Panic selling is often triggered by bad market news or predictions; all of which need not be true.All kinds of traders - individual and institutional short and long-term traders, investors, fund managers - are often involved in panic selling. The selling activity is so high that everyone wants to get out of their holdings as early as possible without any regard/demand to the prices at which they sell. Most traders involved in panic selling may have to suffer serious losses.Often it is the pure human emotion of fear and nervousness which controls the panic selling activity rather than the fundamental or technical market analysis. Many times, the media too can add fuel to the fire. Markets follow different prevention methods to counter the panic selling activity (and possible market crash).Ha...
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Bearish Three Line Strike Pattern
2009-08-27 15:02:00
Bearish three line strike is a candlestick trend continuation pattern, indicating the continuation of an existing downtrend; even after a day of high bullish activity. This is a less reliable and rare candlestick formation comprising four candlesticks; the first three are bearish candlesticks and the fourth one is a long bullish candlestick.The requirements of a bearish three line strike candlestick pattern include,The pattern should be formed in an established downtrend. The first three candlesticks are bearish (black or colored) candlesticks with consecutive lower closes. These three candlesticks resemble 'Three black crows pattern'. The fourth day is a long bullish day, which opens below previous close and closes above the real-body of the first day candlestick. The market is characterized by strong bearish trend. The fourth day is the profit taking day for shorts. The high bullish activity on the fourth day indicates that the price may reverse. But the existing downtrend is li...
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Stock Market Weekly Update, August 25, 2009
2009-08-26 04:01:00
The Week Ahead: Comments by Fed chairman Ben Bernanke about a recovering economy although slow to evolve was enough to help lift markets to new highs for the year. The S&P Case Shiller Home Price Index and consumer confidence numbers are released Tuesday while the durable goods and new home sales are due by Wednesday. The preliminary Q2 GDP report will be out on Thursday, but the personal income and consumer sentiment figures will have to wait until Friday.Stock s to Watch: The existing home sales number helped home building companies like Ryland Group (RYL) continue an up trend that started last November. Shares of Brunswick Corp. (BC) continued to rise from last years low after Citigroup noted a modest improvement in leisure sales such as boats since July. Teen apparel and retailer, Aeropostale (ARO) reported same store sales up 12% and beat earnings estimates by a penny for the 2nd quarter lifting the stock to a new all time high.Special Note: Volume continues to dry up as th...
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Price Rate of Change Indicator
2009-08-25 15:27:00
Price rate of change or ROC indicator is an important technical analysis tool for measuring an instrument's price changes. ROC is widely used by short-term and swing traders to find oversold and overbought levels, to analyze trend strengths and to find trend changes. The price rate of change indicator resembles volume rate of change or VROC indicator, but is blind to volume changes.Price rate of change is expressed in both points and percentage. It is calculated as the difference between current price and the price ?n? periods ago.ROC (point) = Price today ? Price 'n' days ago.When calculated in percentage, the above ROC value is divided by the number of periods and then multiplied by 100.ROC (%) = (Price today ? Price 'n' days ago) / 'n') x 100ROC rises with rise in current price and falls with fall in price. Many traders use a center line (a 0 line or 50 point line) for easy evaluation and to get better results. The normal time-period for ROC indicator is 12 days (short-ter...
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Investing in IPO ETFs - Advantages and Disadvantages
2009-08-24 15:20:00
IPO exchange traded funds are ETFs which allow traders to profit from the up-and-coming stocks. Investing in them holds many advantages and disadvantages.Advantages of investing in IPO ETFsThese enable investors to gain exposure to IPOs when they are first introduced in the market. Investors can own diverse stocks from various industries and sectors. They track some of the companies with the highest growth-potential and allow investors to profit from successful IPOs.They follow specific rules for including and excluding the stocks in their portfolio and thus are often less risky than investing directly in those stocks. They are periodically adjusted and thus are very good investments when markets are steady and rising. Disadvantages of investing in IPO ETFsThey are risky investment instruments as IPO stocks can be highly volatile, over-valued and from small companies.They are new instruments, and there is not much performance history available.IPO stocks (after an IPO) may be more p...

IPO Investing & Trading Basics
2009-08-21 15:19:00
Initial public offerings or IPOs are considered risky trading opportunities; often investors are advised to stay away from them until the price stabilizes and the growth potential of the company is revealed.Statistics shows that most IPOs fail. After a year or so the prices can be far less than the debut price. Most IPO stocks are of small companies. Although some of them have high growth potential, most of them just want to raise some money from the public and they fail to achieve their goals.There are many non-market forces which can control the price changes?high selling activity from large shareholders just after the lockup period or very active short-covering by traders because of short-interest in IPOs. The market forces never stay the same. The economy is always changing and new market forces can increase or decrease the prices of shares.Underperforming companies are common. Poor management, economic changes and/or local or international changes can affect a company?s perform...
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What is Lock-up Period?
2009-08-20 15:00:00
Lock-up period is the time frame when shareholders are not allowed to sell or redeem the shares of a company. This period applies to large shareholders such as hedge funds, company owners and executives, and does not apply to individual investors who bought shares via public offering. The usual lockup period can be from 90 days to 180 days; however, it can be up to one or two years for some firms.The most common lock-up period is the IPO lock-up period, where a company restricts its big shareholders from selling their stock just after the IPO. This offers extra-protection for outside investors to trade these new illiquid stocks and helps market forces to decide the price of shares on an ask and bid basis. This also prevents shareholders with 'inside knowledge' from getting rid of their shares before the public comes to know the bad news. Lock-up period also helps hedge-fund investors as hedge-fund managers can keep lower amount of cash on hand and the underlying investment would r...
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Bullish Three Line Strike Pattern
2009-08-19 16:48:00
Bullish three line strike is a bullish trend continuation candlestick pattern indicating the continuation of an existing uptrend after a long bearish day. This is a rare and less reliable candlestick formation. Bullish three line strike is a four candlestick formation comprising three continuous long bullish (white/colorless) candlesticks and a longer bearish (black/colored) candlestick.The requirements of a bullish three line strike pattern include:The market should be characterized by a significant uptrend.The first three days are bullish days, each one closing above the previous day?s close. The fourth day is a long bearish day, which opens above the three bullish candlesticks and closes below the three bullish candlesticks.The market is characterized by strong uptrend. The fourth day is a profit taking day, which opens in the direction of the existing bullish trend but the strong bearish activity gives an indication that prices may reverse. The existing bullish trend is likely t...
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Net Income & Related Terms
2009-08-18 16:15:00
Net Income or NI, also known as bottom line, aftertax profit and profit attributable to shareholders, is defined as the total income (profit) after all expenses and taxes deducted. It is one of the figures of great importance in a company?s financial statement. This figure, usually found at the bottom line of a statement is the basis of calculating the key fundamentals of a stock such as price-earnings ratio (PER), earnings per share (EPS) and return on equity. Net income is also widely used to compare a company?s performance with its historical performance, industry performance and with other companies.There are also some related terms.Gross Income: Is the total earnings of a company minus the cost of goods. This does not consider any taxes, incidental incomes or operating expenses.Net Operating Income or NOI: This is the total income of the company after all operating expenses are deducted. This does not consider any taxes or interests. Many investors take this as an analysis figu...
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IPO Exchange Traded Funds
2009-08-17 16:33:00
IPO Exchange Traded Funds or IPO ETFs are ETFs which track stocks recently held in an Initial Public Offering (IPO). They were introduced in 2006 and are gaining popularity. IPO ETFs help investors to profit from the most expected quick growth of stocks in the initial years of public trading and from some of the companies with the highest growing potential.The index tracked, and portfolio management of IPO ETFs vary considerably. For example the First Trust IPOX-100 tracks the IPOX-100 index, which includes 100 largest IPOs by capitalization. The index follows specific rules for including IPO stocks.The index includes only US corporations.A number of securities/sectors are excluded such as REITs (Real Estate Investment Trusts), CEFs (Closed Ended Funds) and ADRs (American Depository Receipts). To be included, the companies should have a market capitalization of at least $50 million and an IPO of at least 15% outstanding shares.For avoiding the high volatility/speculation of prices, ...
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Advantages and disadvantages of Investing in DPPs
2009-08-14 15:24:00
Direct Participation programs or DDPs are attractive investing instruments. Moreover, many of these programs have attractive marketing methods, which can drive people to them. Here are some advantages and disadvantages of investing in DPPs.Advantages of Investing in DPPsDPPs offer good tax benefits They are good instruments for long-term passive investment and thus are ideal for investors with low investing knowledge DPPs let investors invest their money in projects with high potentials, like oil exploration, wind/sun energy harvesting, movie production, and real-estate investment trusts (REITs) They can offer steady/high returnsThey are most suitable for persons with good income and savings and wish to reduce their tax burden. Disadvantages of Investing in DPPsThey are risky investments, investors can lose as much as all the amount they investedThey are illiquid instruments, transfer of units are usually restricted by contract. Although some are traded over the counter (OTCBB), the...

Unique Three River Bottom Pattern
2009-08-13 15:22:00
Unique three river bottom is a rare bullish candlestick bottom reversal pattern indicating the end of existing downtrend and the start of a new uptrend. This is a three candlestick formation which is formed at the end of a downtrend, first indicating market uncertainty and then bullish market reversal.The requirements of a bullish unique three river bottom pattern include:There should be a significant downtrend existingThe first day is a long bearish day characterized by a long black or colored candlestick, preferably closing at a new lowThe second day is also a bearish day characterized by a hammer like candlestick which opens higher to the previous close. The lower shadow of the candlestick forms at new low but the day closes near the opening priceThe third day is a bullish day characterized by a small bullish (white or colorless) candlestick which is placed below the real body of the second day candlestickThe bullish unique three river bottom pattern forms when bears lose control...
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Volume Rate of Change or VROC Indicator
2009-08-12 15:00:00
Volume Rate of Change (VROC), also known as ROCV, is an important indicator of gauging an instrument's volume changes. VROC is most useful when analyzing a security's ability to cross supports/resistances, trend changes and trend strengths and when analyzing formations like peaks and foundations. Volume rate of change indicator resembles price rate of change indicator, but it is blind to price movements.Volume Rate of change is calculated by dividing the amount of volume changed in the last 'n' periods, by the volume 'n' periods ago.VROC = (Volume today - Volume 'n' days ago) / Volume 'n' days agoPositive values of VROC indicate that the present volume is higher than the volume 'n' days ago; and negative values vice versa. Positive values are indications that the current bullish/bearish trend is still strong, and negative values are indications of the weakening of existing trends.VROC is plotted below the price chart. When trading with volume rate of change indicator, it...
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Ideal ETF Only Portfolio
2009-08-11 15:36:00
ETF can easily fulfill the average investor?s goal of portfolio diversification and returns that meet/beat a benchmark. With investing only in a handful of exchange traded funds, the portfolio becomes extremely diversified, liquid and profitable. Here are five types of ETFs which can be the ideal candidates for long-term investing and to include in an ETF only portfolio.ETF Tracking Large Cap Stocks ? ETFs which track large cap stocks traded on major US exchanges such as NYSE, S&P and NASDAQ are extremely liquid and can offer (almost) steady returns.ETF Tracking Small Cap Stocks ? ETFs which track small cap stocks traded on US exchanges like Vanguard Small-Cap can often offer returns that beat those tracking large caps. ETF Tracking International Stocks of Developed Markets ? This helps you to profit from the companies and economies of many European nations.ETF Tracking International Stocks of Emerging Markets ? Emerging market ETFs let you profit from some of the fastest growin...
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Stock Market Weekly Letter, June 9, 2008
2008-06-09 19:15:00
The Week Ahead: The price of oil had its biggest one day spike ever on the same day unemployment was reported to have the biggest one month increase in 22 years. A perfect storm of bad news for the economy. Important to watch will be Tuesday's trade balance and Ben Bernanke's keynote address on inflation in Boston. The Fed's beige book of economic activity will be released on Wednesday as will OPEC's oil report. Retail sales, jobless claims, and business inventories are due Thursday while the CPI report is released Friday.Stock s to Watch: MGIC Investment Corp. (MTG) was downgraded again on a poor outlook for mortgage insurers for the next two years. Inspire Pharmaceuticals (ISPH) surged on news that a recent study showed treatment for cystic fibrosis improved breathing significantly. Focus Media (FMCN), A digital ad company in China, showed a 1st quarter loss versus a profit from a year ago and cut its 2008 revenue target do to the recent earthquake that has disrupted operations...
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The Problems with Predicting the Market
2008-06-06 14:05:00
Many traders, especially beginners try to predict the market and often face huge losses. Although most markets behave in a cyclical manner, this cycle isn?t that much predictable ? especially for short-term traders. There are many things which influence the market performances and no single trader can consider all those at the same time. Here are important things/facts to consider.No trader can accurately analyze all the forces and factors which influence the market direction or the financial instrument price.There is always uncertainty in the market.A good trader determines the possibilities with most accurate information to which he has access; and makes a trading decision with regards to the greatest possibility. The trader then hedges against the other possibilities by using some strategies. He constantly monitors the market/product and recalculates the possibilities and changes his trades with regard to the change of possibilities. Inexperienced traders often calculate the poss...
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