All You Need to Know About Pre-Market Stock Trading
June 28, 2017
What is pre-market stock trading?
As a norm, the regular stock trading market hours are usually between 9:30 am through to 4 pm. The opening and closing of this official trading period is usually signaled by the sounding of a bell which in most instances is done by the CEO of a newly listed company or any other person of note. During this official period, individuals can be able to trade in all companies listed within the exchange and also place any type of order.
However, trading can still take place outside the official hours and as a norm transactions carried out during this period are usually subject to a number of set rules. The extended trading sessions usually offer the best trading opportunities since price-sensitive news is most often released prior to the start of the trading session giving individuals an edge when it comes to the actual trading: this is where pre-market stock trading comes in.
The pre-market stock trading hours usually start at 7am and run to the official start time for stock trading. The trading that occurs during these hours usually set the tone for the day’s trading. However, the time frame is subject to some rules. For instance NASDAQ allows pre-market stock trading orders to be placed at 7am but execution of the orders can only take place at 8am.
For individuals who intend to embark on pre-market stock trading, the following is an overview of some of the trends that are characteristic of this type of stock trading.
Low volume trading
This is perhaps one of the most notable characteristic associated with this type of stock trading. The low volume trading is usually brought about by a number of factors. For starters, most individuals in the investment community are usually not active during this period and as a result this brings about low volume trading.
However, the most pre-dominant reason as to the low volume trading is the cap or limit placed on the size of orders placed. This is done by the regulating authority to prevent volatility in the market prior to the official trading time. For instance, a company might release great news that is bound to increase the value of its shares. An individual on hearing this might attempt to purchase a huge amount of shares so as to benefit from the impending share price hike. This will ultimately result in the share price shooting up remarkably before the official stock trading hours. To avoid this, the regulating authority usually places a cap on the number of shares that can be bought or sold during this period.
Volatility During Pre-Market
This is another common characteristic associated with this type of trading. The market at this time tends to be quite volatile due to the availability of information. Simply put, a listed company can release results before or after the official trading hours. Share prices usually react violently to this news as investors try to establish a new price
Risky Stock Trading
This kind of trading can be quite risky since relevant information is quite limited during this period of trading. Volatility during this trade period also contributes a lot to this. A good case in point is a situation where the share price might be skewed extremely high in the pre-market but return to `normal’ during the official trading hours.
In conclusion, the pre-market trading gives individual’s opportunities that are not available during regular trading hours. However it comes with a warning, you can make a sizeable profit based on your informed decisions but if things go wrong, there is the chance of making a loss.
Differences Between Day Trading and Investing
June 20, 2017
There are a million ads broadcasting wealth through day trading. Truly, day traders and long-term investors both profit and both lose money. Some fruitful long-term investors lose their money when attempting to day-trade and some time or another trader can’t pick a decent long-term investment. Regarding trading, the distinction is for the most part in personal temperament and time. Below are the differences between Day Trading and Investing:
The fundamental differences between day trading and investing are the action levels and position holding times. Day trading includes dynamic management with a short-term holding period, though investing includes latent management with a longer-term holding time horizon as a rule spanning from different quarters to years. Day traders concentrate on short-term trades contained in a single trading day using direct-get to trading platforms. Investors tend to screen portfolio positions periodically from week after week to quarterly through statements and online browser based platforms.
Technical Analysis versus Fundamental Analysis
Day trading relies more on technical analysis using charts and technical indicators. Investing centers more around fundamental analysis including earnings reports, financial metrics, news, and ratios. Fundamentally, day traders are more interested in a stock’s value action, while investors are more centered around the underlying company. Day traders may likewise use for a higher concentration of offers to stash a littler relative value movement value pick up.
Day trading includes more transactions in this way generating more commission expenses, though investing includes not very many trades. A day trader might get in and out of a position different times in a single day, while investors may hold positions for a considerable length of time or years. Along these lines, day traders are more sensitive to broker commissions. To an investor who plans to hold a position for a considerable length of time, a commission is irrelevant. Conflictingly, day traders are getting in and out of positions routinely so commissions can include quick.
Sorts of Stocks
Day traders have diverse criteria than investors when searching for stocks. As said above, day traders are more centered around technical analysis than fundamental analysis. Traders are not very worried about a company long-term potential, management team, and so forth. Rather they are centered solely around value action. Day traders search for stocks with momentum and volatility. This creates the chance to exploit critical value action. It additionally gives the liquidity important to get in and out of positions. Conversely, investors are centered around great companies: companies they accept will develop in the coming years. While volatility is useful to a day trader, it could speak to flimsiness to an investor. Investors tend to search for more secure stocks from more legitimate companies.
Drawback risk can frame from worldwide markets and occasions while stock markets are closed resulting in futures gapping down, which eventually makes most stocks likewise open with a hole down. Investing trusts these are quite recently little hiccups in the general picture of the long-term perspective. The absolute most unstable holdings periods include earnings reports. Long-term investors go for broke amid the earnings season. Open companies are required to give a quarterly earnings report enumerating the condition of business and the earlier quarters execution.
Most companies will likewise give execution projections pushing ahead, otherwise called earnings guidance. Stock’s can respond viciously to the corporate earnings report and guidance. A long time of profits can be lost in a single session for missing consensus analyst appraisals and guidance figures. Investors regularly will choose whether to keep holding a position based on these results where fundamental analysis has a key influence in the basic leadership process.
What is a Stock Market Technical Indicator?
May 18, 2017
A stock market technical indicator is a series of data points that are derived from the application of a formula to the price data of a security.
Technical indicators serve to predict the future price levels, or simply the price direction of a security by examining the past patterns.Technical indicators can be developed using only core elements of chart analysis, such as patterns and mathematical functions.
Stock market technical indicators are mostly used by active traders to analyze short-term price movements. They offer a different perspective from which to study price action.
The following are some of the top stock market technical indicators:
Support and resistance
These barriers are used by stock traders to establish the ideal time to enter or exit the market. Besides, they give clues about the direction of the market. The unique thing about these technical indicators is that they do not become obsolete as they are caused by human nature. Support and resistance have always been and will always be a natural occurrence in all liquid markets.
Price action in conjunction with moving average and support and resistance helps traders to go with the trend and identify the path of least resistance.
Volume serves as an effective indicator of the conviction of traders. Volume placed in context with price movement, allows one to trade effectively. In order to measure the significance of volume, a trader needs a baseline to establish the percentage change over an average day.
This stock market technical indicator helps traders to identify a change in trend. They measure buying and selling pressures by assuming that no commodity can sustain an upward or downward trend without consistent buying and selling pressure.
Relative strength index (RSI)
This is a great tool that helps trades to time their trading signals. When a stock is overbought, the RSI will show a level above 70 and a stock is oversold if the RSI indicates a level below 30.
These tools identify periods of high and low volatility for stock. Besides, they can be used to identify the trend of a stock. Together with moving averages, a trader can use these bands to identify support and resistance.
Why use stock market technical indicators?
The core purposes of technical indicators is to alert, confirm and to predict.
Technical indicators alert traders to study price action keenly. If momentum is warning, it may be a signal to watch for a break of support. A momentum warning signifies the likelihood of a break of support while a large positive divergence building indicates the possibility of a resistance breakout.
A trader can utilize technical indicators to confirm other technical analysis tools. In the event of a breakout on the price chart, an equivalent corresponding moving average crossover can confirm the breakout. On the other hand, if a stock breaks support, an equivalent low in the On-Balance-Volume (OBV) could serve to confirm the weakness.
Securities traders can use technical indicators to predict the direction of future prices.
Stock market technical indicators help traders to make trading signals. With the right method, traders can use the indicators to signal trading opportunities and come up with effective strategies.
What are Candlestick Charts?
March 16, 2017
Candlestick Charts are also well known by the name Japanese Candlestick Charts. This type of chart is used to represent financial data and its movements. Visual representation provided by the candlestick pattern is easy to understand for analysis and better decision making purpose.
While creating a candlestick chart data about the prices high, low, open and close are necessary for the financial purpose. High and low are presented by the lines. Stock can close when they have high or low value.
If a stock is closed with the low value then the opening value it is represented by filling the body of a chart. If it’s opposite than the body part of candlestick will not be shaded. The body of the candle chart can be shorter or longer in size. The longer candle there is it means that there is more movement in stock and the value could be increasing or decreasing depending if it’s shaded or unshaded. So if the body part is unshaded then its good time to buy the stock since it’s cheaper at that time. But if the body part is shaded then the price has increased its time to sell the stock and it will help financially.
Most used Candlestick Chart Patterns
- Shooting star
- Blending Candlesticks
Formation of Doji occurs when the open value and the close value equal to each other. It’s hard to determine if the stock should be sold or to buy more with Doji Chart Pattern. Doji pattern is of various types such as Long-legged Doji, Dragonfly Doji, Tombstone Doji and Gravestone Doji. When Harami pattern is shown in a chart it represents that on the first day of stock market. The pressure is high for both the sellers and buyers. It is used when each day the prices are going to be increasing. Hammer formation and shooting star formations are similar to each other but little bit of opposite kinds. The shooting star always points upwards while the hammer points downwards. But both provide information that helps in selling the stock.
The Blending candlesticks are formed with uniting of candles with each other so they are blended together. Basically, the pattern has more than one candle used in this candlestick pattern. With the blending candles the opening, closing and high and low values exist same as other types of patterns is representing. But with the blending of candlesticks pattern, it also requires the open value of first candle and close value of the last candle in blended candlesticks. Blended candles are represented by the visual representation of hammer, shooting star, and other candlestick patterns as well. In blending candlesticks there could be a use of more than just two candles in forming the pattern of blending candlesticks.
Candlesticks are being used for many years now. A way of representing financial movements is easier to understand with candlestick charts. Each candlestick in the chart only shows the change in movement of a single day. So each day in a month a new candle formation takes place on the chart to compare everyday stock market details. The method of using candlestick charts is easier and better way for anyone to use. With its visual representation, the chart helps make decisions of selling and buying stock easier.