Qs

How do you use pivot points to trade forex?

One of the most appealing things about technical analysis is the ability to adapt it to a variety of tradable markets. By definition, technical analysis concentrates on the study of market action in an attempt to predict future movements. As such many of these indicators will perform over a range of markets. Your choice of…

How do I determine the best stock to trade?

This is a common issue confronting new share traders who have decide to go the online route and do it themselves. As you have mentioned “trading”, I will assume that it is not long term investing that will be the philosophy of your account. First, you need some education about how you will trade once…

How does the ban on short selling affect options traders?

The idea of short selling is to profit in a declining market. As a result of the ban on short selling, whereby and investor/trader will sell stock that is either borrowed, or not yet owned, only to buy the stock back at the lower price, many have shifted to the use of options in order…

Should I buy options that are in the money or out of the money?

There is no wrong and right answer to this question. Whether you decide to buy in the money or out of the money, options will be totally dependant on your trading strategy and tolerance towards risk. However we will discuss some differences between trading options at various strike prices. In the money options are obviously…

Why buy an option rather than a share?

When we look at why people trade options as opposed to shares there is one common attraction and that being the element of leverage options provide. This means for a fraction of the price you can obtain the same exposure to the fully paid ordinary share by simply trading options. For example, if we are…

What are naked options and why are they risky?

A holder of a call option has the right, but not the obligation to buy an underlying share at a specified price, whilst the holder of a put option has the right, but not the obligation to sell the underlying share at a specified price. The process of selling new options is called ‘writing’. When…

Why is it bad to buy an option close to its expiry date?

I think that it is worth taking a quick step back and first discussing how we value options. If you were to dissect an option’s value into its components then the result would be two parts: Intrinsic Value and Time Value. Intrinsic Value is the option’s value if exercised on any given day, defined as…

Where did CFDs come from, and why the weird name?

Contracts for Difference or CFDs were originally stgeloped in the United Kingdom in the early 1990’s by Smith New Court, a London based trading firm. CFDs were mainly used by the firm’s hedge fund clients to short sell using the benefits of leverage and also to take advantage of the stamp duty exemptions, which were…

Capitalising on price movements in reporting season

I am currently a new trader and I’m playing the Sharemarket Game and over the weeks I closely analyzed all the companies. To my complete surprise one of the companies (Downer EDI) went from -0.81% on the 20 Feb to 14.29% on the 21 Feb and there were no announcements prior to this. The day…

Trading the top 200 Aussie stocks with an eye on the SPI or the XJO, but never both

I have been trying to understand why the SPI and XJO follow the same intraday and daily trajectory. I have asked a number of people but have not yet obtained a satisfactory answer. On any given trading day a multitude of people trade the top 200 Australian stocks, with little or no concern for the…