Trading & Technical Analysis

Contingent Order

A contingent order enables you to place an order into the market ‘only if’ certain conditions are met. For example, an investor that wants to buy a set of shares and offload another set at the same time (a buy-write) would place a contingent order. These types of orders can be difficult to pull off…

Blue Chip

The term is borrowed from gambling, where the highest value chips are the blue ones. Blue chip companies are normally characterized by financial stability and strength and have large market capitalisation. Blue chip shares are viewed as being less risky investments than small-company stock. However, there have been plenty of examples of blue chip companies,…

Buy and Hold

The buy and hold strategy is based on the assumption that in the long run stock prices will go up, and historical data over the past five decades appears to support this assumption. The logic behind the assumption is that capitalist economies expand. Consequently, prices and profits rise and their growth is reflected in the…

Average Daily Volume

Average daily trading volume (or ADTV) is a helpful tool in determining the liquidity of a market and in identifying sharp changes in trading patterns. These are usually indicative of circumstances that may be of relevance to shareholders and traders. When ADTV is high it means that the respective stocks are more competitive; they can…

Scanning software

Scanning software is an essential tool for technical traders. Basically, scanning software lets you scan all possible stocks in the market based on your favourite indicators – which might include Momentum, RSI, Ultimate, Stochastic, CCI’s, OBV and Price Oscillator. It’s then a matter of charting the stocks – possibly combining some fundamental research – and…

Portfolio Management Software

Portfolio Management software can be a huge help at tax time. It’s a far cry from a shoebox, or the top drawer and can quell those troubling thoughts in the middle of the night: How much brokerage have I forked out this year? What on earth did I sell those Telstra warrants for back in…

Point and Figure Charts

The point-and figure chart is widely popular for detecting a share price trend. To an outsider this chart could be mistaken for a game of noughts and crosses. Traders use these charts to identify the points or ‘breakouts’ where there is a noticeable change in the numbers of buyers and sellers – hence signalling a…

Moving Averages

The moving average is one of the simplest indicators a trader can use. It can, for example, be the 9 and 20 day moving averages (MA). Traders study their cross-overs and the relative position of the price with respect to the moving averages. Price movements on a chart can be shown in different formats such…

MACD

The MACD – or Moving Average Convergence Divergence – is a commonly used technical indicator. The MACD is a trend-following momentum indicator that measures the difference between two Exponential Moving Averages (EMA). Simply put, when the MACD is rising it indicates that the 12 day EMA is trading above the 26 day EMA. This implies…

RSI

The Relative Strength Index (RSI) is used to identify when a market is overbought or oversold. It is computed by analysing all the bullish ranges against all the bearish ranges during a particular period of time (usually 14 days). By adding all the bullish trades (when prices went up) and dividing it by the summation…

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