FAQ

How do I calculate the Average True Range on stocks to set a stop loss position?

Any successful trader will tell you that stop losses are essential to a good trading strategy, but knowing where to place your stop loss is less obvious.  Average True Range (ATR) can be an effective way to set stop loss positions and profit targets, and avoids the problem of being stopped out early. What is…

How to know if a share price has bottomed or topped

Question: What are the indications that a share price has bottomed or topped its current trend?   Response: There are many ways to potentially identify if a share has bottomed or topped in a current trend. One of the most popular ways to identify the end of a trend is through technical analysis. Often the…

When stock prices fall, where does my money go – can money just disappear?

When you hear that the sharemarket has lost $40 billion dollars in one day, it can be quite terrifying. How can so much money be wiped off the market in one day? Unless your stock has been going up, it’s difficult to make money in a falling market. In fact one of the few ways…

Why do companies care when their share price falls?

From a transparent point of view it can be confusing to wonder why companies care when their share price falls. After all, listed companies have already received money from investors, when they first sell shares through an Initial Public Offering (IPO). What happens in the secondary market, when investors buy and sell to each other…

What are dividend reinvestment plans?

A dividend reinvestment plan offers shareholders the opportunity to repurchase new fully paid ordinary shares in a company, rather than take their dividend payment as cash. One of the main benefits is that additional shares purchased through the plan are generally offered at a discount to the market price. This discount normally works out between…

What does it mean when a share goes ex-dividend?

To explain what it means when a share goes ex-dividend, we should first understand what a dividend is. A dividend is a taxable payment which is given to shareholders by the company they are invested in. Dividends are usually paid as cash (in the form of a cheque or by EFT if requested), however, they…

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…

Why do some stocks have a bigger gap between Bid and Ask prices?

Recent sharp declines on the Australian share market have highlighted one of the most common misconceptions when it comes to trading shares: that heavy selling alone contributes to the price of a stock going down. It sounds as plausible an explanation as the reverse – that intense buying activity in a stock will push its…

Should I reinvest dividends or cash out?

There is no doubt dividend re-investment is an attractive option to many shareholders as it provides the benefit of a small discount and substantially reduced brokerage. Any purchasing of share assets should depend on the outlook of the particular share at the time of purchase. Sometimes you may hold a tranche of shares that are…