What is the uptick rule, and how does it affect forex trading?
US regulators revoked the “uptick rule” on the 6th July 2007. Previously the uptick rule, which was implemented in the 1930s following the US stock market crash, was designed to ensure it was more difficult to short sell stock. Under the so called uptick rule, a short sale may only take place if the market…
How do currencies move in relation to each other?
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other. There are a few reasons why this is significant, but most importantly, it allows traders to understand their exposure. As we have stated time and again, correlations between different currency pairs will inevitably…
Why does the average forex trading strategy lose money?
Extreme forex market volatility and major headlines has made forex trading more popular than ever, but the lightning-quick influx of new traders has been matched by a similarly dramatic outflow of existing traders. Market conditions remain as challenging as ever, and many novice forex speculators have found it very difficult to preserve capital – much…
What’s the difference between top down and bottom up investing?
There are many different approaches an investor can take when looking at buying shares, and whilst top down and bottom up are completely different in their strategies, their desired result is exactly the same – to pick out the stocks which are guaranteed to deliver the best returns. The top down approach focuses on the…
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…
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…
10 top dividend paying stocks
When the sharemarket falls by 20 per cent or more – as it has done since November – one of the major comforts to an investor is the dividend income from shares. It comes from a company’s earnings, so it’s not affected by the share price. So the dividends being paid this year – usually…
Why everyone loves penny dreadful stocks
Penny dreadfuls – stocks that sell for a handful of cents yet give big percentage gains – have a long history in Australia. Since the beginnings of the stock exchange, resources explorers have traditionally filled this role, often hitting paydirt with a drilling hole, resulting in a share price surge. More recently, technology stocks and…
