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…
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…
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…
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…
