Bollinger bands are used by stock traders to determine overbought and oversold levels in the markets. Bollinger bands consist of two trading bands moving above and below a moving average. When using these bands you will see a center line which is either the exponential moving average or the simple moving average (depends upon personal [...]
Trading volatility; an investing method typically employed in stock option trading, measures the risk of an option over time. In theory, the chances of an instrument’s price being further out from the current price increases over time. Thus, the volatility must be taken into account when selecting an option trade.
Three CBOE volatility indexes
1) The [...]
Spread trading is used in technical analysis and it is when you take a long and a short position at the same time, in order to make a profit. This profit comes from the “spread” which is the difference between the “bid” and the “ask” price. The “bid” is the offer that is made by [...]
As you learn about the stock market and technical analysis you will eventually learn about the different types of stock market charts that are available to stock traders. In today’s article we discuss four different types of stock market charts including line chars, bar charts, point and figure charts, and candlestick charts.
Line Charts – the [...]
Point and Figure Charts
Point and figure charts were originally designed for long term investors but are now also used by short term traders to trade stocks, commodities, options, or other financial instruments. Point and figure charts are considered by many stock traders to be the easiest charts to use when identifying solid entry and exit [...]
Support and resistance are concepts that go hand-in-hand with technical analysis . Both are terms that are used by technical traders and they refer to the specific price points that have historically prevented trades from pushing the price of an underlying security, such as stock, in a specific direction.
When learning how to read stock charts [...]
Shorting Stock for Beginners
Shorting stock occurs when the investor borrows stock to sell with the expectation that the price of that stock will drop. The investor then buys the stock back to replace it at a cheaper price. Clear as mud? Let’s explain further. When an investor goes long on an investment, it means that [...]
Before we discuss breakout trading we must first define what a “breakout” is. A “breakout” is a stock price that moves beyond the defined support and/or resistance levels and it does so with increased volume. Day traders and other stock traders will use this form of trading as a way to take a position within [...]
Gap trading is a form of technical analysis used by day traders and other types of traders as well in order to trade stocks or other financial securities. Investors must learn how to read stock charts as part of their trading education. Gaps are actually areas on a chart where the price of a stock [...]
What is a Technical Indicator?
The purpose of using a technical indicator is to predict future price levels, or the general price direction of a stock, or other security, by looking at past patterns. In other words, indicators are used in technical analysis and they do not analyze any piece of the fundamentals of a company [...]
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