This thread is to teach anyone interested on how to trade the US market and earn better returns compared to keeping your money in the bank, only to be used by other fund managers.
The “why” you are doing anything is more important than the “what”. When you understand the “why”, then the “what” is not much of a question.
• Positioning ourselves anywhere in the world and make foreign currency as if we were based abroad.
• Spend more time with our family, being able to work from home or any location.
• Know exactly what happens when you lose or make money, so that you know exactly what to do when opportunity knocks again.For me, the freedom outweighs all, am sure you can speak for yourself.
The “how” is the next step following the “why”, these are followings things you need to start.
• Computer system with reasonable internet speed.
• The desire and will to learn.
• Keep an open mind.
• Do not be a pessimist, for every dollar you lose is a learning curve, and every dollar you make confirms your trading rules. Doctors spent years in the university to become qualified, so do not expect margic.
• The Rules are as follows
> Let your profit run
> Cut all loses as soon as possible
> Do not buy stocks going down in price (averaging down).
> Listen to the general market ( 75% of the stocks follow the market direction)
> Approx. 10,000 stocks are traded on the market, Buy the best of the best stocks, one with the following features¦
Good Earning per share EPS.
Stocks making good sales approx. 25% every quarter.
Stocks with good return on Investments. ROE.
Stocks with high profit margin.
Stocks with increasing sales per Quarter and year.
I will provide you with information on how to carry out technical analysis and suggest some of the stocks with these traits for you. I will post a topic at regular interval. If there are no questions I will assume all is fine and move onto another topic.
WHAT I AM NOT
• Millionaire on the market.
Everything I have learnt, I have done on my own in the corner for my room and on the internet. Now I have an idea of what I talk about and await to translate it to money.
- By doing this, I will clearly define a logical trading strategy and sharpen my skills further.
- STOCK MARKET
A stock index or stock market index is a measurement of the value of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.
- *NASDAQ Stock Market*
Is an American stock exchange. It is the second-largest exchange in the world by market capitalization
- *New York Stock Exchange (NYSE)*,
sometimes known as the “Big Board”, is an American stock exchange located at 11 Wall Street, Lower Manhattan, New York City, New York, United States. It is the world’s largest stock exchange by market capitalization of its listed companies at US$19.69 trillion as of May 2015. The average daily trading value was approximately US$169 billion in 2013
*Dow Jones Industrial Average /Industrial Average, the Dow Jones,*
Simply Called theDow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles DowThese are the major averages on which our stock market analysis will be based and referenced as we go along.
WHAT DRIVES STOCK PRICE
he move movement of a stock/equity is determined by several factors, which include but not limited to the following
1. The general market movement – 75% of stocks follow the direction of the general market.
2. Institutional ownership – Funds, banks, insurance companies, these are the big boys that inject significant money into a stock that affect price.
3. Fundamentals- The fundamental are the factors that interest the fund managers to invest into the stock. The fundamentals are derived from the company’s books. It include, sales, earnings per share (EPS), return on investment (ROE) debt e.t.c
There are factors that need to considered in buying a stock. First of all, you need to have a list of at least 30 stock with solid fundamentals, we will discuss how to come about these values later. You then have to make sure you general market is an uptrend and your stock are at the right buy point. The right buy point is determined by your technical analysis. Once you have all these considered, you need to determine you entry, price, your profit taking Zone and your stop loss (total risk) before entry.
Once the factors are determined the market will take you into the trade rather than you pressing a buy. Buying a stock by pressing the buy bottom is a beginners way of buying stocks. Experienced trader will set all his criteria for a buy at least an hour before the market opens, and when the conditions are right, the trade will execute. No emotions of any sort in such trade. In fact you can set your conditions and walk away from your trade.
To understand the tools and techniques used in technical analysis, I would start by defining what technical analysis is.
“Technical analysis is the study of Market action, primarily through the use of charts, for the purpose of forecasting future price trends”.
(Price, volume and open interest) Open interest in mainly used in futures and Options. For stock analysis, we will be sticking to Price and volumes.
The philosophy of technical analysis is based on three premises1. Market action discounts everything.
2. Price moves in trends.
3. History repeats itself.
- Market Action discounts everything.
Here, the technicians believe that everything that could possibly affect the price of a stock (fundamentally, politically, psychologically or otherwise) is actually reflected in the price of the market. By studying the price chart and a host of supporting technical indicators, the chartist lets the market tell him/her where price is likely to go.
- Price move in Trends.
This is based on the premise that price move in trends – at trend in motion is more likely to continue than to reverse.
- History Repeats Itself.
Most of the chart pattern that has been developed over the years are based on human psychology which tends not to change. These patterns are based on well identified psychology of human behavior in the stock market. This is based on the fact that the action of human in the market is directly related to “greed” and “fear”.
CANDLE STICK PATERNNOTE a weekly (End of Friday candle stick) is more important than a daily candle stick, this provide the average behavior rather than a one off.
Please click this link, it will show you all you need to know about candle stick.
Please read and digest it, It is very crucial in your daily and weekly understanding of the market behavior.
Here you do not need Nigerian Broker. I have traded on the Nigerian market using a Nigerian broker only to get frustrated ( ho.. we cannot buy today, hoooo we cannot sell today, hoooo the quantity is not ready) or the IPO has closed. You do not get all this on the US market, you will open and online trading account yourself, you can open one like you open an email account (very fast). This will give you an instant access to the platform am using to analyse the stock.
To trade, it might take another 4 weeks as you will have to set up your bank account to Fund the brokage account and verify your documents to ensure you are who you claim you are. All that will be done online. Once done you are ready to role, but right from the start you will have access to a dummy account you can you to practice the platform and familiarise yourself with it.
For US and International Traders
There are many online brokers in the US but I will recommend the use of
TDameritrade.com or Interactive BrokersThis is the one I use and it will let you follow as I proceed. It will cost you 10 dollars to buy and 10 dollars to sell not matter how many stocks.
From a 50 dollar purchase to a 100 thousand dollar purchase. It always cost 10 dollar per trade. You know what your cost is up front. However for interactive brokers, the minimum deposit is US $10,000. If any of these interest you guys, you should check them out and send them an e mail. also check out [url]stockbrokers.com[/url] for a list of brokers.
There is also Robinhood which offers commission free trades but it is only for US Traders but and Australian Beta version is coming out. I recommend RobinHood for beginners IF YOU ARE IN THE US