Sunday, July 29, 2007

How Online Trading Education Can Make A Difference

How Online Trading Education Can Make A Difference By J. Foley


Each online trader will trade in their own style, depending on whether they are
going to be long-term, medium term, short-term or day traders. Making a
decision on the type of trader you want to be, however, means you need to be
aware of the trading education available to assist you.

Stock charts

Stock charts are used and analysed by an online trader in order to help him
determine when to buy and sell stock. The main types of stock charts in use
include:

- Line charts: which, as the name suggests, is a line on a chart connecting
stock price over a period of time (can be minutes, hours, days, weeks,
months, or even years).

- Bar charts: similar to line chart, however the information contained is the
open, high, low and close price of the stock for one particular day.

- Reference chart – charts the stocks price and trading volume and is used to
plot where the stock price may go to.

- Candlestick charts – the information contained in candlestick charts is the
same as that you can find in bar charts; however, the display format is slightly
different.

Technical indicators

As there name suggests, technical indicators are used by stock traders to
track a stock’s previous performance in the hope that it may forecast where
the stock is going to go. This is done by making use of the stock charts
previously mentioned, plus additional analytical indicators which might have a
part to play.

It should be noted that technical indicators can be very confusing if you are
new to this type of information analysis. However, basic use is made of a:
- Bollinger band: which was invented by John Bollinger and uses 3 band lines
to track stock price fluctuations: an upper, centre and lower. The centreline is

the moving average, while the upper and lower lines are twice the plus and
minus standard deviations, respectively.

- Moving average: is a stock price/time series technical indicator. These can
then be calculated over short, medium and long term periods, as the need
requires, to determine where the stock may go and whether you should be
looking to maintain a short, medium or longer term position.

- Candle stick trend reversal: using a candle stick chart, a candle stick trend
reversal technical indicator will use the information in the chart to determine
when to buy in and sell out of a stock.

Keep in mind that there are other types of technical indicators in use, but the
above are the primarily the types used by new online stock traders.

Analysing the information

Assuming you have correctly analysed the stock chart and technical indicator
data, you should then be able to chart a stock’s movements – thereby
hopefully ensuring that you remain one of the 20 percent who make a profit
from online trading from Day One.


Article Written By J. Foley

Want To Learn How To Trade Like A Pro

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