 Share
and Option Trading
Education
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The principles of trading are basically
very straight forward:
Buy something that is undervalued and
sell it if it becomes overvalued.
This applies to all goods whether they are physical products or
intangible products. Trading goods goes back into prehistoric times
where traders bought where the goods were plentiful and sold where the
goods were scarce. The difference was the "profit". The price paid for
shares or options depends on the "expectations" of buyer and seller.
The buyer expects them to increase in value and the seller expects them
to either stay the same, because they have risen in price, or to
decrease in value. This creates a market and the emotions of fear and
greed become involved when fortunes can be made or lost. It all depends
on expectations.
There are two basic approaches to determine expectations for the value
of shares/stocks:
The Fundamentals approach, which looks at the value created by work
done to produce it. This is the approach followed by investors such as
Warren Buffett. They look at the sources of materials and labour
required to produce the products, and the potential shifts in supply
and demand of these resources for their production and consumption.
This includes the prospect of growth in demand and supply.
The Technical Analysis approach, which purely looks at the price and
its movement. This is the approach taken by Technical Analysts who
chart stock prices and then examine the price movements to determine
the direction and likely magnitude of future price movements. They base
their buying or selling decisions entirely on this analysis.
The Getting of "Wisdom" in Trading
There are many ways to learn to trade on the stock-market. You can
start as I did forty years ago, make mistakes, and lose interest
because you lose money. This would be a great shame, because investment
is a sure way to build your assets and to provide for yourself and
family in the bad times that most of us experience as we go through
life. It
provides a backstop for job loss, and in the long term can provide the
wealth and income that gives you the financial freedom to live as you
choose to live.
A much safer and better way to learn is by educating yourself using the
many methods available today that did not exist in my youth. There is
really no reason why you cannot
start with relatively small sums from your savings, and progressively
build them into the wealth required to achieve your dreams. This method
has been used for centuries, and it is still applicable today. But it
does require clear goals and actions to achieve them.
Many others have done this and have reached the position where they can
choose whether to work, and how they wish to work.
YOU can be one
of them, if YOU establish
YOUR vision, and
then take the necessary ACTION (work) to create it.
It
is entirely up
to YOU. It is YOUR CHOICE. What do YOU WANT OUT OF LIFE?
Below are some
of the approaches you can use to get yourself started.
- Read newspapers and magazines dealing
with shares/stocks.
- Buying a newsletter and following the
recommendations of an expert, or group of experts, while you invest
your funds. There are many from which to choose and it should focus on
your preferred interests.
- Self-education by reading suitable books,
or researching the internet.
- Undertaking one of the many courses
available from individuals or companies that specialise in this
education.
The problem with the first approach is that the information in the
newspapers and magazines is frequently "old news" in the market and is
already included in the share price. This is because of the delay
between when it is written and when it is printed.
Purchasing after you read it may well be before a fall in price. There
is also the possibility that the article was written to promote the
stock so that other traders can sell their holdings at an inflated
price. While the stock exchanges are vigilant about unethical trading
practices they cannot prevent poor decisions from old information.
High quality newsletters are a better source of information provided
you act on it quickly. Once the information is in the public arena it
soon becomes "old hat" and the same situation applies as above.
Self education from books or internet research is a viable method
provided you choose quality information sources. There is a vast
quantity of information available and much of it is free from reputable
websites. Most stock exchanges have an education section that will give
you the basics to learn to trade. They also have a huge amount of
information on the stocks that are listed on their exchange.
or websites.
Courses
can be in several different forms:
- Correspondence
- Face to Face Seminars
- On-line via the Internet
My
personal recommendation is to do a course, because this will give
you:
- a fast start
- make you much more aware of what is
involved in trading and investment
- help you avoid some common mistakes
- help you to achieve your dreams faster
- and can be supplemented by additional
reading and education.
The question is, "Which
Course?" There are many available in the
market
place today and some are better than others. This site aims to assist
you to evaluate the range of courses available to meet your needs.
You can choose a course depending on
where you are in your learning and your preferred style of Trading.
I began by simply attending an
introductory seminar by an share and option trading educator I
met at a local Investment and Trading Expo. He was promoting his
Technical
Analysis Training program and I wanted to learn it. It was
more by chance than anything else, but he proved to know what he was
talking about. I invested in his Home Study course, rather than the
face to face seminar, because my time commitments did not match his
schedule.
In retrospect I would have progressed more quickly if I had done the
face to face course, because you do learn more in this type of
interactive
environment. You are also stimulated by meeting other like minded
people. Once you have mastered the basics you can add to your learning
by selectively doing more courses that cover additional areas of
knowledge as and when you feel the need.
» Basic
Technical Analysis Share Trading Courses
» Fundamental Analysis
Share Trading Courses
» Price
Analysis - A Different Approach
» Options Trading
Courses
» CFD Trading courses
» Advanced Trading
Techniques
The purpose of Technical Analysis is to
create a visual graphic picture
of the price movements of stocks/shares/commodities/forex that will
enable the user to make an assessment of which direction price will
move in the future. There is a basic assumption that the price will
continue to move in the direction of the trend until there is
sufficient data available to show that the trend has reversed and
changed direction. Trends are more easily discerrned over longer time
frames, and the shorter the time frame the more difficult it is to
determine the direction price will move. Daily price movements can
contain more "noise" than weekly price movements, because they can have
their own short term cycle movements within the week; and weekly price
movements contain more "noise" than monthly price movements, because
the longer time frames have a smoothing effect on the price trends.
Similarly if one is trading on an intra day basis you soon notice that
there are cycles within cycles and that they all have their own trends.
To put some order into this and create visual graphic images that are
more suitable for our brains to grasp, we make use of a variety of
charting methods.
These include, bar charts, line charts, and candlestick charts. There
are other special chart types such as swing charts and point and figure
charts that are also used by technical analysts. But it is from the
first three chart types that most derivative charts are determined.
These include straight line trends, a variety of moving averages using
a range of different time periods, Stochastics and Moving Average
Convergence-Divergence and many others. So much has been written about
all these different charting processes that I do not intend to
duplicate with another book, but simply to refer to books I have found
useful.
To construct these charts there are now many different software
packages available on the market and it is no longer necessary to hand
chart them. I will say this though, that having learnt to hand chart a
stock in a training course, I have found it particularly valuable in
understanding the erratic way price movements can and do occur.
There are many services that provide the basic charts that you are
likely to require for free on the internet. So even if you have little
money, you can get access to basic charting information readily to
assist you in your learning. But don't expect to truly understand what
is happening until you have gained some experience with real trades.
For a list of recommended books refer to the Trading Books page.
Fundamental Analysis has been around
from the very beginning and
ultimately it is the fundamentals that are the main drivers for the
success of a business. This has been the approach used by Warren
Buffett and many other traditional investors. It is usually the basic
approach for the major firms such as Merrill-Lynch, Goldman-Sachs and
many others when making investment recommendations to their clients.
One Australian business utilising this approach is Lincoln StockDoctor.
It has been developed on work done by Merv Lincoln for his PhD and
developed further with his son Tim. It is based on the analysis of all
the financial reports of listed firms submitted to the ASX annually and
utilises a series of financial ratios to determine the performance of
the stock from one year to the next. It then combines this information
with the current market prices of the stocks to determine which stocks
represent "value" investment for the investor/trader. Based on this
information it filters and ranks the stocks with the best performance.
If you are interested to know more of this approach then follow the
link: Lincoln Stock Doctor
Another package that provides Fundamentals information as well as the
software for Basic Technical analysis is
IC-Investor.
This package is less expensive than StockDoctor, but it is an excellent
package and may be all that you need. It covers all the Basic Technical
Analysis Tools that a beginner is likely to need and provides a variety
of features for more advanced investors/traders. The Fundamental data
can be updated with the most recent financial reporting information and
it shows ex-dividend dates and payment dates at the click of a mouse.
It incorporates a trade planner, a portfolio manager, and has some very
useful addon software to scan for specific trading situations and will
also allow you to build your own scans as you become more experienced.
I bought it to give me access to the Fundamentals and commodity
information that was not available at tthe time in Market Analyst. I
have found it an extremely useful package when evaluating shares in
particular situations.
In the last twelve months I've
encountered a completely different
approach to analysing Price Movements that is being taught by David
Vassallo of
Market Informer. This method purely looks at Price
Movements and looks for particular patterns to form to determine the
likely direction. The magnitude of the movement is then calculated from
the ratios of the previous high and low. For more information on this
method follow the link.
I am impresssed with what I have seen of this method and believe it is
worth learning more about it. David Vassallo provides a course for
those interested and also an advisory service for those who simply want
the information to trade.
Click here for
a full review on David Vassallo and Market Informer
There are many people offering education in Options Trading. One I like
is Options University, run by Brettt Fogle and Ron
Ianieri. They provide
an excellent education program for those interested to learn Options
Trading. I like their approach because they teach students to
understand the full implications of Options, including volatility and
time decay and "the Greeks". This enables students in their program to
then select whatever is the most appropriate strategy for the
situation, rather than learning a strategy and then applying in
inappropriately. This is the standard of education required for those
working professionally in the industry. Learning
strategies without this full understanding can get people into trouble
because they make mistakes from a lack of knowledge. Periodically they
release a new course, or provide supplementary training material and I
recommend them to anyone interested in learning about options.
The more I see of this group of professionals the more impressed I am
with their passion for their subject and commitment to providing good
education on Options Trading. For those who want to know more about
Options University follow these links: Options University and
Who is Options University
I have now spent the last couple of months studying the Mastery Series
II program and have found it excellent. I keep going back over sections
of the DVD's to burn it into my brain. Ron Ianeri covers everything
very thoroughly and as I apply the concepts I expect to have a
significant improvement in the efficiency of my trading. Options do
have definite advantages in specific situations and knowing both how to
use them and when to use them adds another tool for trading purposes.
For more information on Options
University and the courses they offer go to their Home
page.
Options University - HOME PAGE
Click here
for
a testimonial on Ron Ianeri and Options University
To promote their platforms most CFD
providers are now providing many incentives to open an account with
them. This often includes free training and charting packages to
attract and retain their clients accounts. The platforms have also
become much more
embracing in the range of products offered. Most now include Shares,
Options and Forex and some offer commodities as well. There are now
many competitors in the market place but the longest established
are:
- CMC offers an excellent
free
educational package now and the charting facilities have become much
more sophisticated in the last year.
- IG markets also offers
comparable facilities for clients and is continuously adding features
to their platform.
- MF Global provides a
Direct Market Access platform and also provides training in conjuction
with
David Vassallo of Market Informer.
For
more information of
CFD
providers see the Links Page.
There are several advanced technical
trading
techniques that you can study after mastering the basics. The two most
common approaches in Technical Analysis are developed from the work of
W.D.Gann. The first looks at cycle analysis using time and price, and
the second develops the concept further with the introduction of
"geocosmics" or astrological studies.
Both of these approaches make extensive use of computer software
programs to analyse the price movements of shares, commodities and
forex to assess the probability of which way the price is likely to
move. Many software packages include tools designed to assist the
technical trader to make their decisions on whether to place the trade
long or short, and to estimate the possible movement that will occur.
Market Analyst 4 is the software package that I am using for this
analysis, and I have progressively upgraded to the Astrological
Edition. This software includes an ephemeris built into it. A new
edition, Market Analyst 5, is being released this month and will
include many additional features including the ability to produce three
Dimensional charts. I am enrolled in the training program when it is
released and will be interested to see if it improves my
decisionmaking.
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