Trading Tips Blog

1 2 Academic research is an often-overlooked treasure trove of information for investors. Some investors ignore the research journals because they know the academic community believes markets are efficient and since academics believe that, some investors reason that there can’t be anything about how to beat markets in the journals. This is not true. Academics do tend to believe the efficient market hypothesis (EMH). In broad terms, this idea says market participants, as a group, immediately analyze new information about companies as it ...
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1 2 Almost every investor wants to be like Warren Buffett in some way. While there is unlikely to ever be another Buffett, we can certainly learn from studying his investments. Many analysts point to his ideas about value investing and being patient as keys to his success. What they could be missing is how, at times, Buffett has combined value investing, patience and a desire to generate cash into a successful investment strategy. The strategy associated with this lesson is one ...
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1 2 It seems obvious to state that markets are connected and moves in one market are often related to moves in other markets. But in 1991, this was a new idea. In that year, John Murphy published Intermarket Technical Analysis Trading Strategies for the Global Stock, Bond, Commodity, and Currency Markets to provide the first explanation of the relationships between markets. First, let’s look at Murphy’s ideas and then we can develop trading strategies based on intermarket relationships. Many traders believe intermarket ...
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1 2 Risk is part of investing. It is unavoidable and it’s even sought after. Risk is clearly related to potential rewards. To achieve the largest possible returns, investors have to accept higher than average risk. Low risk is associated with low returns. While these basic principles are well understood, the meaning of risk is less well understood. Professionals almost always tend to define risk in terms of standard deviations. This is frustrating because the idea of a standard deviation means nothing to ...
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1 2 If you watch any one of the business news channels for more than an hour a week, you are likely to hear an expert proclaim that investors are moving money in or out of particular sectors. They might say “money is flowing out of financials and into gold mining stocks” for example. While it seems statements like this require actual knowledge of what other investors are thinking, that really isn’t the case. Sometimes the comments are based on observations of ...
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1 2 I saw an interesting chart over the weekend and want to share it with you so I recreated it. There are Bollinger Bands, moving averages, trend lines, stochastics, RSI and MACD. I think the chart is saying to buy but it’s not easy to tell. This chart is clearly an example of too many indicators. In fact, all three of the indicators at the bottom use the same information and will almost always give the same signals. We can confirm that ...
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1 2 A little more than 17 million voters in Great Britain created turmoil in global markets when they voted to leave the European Union. According to analysts at Standard & Poor’s, the vote led to $2 trillion in losses for investors around the world. These short-term losses reminded investors that markets are always volatile. Volatility is also defined as risk and is often explained in academic terms. From an investor’s perspective, stripping away the academic jargon, risk is the  amount of money ...
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1 2 Traders are usually focused on maximizing profits and moving averages (MAs) are one of the tools some traders use to meet that goal. An MA is applied to smooth price data and help to identify the trend. One of the earliest references to this strategy can be found in the classic technical analysis text book, Technical Analysis of Stock Trends by Robert Edwards and John Magee. In the first edition of their book, in 1948, they wrote: And, it was back ...
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