Advanced Trading

Some preferred stock issues have a convertible feature that allows holders to exchange their preferred stock for common shares. The conditions and terms of the conversion are set when the preferred stock is first issued. The terms include the conversion ratio, which is the number of common shares the preferred stockholder will get for each preferred share exchanged, and the conversion price of the common stock. Preferred Stock Example For example, Company XYZ issues a new convertible preferred stock that is sold at $100 per share and is convertible into five common shares of XYZ Company. The conversion ratio is therefore 5:1, and the conversion price is $20 per share for the common stock ($100/5 shares). If the market price of the common stock ... [read full story]

There are only two basic definitions for bullish and bearish volume: 1. Bullish volume is increasing volume on up-moves and decreasing volume on down-moves. 2. Bearish volume is increasing volume on down-moves and decreasing volume on up-moves. Knowing this is only a start and in many cases, not a great deal of help for trading. You need to know more than this general observation. You need to look at the price spread and price action in relation to the volume. Most technical analysis tools tend to look at an area of a chart rather than a trading point. That is, averaging techniques are used to smooth what is seen as noisy data. The net effect of smoothing is to diminish the importance ... [read full story]

When trading the breakout of any stock market chart pattern, it is important to continually monitor the stock to determine whether it is performing the way you anticipate. Never forget that stock market technical analysis is an art, not a science. If a stock isn't acting as expected, it is best to get out at a sensible, predetermined level instead of relying on hope. When in doubt, get out! Bull Trap Occasionally, a stock will breakout to the upside, fall back into support, and then continue to decline to new lows. This action, which leaves all the new holders of stock with losses in their account, is known as a bull trap. When stocks break out to new highs it encourages many ... [read full story]

There is big money to be made on the short side of the stock market. But the public is not short-sell minded. We advise a toe-to-the-water approach. Try it slowly and see. It’s not so cold. In fact, it’s fine once you get in. You gain confidence that you can handle any market direction! But know the ropes first. In theory, short selling can cost you more (because a stock you buy at $20 can only go to zero, but a stock you sell short at 20 can go to 60 or 400). But, if you follow the strategies outlined below and the stock market advice in this Stock College, this should never happen to you. A simple stop-loss order gives total protection. ... [read full story]

In the U.S., the stock markets and exchanges (New York Stock Exchange, American Stock Exchange, and Nasdaq) are open from 9:30 a.m. to 4:00 p.m. eastern standard time. What happens when a company announces bad news after the close of the market? News can affect the stocks in your portfolio, even when the markets are closed. Must you wait until the market opens the next business day to sell your shares? Not necessarily - "if you're willing to venture into after-hours trading and accept the risks that this type of trading incurs. Some brokerage firms offer after-hours trading that enables you to buy and sell stocks, and possibly avert disaster "as long as you understand the risks. Since the late 1990s, individual stock ... [read full story]