Newton's Laws Of Stock Market Trading by toriola1

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									Presented by Daniel Toriola
Choosing the right Stock is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. Click here to know more

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Newton’s Laws Of Stock Market Trading By Jason Ng

Read the oldest stock market wisdom from the world renowned physicist. This revelation had me surprised too. I was idly flipping through my old physics textbooks yesterday when it suddenly struck me. I was amazed to realize that Sir Issac Newton’s laws of physics points to so many profound and important rules in the stock markets today. So, here we are… the physics of the stock markets. Newton's First Law of Trading “A Stock at rest tends to stay at rest and a Trending Stock tends to stay in trend unless acted upon by an equal and opposite reaction or an unbalanced force.” This law teaches us the same thing the old commodity traders will… that the trend is your friend. If a stock is trending sideways, it tends to stay sideways until a powerful enough market force takes it out of its trend. If a stock is trending up or downwards, it will tend to stay moving up or downwards until drastic changes happen to the company or the market at large creating an “equal and opposite reaction”. We should therefore always trade in the direction of a trend and always be vigilant for signs of an ”equal and opposite reaction” or the “unbalanced force”. Such a force may take the form of a drastic change in the market sentiment at large or drastic change in the performance of the specific company in question. Newton’s Second Law of Trading “The acceleration of a stock as produced by a market consensus is directly proportional to the magnitude of that consensus, in the same direction as the consensus, and inversely proportional to the mass of the stock.” This law teaches us that a stock moves up or down into a trend due to a force created by market consensus. How much a stock moves up or down that trend is determined by the magnitude of the market consensus and how “massive” a stock is. By “massive” we are talking about the price of a stock. The more expensive a stock is, the more well established the company has been and the lesser in percentage you will make out of the same move in absolute dollar versus a smaller, less massive
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stock. The force of the market consensus is directly proportionate to the event that spurred it. If a company produces a breakthrough product on a worldwide patent, it creates an extremely strong market consensus that is likely to take a stock very far. If a company merely scores a marginally higher earning this quarter, it is unlikely to produce a market consensus that will go very far. Newton teaches us to not only look at what the news is but also how well established the company is in order to determine how much momentum it will produce in a given trend. The same breakthrough that drives a small company’s shares up by hundreds of percentage points may perhaps move a big company’s shares only by a fraction of that percentage. Newton’s Third Law of Trading "For every action, there is an equal and opposite reaction." No need to explain this one in much detail, do I? For every buying or selling, there must be an equal amount of buyers or sellers on the other side. The stock market is a zero sum game. For every buyer, there must be a seller and for every seller, there must be a buyer. The real question is, who is profiting from each of their buying and selling. There is really no such thing as more buyers today than sellers or vice versa. Every trader needs to understand that you can be on the wrong side of the table at anytime and only a sensible portfolio management system can help you go in the long run. I have traded actively in the stock markets for over a decade and survived with ancient wisdom such as what you have read here. There is indeed wisdom to be found in every corner of our life and if we care to look carefully, we will never be in a lack of guidance. Jason Ng is the Founder of Masters 'O' Equity Asset Management. He is a fund manager specialising in options trading and his Star Trading System has helped thousands. Please visit http://www.MastersoEquity.com.

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A Stock Trading System Can Help You Be A Better Trader By Tony Spann

First we'll start off with what a system is. According to Merriam-Webster's Collegiate Dictionary a system is "an organized or established procedure". It follows then that a stock trading system can be defined as "an organized or established procedure for trading stock". Two words in this definition are very important. Those words are organized and established. These words basically tell us that a stock trading system is planned. Planned is good because it indicates that when trading using a stock trading system that we know what to do ahead of time. Every profitable stock trader has a plan. You don't want to jump into a trade and then try to figure out your next move at the last minute. Another thing we can say about stock trading systems if that they are designed to trade stocks profitably. That, of course, is the intention and not necessarily the outcome. Basically I haven't heard of anyone wanting to create a stock trading system that loses money. Stock trading systems may be broken down into 2 basic types: Fundamental Technical The differences are that fundamental analysis uses economic data about supply and demand whereas technical analysis uses past price, volume, etc. data. Most of the time when someone refers to a stock trading system they are referring to a system designed using technical analysis. Stock trading systems range from very simple to very complex. A simple example of a stock trading system would be as follows: Buy a stock at the open every Monday Sell the stock at the close every Friday I know this is a simple stock trading system and you're probably saying to yourself, "That would never work". Maybe it would and maybe it wouldn't...only through testing would we be able to find out. Stock trading systems have grown in popularity over the last few years. One of the reasons more and more people are trading stocks using stock trading systems has been the need to have more control over risk. After the sharp decline in stock prices starting about April 2000 we all started to realize that maybe there is more to making money in the stock market than "buy and hold". Whether you're a beginner or a seasoned pro you'll discover the best Stock Trading tips, tricks, and techniques as well as valuable resources and information at http://www.tradingknowhow.com . Come on in and grab your free Stock Trading ebook while supplies last.

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