Blog

One of the strongest forms of confirmation is a double reversal signal.

For example, the current chart of Wal-Mart shows how two bullish reversal candlesticks show up on the price chart, and how to interpret them. In this case, candlesticks provide strong bullish signals even though momentum contradicts what these show. A skilled chart reader knows that when you get contradictory signals, you either have to wait out the signal trends or find strategies that benefit if the stock price moves in eit

Candlestick signals are worth following to find timing opportunities. As an example, check the latest blog post at TheStreet.com for Chevron stock. The chart includes candlestick signals highlighted: Chevron - potential profits from dividends and covered calls

You can discover the world of effective chart reading with Profitable Trading Strategies Using Candlestick Charting. This is a comprehensive and complete course on the nature of candlestick charting, offered exclusively by the Global Risk M

The candlestick signal, when confirmed, is a powerful tool for timing trades. To see an example of how thing works in a current chart, check the article about Kellogg Co. at TheStreet.com

You can discover the world of effective chart reading with Profitable Trading Strategies Using Candlestick Charting. This is a comprehensive and complete course on the nature of candlestick charting, offered exclusively by the Global Risk Management Community. By the conclusion of this course, you should be able

A one-day session with a variety of interpretations is the spinning top.

This is a session with a relatively small real body of either color, showing up about mid-range in the session, and with both upper and lower shadows longer than the real body.

The signal can occur at the top or bottom of a trend, or even in the middle. It can also mean reversal or continuation. This depends on what other signals are found at the same approximate point in the chart. Reversal is most likely when it shows up at

When it comes to chart analysis, unusually large and small ranges have a lot of meaning. Measuring the distance between opening and closing price tells you a lot when trends develop or begin to lose momentum. Some specific patterns are excellent gauges of when reversal in the trend is likely to occur.

            First a few terms: The “real body” is the range between opening and closing price, shown as a rectangle in the candlestick, which is either white (prices moved up) or black (prices move

In Japanese, "marubozu" means "with little hair." This is a reference to the expected small or non-existent upper or lower shadows on this candlestick.

The black marubozu is one variety of a long black candlestick and may have small upper and lower shadows. However, these will be quite small compared to the non-marubozu long black candlestick, which may have much longer upper or lower shadows. The appearance of the black marubozu is bearish because, like all black sessions, it opens at the top[ a

The federal tax rules concerning options are among the most complex sections of the tax code. This has led to many misunderstandings. For example, many traders have heard that some covered calls are "unqualified." What does this mean?

It means that in some situations, a trader who has opened such a position will not be able to report gains as long-term gains if and when the call is exercised and the underlying called away. This applies only if you have held the underlying for less than one year w

The naked call is probably the highest-risk option strategy of all, right?

Not necessarily.

Most options traders associate risk with specific strategies. But you might want to question this assumption, based on a different definition of risks in trading: risk is not only determined by the attributes of a strategy, but more so by when and where the position is opened.

Even the notorious uncovered call may be less risky than most traders believe, based on a few important observations. These include:

1

In the 1940s the average holding period for stocks was as high as 10 years. This is unheard of today. Now the average is down below one year and many active traders (day traders, swing traders) are looking at being in open positions for a matter of days, not even weeks or months.

With this new "normal" (created in part by access through the Internet, low trading costs, and markets characterized by high volatility), do options play a role?

In fact, they can. Options are flexible, much cheaper than

Traders, especially covered call writers, love the forward roll. It helps avoid or defer exercise, creates additional income, and helps keep ownership of stock that is on an uptrend.

But there are potential problems. Among these are the following four every covered call writer needs to remember:

1. Rolling keeps you exposed longer, tying up capital. As advantageous as it might look to roll forward, does it really make sense? When you roll, you buy to close the original position and replace it with

The attraction of the ratio write is the potential for higher premium income. Traders too often convince themselves that exercise is unlikely, and that time decay is likely to outpace intrinsic value as the stock goes higher, even if the calls go in the money.

Here's the thinking: You own shares of an underlying security. You sell to open ATM, OTM or slightly ITM (At, Out of or In The-Money) call positions with one to two months until expiration. A ratio write is defined as a strategy in which yo

This October 14-16, MoneyShow.com will present this year's International Trader's Expo. From the website:

"Join thousands of your fellow traders for this three-day event that will have a substantial impact on your trading success in today's markets. We're bringing together the country's top trading pros with one goal in mind-to teach you their best trading strategies to help you profit in the months ahead."

Registration is free. You can sign up at Las Vegas Traders Expo, where further details are

Using the Black-Scholes pricing model for pricing options is not the best system for trade timing. Given the numerous flawed assumptions in Black-Scholes, traders may consider an alternative for selecting options and timing trades - for two reasons.

First, many systems are based on using options expiring in the very near future. However, if the selection is based on implied volatility analysis, this is an unreliable method. Volatility

The original Black-Scholes formula often is cited as the authoritative source for options pricing. However, with a large number of variables built into option formulae, it is surprising that they occasionally are close to approximating or matching market value.

The Black-Scholes formula as originally published was full of unrealistic assumptions. These include:

1. Volatility is fixed and never changes.

2. The short-term interest rate never changes.

3. Anyone can lend or borrow as much as he wants as

On the surface, it seems obvious that chasing big dividends is smart trading. But in practice, a double-digit dividend stock may also be a red flag.

Because dividend yield is based on the dividend per share and current price per share, if the price plummets, the yield goes up. A big dividend could result from bigger problems in the fundamentals.

For the purpose of evaluating dividend yield, the reasons behind these changes are not important; what is important is the underlying cause of the decline

So many traders start out with a sensible plan, only to abandon it because of the way the markets move. This abandonment of a smart plan invariably leads to potentially small added gains but large added losses.

In entering a trade, it is sensible to set two goals: the point where profits will be taken, and the bail-out point where losses will be cut. If you buy a long option, you should know going in that 75% of options expire worthless, so setting goals to sell and close make sense.

This does not