He has designed over a dozen analytical stock market software systems.

The moving average is not as glamorous as many of the new indicators and specialized indices that mathematicians around the globe are clamoring to create however the moving average you can be sure is still one of the most important indicators you can use.  After all, isn’t past performance the best indicator of future success? 

Before we delve too far into an argument supporting the use of the moving average a bit of discussion regarding a description of how the indicator works is necessary.  A moving average is simply that, an average of the price of a stock over a set period of time.  The benefit of using an average of the prices rather than the actual prices is the smoothing factor the average calculation incorporates into the result.  By averaging the prices the impression of unusual price spikes or sudden drops are diminished and what emerges is a more stable or less volatile trend of a stock price’s history. 

The smoothing benefit of the average has more of an impact over longer periods of time as should be expected.  The more data points that are averaged then the greater the weight of the most common price trends.  So longer period averages a popular one being 200 days for instance tend to result in much smoother lines than shorter averages.  In a sense the longer term averages can be seen as representing a company’s long term potential, based on their historical performance and short term averages their daily or weekly trends. 

The study of comparing short term moving averages against long term moving averages is probably the most common approach to using the moving average indicator.  In fact one of the most popular traditional indicators the MACD (Moving Average Convergence/Divergence) is based on comparisons of short term versus long term moving averages.  There are some distinctions between the calculation of the MACD and comparing short term versus long term moving averages however the principle is essentially the same.  The difficult part is interpreting what the averages tell you about the stock’s performance.  Essentially the question is always: Does a short term average cross over a long term line signal a new break out for the stock or will the short term trend fall back in line with the longer term trend?  It’s not fool proof, you still have to make your own assessments, but the indicator can help you.

Traditionally most analysis of short term versus long term averages considers crosses, where the short term average line crosses over the long term line to most often indicate a new future trend of a stock.  In other words, meaning that the longer term average will follow the direction of the shorter term moving average.  In reality however this is not always the case.  Often short term averages will cross the long term average only to fall back into line with the long term trend.  Only you can determine which average indicates the true direction the stock price will take.  At this point, often supporting information such as news or quarterly financial releases are used to assist in determining if the short term moving average trend is merely a market driven change or if it reflects a basis for the increased value of the company. 

There are some analysts that not only focus on short term versus long term crosses of the moving average but that also take the “steepness” of the cross into consideration.  Steep or sharp dramatic crosses in this case are often seen as being strong market direction indicators signaling a future change in the price trend.  If you test this with a real chart at http://www.stockrageous.com , and select the short term 20 over the long term 200 average which is the traditional standard for short versus long term average cross analysis in a five year chart you will note the impact of steep crosses in almost any stock. 

Advantages of Floor Traders - and How to Get Them

Traders who make their living on the floor of an exchange have some things that I think are advantages. You see floor traders can draw from their senses. What I mean by this is they can use sight, sound, and speech.

These are advantages that they add to their arsenal when trading. The pit on a trading floor looks very chaotic but there is a simplistic ebb and flow to what is going on there.

I will explain how this is an advantage. When you trade on a computer you are only watching the price movements on a chart and you base your trading decisions accordingly. On the floor the action of people moving around can often tip traders to which markets are about to go higher. Just like all people, traders will gravitate to where the action is happening.

Trading on a computer does not allow for the noise of the action to influence you. Traders who are on the floor can hear the crowd noise rise and fall. This is much like a football game. If you were busy and not watching the game you could still have an idea of how it is going by listening to others in the crowd who are cheering or not according to the action on the field. This is particularly an advantage if you are in a position and looking for a good place to exit.

You can judge momentum of the current market direction and get a feel for when to exit. The advantage of speech is obvious. You are spending your day surrounded by others that make a living in the same business. Information and strategy can be discussed with peers and better understood.

When breaking news hits you will hear first hand what other market movers think about it. These are a few of the advantages that I feel the floor trader has on his side. some of these can be replicated and taken advantage of by traders based at home.

Forex Trading: Good Opportunity Or Scam?

Until recently, the forex market or foregn currency exchange market wasn't for the average trader or individual speculator. With the large minimum transaction sizes and often-stringent financial requirements, banks, hedge funds, major currency dealers and the occasional high net-worth individual speculator were the principal participants. These large traders were able to take advantage of the many benefits offered by the forex market vs. other markets, including the fantastic liquidity and strong trending nature of the world's primary currency exchange rates.

Fortunately, thanks to new legislation written in the late 1990’s, forex brokerages have opened up to the general public and offer trading opportunities for anyone who has an interest in trading currencies for profit. In fact, many brokers allow traders to open and trade currency with as little as $250 dollars in an account.

Regrettably, all of these new currency trading opportunities have created a lot of hype around the forex. Some of this hype includes magic trading formulas, “easy” indicators and expert trend predictors. There are now countless currency brokerages enticing potential traders to open accounts and start trading today. Many people have started to get the feeling that trading currency is more of a scam then anything else. We strongly disagree with this notion and are certain that the forex market has much to offer investors. However, before your take you paycheck and head down to the nearest brokerage to open your forex account, may we make some important suggestions before you enter the currency market?

First, there are thousands of websites with information, terminology, trading strategies and more. We recommend researching several of them as you begin to explore the basics of what the forex is. Brokers often will offer information about the forex, but realize that they are also trying to get you to open an account. Aside from brokerage sites, there are several informational sites and a few forex education companies on the market that offer good information without the pressure of signing up for a “live” trading account.

Second, read some books. Most of the professional forex traders operate using a combination of Japanese candlestick charts and other complex indicators to determine the direction of a particular currency pair. Find books about technical analysis trading, candlestick charts and other methodological indicators. Remember that when you are buying currency it is like buying a stock in a nation or country. Learn about different countries economic announcements, interest reports, and job indicators. These are highly relevant factors that help indicate a currencies direction.

At this point, it may be time for you to open a demo account with the broker of your choice. This will help you get familiar with trading platforms and basic charts. Practice making some “demo trades”. Even after doing some basic homework you will find that you fell like you areflying by the seat of your pants” during your trades. At this humbling point in your new forex trading career you realize its time to take a forex training course.

There are many forex training courses on the market today. They come in many forms including seminars, home study courses, interactive online courses, and class room education. Fxcenter.com, one such forex training course has found that the best education courses use all of these methods in their training regime. They feel that a program should include a minimum of 20 hours of home study to teach the basic principles of forex trading. Next a student would need to observe the market in action, without necessarily making trades. To do this, an interactive online class is necessary to help you tie in all the information and begin to apply it to live market conditions. Onsite classes then further reiterate the fundamentals of trading forex and help the student discover a trading strategy that fits his or her personality, financial status and risk tolerance. Finally, working with a highly skilled forex mentor, again during live market sessions, is critical to help the student understand the psychological part of trading. These mentors would also help students create an advanced trading system and analyze the market minute by minute.

Most successful traders have spent years developing good trading habits and learning the hard way how to take advantage of currency volatility. We strongly recommend you follow these steps as you begin to investigate investment opportunities in the forex market.