Articles

The last week again showed continuing momentum but despite the good news on the US reporting front, stocks did not match that with a surge of buying as much of the good news has been factored in. This could be a case of "buy the news sell the reality.” Indices volume is now starting to lag and this can also be seen in individual stocks both here in OZ and in the US. It’s called taking a breather – which is good to see. With the market having achieved such gains the propensity for further upside for the medium term, is abating as investors become more cautious.

One of the challenges for ‘part-time’ traders is having enough time to complete the necessary analysis to find trades on regular basis. One of the keys to success in trading is having a regular timetable for analysis and sticking to it. Most professional traders approach their trading in a ‘routine’ fashion. The aim of the current ‘part-time’ trader should be to set in place a programme, which may only take a few minutes each day, but keeps them on top of any prospective trading opportunities.

Of recent times, trading the SPI200 has been a little frustrating when trading only with ABC trading rules. There has been a strong trend in effect though it has been difficult to enter. Trades have been opening outside our limits or if you note the swing chart since the start of October there has not been a lower swing bottom only higher swing tops. From time to time certain markets that may in fact be your favourite do everything they can to make sure you can’t trade it. This has been a topic that has been raised in my discussions with students as a trading tutor with Safety in the Market.

Investors often experience a progression from the stock market to the world of options trading. In addition, as investors become savvier, the appeal of options increases, but the perceived complexity of these instruments diminishes. Sooner or later, traders realize that options hold various advantages over stocks—their ability to structure different types of risk-rewards, the ability to take relatively small amounts of capital to control a much large amount of capital (a.k.a. leverage), and the ability to trade for profits regardless of market direction. However, although many stock market investors begin to appreciate the flexibility and advantages of options, many also take along with them a bias regarding the stock market. Specifically, there is a tendency for traders to think in terms of market direction: i.e. will this stock or market move higher or lower? But often times, a stock or index will move sideways for a prolonged period of time. In that case, strategies that depend on direction will not yield optimal results and the better approach will require some horizontal thinking.

So you might ask what is the Caviar Index – it is simply a measure of the good times. When times are good – or we perceive them to be - then we start to live like lords again. We dine out more – at better restaurants – luxury car showrooms become busier and so and so on. Based on Australian economic data we supposedly have been living off a green paddock with rich pickings over the last few years – better than most in the western world at least. But yet few people would proclaim that these have been years of milk and honey and in fact on the contrary it has sort of been hard going some would say.