Stock Trading

If you trade stocks online, invest in stocks, trade the stock market, looking for advise on how to trade stocks effectively and looking for the tools to effectively trade the stock market. Including the right tools to research for investing, or day trading or swing trading. Including but not limited to penny stocks and high beta momentum then this tutorial is for you. Technical Analysis Update

Trading the Put/Call Ratio

The Great Game of Speculation often reminds me of an ever-escalating arms race.

Each individual speculator trading deploys his scarce and precious capital into a vast, unforgiving marketplace. These speculators making bets pit their own emotional fortitude and raw intellect against countless other speculators in the modern financial equivalent of ancient Roman gladiatorial combat.

These capital gladiators willingly enter the financial-market arena fully realizing that only one winner will leave. Either a speculator will emerge victorious with a win or his counterparty will carry the day and vanquish the speculator. Unlike investing, in pure speculation only one side of a trade can be a winner. Only one gladiator remains standing when the dust clears from the battlefield and the trade is settled.

With this binary nature of speculation in mind, speculators are constantly searching for new weapons that might give them an edge. In today’s financial gladiatorial combat the weapons of traders are not wickedly-sharp iron swords or spiked clubs, but superior information. In theory the speculator armed with the best information has the highest probability of victoriously riding out of a successful trade on a mighty white steed.

In reality it isn’t really this simple though. A speculator can possess fantastic information, but if he lacks the courage and emotional fortitude necessary to execute the trade at the very contrarian moment when everyone else thinks it is a foolish idea, the speculator will fail. For example, pretty much every serious student of market history fully realized the NASDAQ was in unprecedented bubble territory in early March 2000, but how many had the raw guts to sell short at NASDAQ 5000? Not many.

The Put/Call Ratio helps speculators discern when general greed or general fear has become so great as to be unsustainable, and the speculator can then deploy capital to reap the big profits when the emotional pendulum inevitably swings back away from its current extreme in the opposite direction.

The Put/Call Ratio is yet another solid weapon within a speculator’s arsenal to time trades to take advantage of unsustainable extremes in herd psychology..........Good Read