Trading Library

Breakout trading is utilised by active traders who prefer to take a position in the early stages of a trend. This strategy can provide limited downside risk if done properly. They can be the starting point for major movements in price and expansion of volatility.

Market rules are there for the same reason highway rules exist: to avoid roadkill. In share trading jargon, you may have heard of company so-and-so slapped with a "speeding ticket." Speed is generally good, but not when it means that your shares suddenly warped to an astronomical value seemingly without any explanation.

Perhaps one overgenerous investor spread top secret advice and caused a buying storm, causing share price to skyrocket. Dodgy company ABC, however, is keeping mum about it.

It is often said that you can't predict what will happen in the market, the best you can do is ride it and get out when needed. As a newbie you may have heard experienced traders something about ''riding the trend''. Identifying and interpreting trends is one of the basic concepts in technical analysis, so its no wonder that its often used by traders when they establish general rules when trading. Even though a trend can be easily illustrated through a line graph, it has different parts that have different implications in an going trade. However what is really important in looking at a trend?

The moving average is another component associated with Technical Analysis. It is a common tool known by most investors and traders. In simple terms it is the average of the closing prices for the last 'n' days. The 'n' equals the number of periods. Therefore if you have a 30 day moving average, it represents the average of the of all closing prices in the last 30 days, which are then rolled forward one day a time.

In addition to company financials as contained within the annual report, an additional resource for the investor is the share appraisal form. This form serves as indicator of the company's health and provides a method to help you in decision making.

Points in Summary

• When buying shares, you invest capital and you become part owner of a company. Evaluating the company beforehand thus becomes necessary. Fundamental analysis is the study of factors that affect a company's profits.