October 15 th 2012. Common Cents Investment Group October, 2012 Agenda FX on Investopedia Today in...

October 15th 2012

Common CentsInvestment Group

Common Cents Investment GroupOctober, 2012

Agenda

FX on Investopedia Today in the market Technical Analysis – Part II Pick a stock!


FX on Investopedia

Our apologies, FX is not trading in our simulator

ETFs that follow FX indices FXKing on Investopedia…

100k 100:1 leverage http://fxtrader.investopedia.com/


Today in the Market


Today in the Market

How does the stock market impact the presidential election If the market is good…the incumbent has

the upper hand & vice versa How does the presidential election

impact the stock market


Today in the Market

How the presidential election can affect the stock market:

http://seekingalpha.com/article/598671-the-presidential-election-cycle-and-its-effect-on-stock-markets


Useful Definition

Entry Level: The price at which you buy the security

Stop Loss: A trade entered that limits the potential loss of value in a security

Support: Price level at which demand is thought to be strong enough to prevent the price from declining further

Resistance: Price level at which selling is thought to be strong enough to prevent the price from rising further


Technical Analysis

Recap Not an exact science Based on the assumption that all market

information is reflected in the price Three simples steps

Determine market bias Pick a trading strategy based on bias Use technical indicators to capture best

entry point


Determine Bias

Uptrend: Markets that continuously make higher highs and higher lows. Look for a buying opportunity at the supports


Determine Bias

Downtrend: Markets that continuously make lower highs and lower lows. Look for a selling opportunity at the resistance


Determine Bias

Range Trade: Markets that are not in an uptrend or downtrend Look for a selling opportunity at the resistance and buying

opportunity at the supports


Trading Approach

Choose between Long or Short Downtrends => Go Short Uptrends => Go Long

Entry points can be at either the Resistance (Short) or Support (Long) for simplicity

Further indicators are used to create a trading strategy


Trading Approach

Indicators are used to determine: Entry levels Stop Loss levels Profit taking (Limit) levels

Organization is half the battle!


Technical Indicators



Trend Line: A straight line connecting consecutive higher lows and consecutive lower lows These are highly watched by most traders

and corporations Good basis to use with or without other

indicators to find good entry point



Phychological Numbers: Price levels that are considered important by the markets These numbers are generally round

numbers like 10, 20, 25, 50, 100, etc. A number of traders place orders at round

numbers, thus providing support or resistance to price movements

Use to identify an entry point



Relative Strength Indicator (RSI): An oscillating indicator Can have values from 0 – 100

0 – 30 => Oversold markets (undervalued) 70 – 100 => Overbought markets (overvalued)

Place trades on a confirmed move out of a certain condition

RS = Average number of days with ‘up’ closes divided by average number of days with ‘down’ closes

RSI = 100-100/(1+RS)



http://www.investopedia.com/video/play/relative-strength-index-rsi/#axzz29NXSCnOO

Prepare to sell short once RSI moves above 70 and goes into downtrend

Book profits when RSI touches oversold levels (~30)



Moving Averages: Calculated by averaging the closing prices of the market over a specified time Simple Moving Average (SMA): Places

equal weight on every price point over time

Exponential Moving Average (EMA): Places higher weight on more recent price points

Commonly over 200 days, 100 days, 10 days



Bollinger Bands: use a simple moving average of a price standard deviation around that moving average to generate trading signals Usually a 20 period moving average and a

2 standard deviation band around the moving average



Moving Average Convergence Divergence (MACD): uses a combination of moving averages to generate a trading signal Plots the difference between 12 period &

24 period EMA (called the MACD) Plots a 9 period EMA of the MACD (called

the MACD signal) Look at the crossovers of the MACD and

MACD signal lines to sell/buy



Stochastic: Another oscillating indicator that takes values of 0 – 100 0 – 20 => Oversold markets 80 – 100 => Overbought markets

C = most recent closing price L14 = the low over the last 14 trading

sessions H14 = the high over the last 14 trading

sessions

%K = 100[(C-L14)/(H14-L14)]



The transaction signal occurs when %K crosses through the %D

%D = 3 Period moving average of %K

Pick a stock!


Membership

Cost is only $20 for the whole year! Benefits:

Member of a very beneficial and informative club that will inevitably be valuable in your future

A network of friends who share a similar interest in investing and personal finance

A virtual portfolio challenge that will strengthen your confidence in investing

$20


Membership

Make sure to check out our website for the presentations Monday night | ccig.osu.edu

Get on our Facebook page and like us!www.facebook.com/ccigosu


Questions?

Questions, comments or concerns?

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October 15 th 2012. Common Cents Investment Group October, 2012 Agenda FX on Investopedia Today in...

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