dennis mccain
  • Home
  • Investing
    • Dividend Kings
    • Div Aristocrats
    • Div Champions
    • Business Dev Cos
    • Monthly Dividends
  • Options
    • Weekly Options

Investing

Ideas and Strategies on Investing.

Previous Articles

An MBA won't help

8/23/2013

0 Comments

 
PictureBuy or Sell.
  Stock charts are historical records of human behavior and are beautiful works of art to someone who has studied human behavior (I have my Master’s Degree in Social Psychology from NC State University). Those charts are the visual end result of the human decision making process. If we can discover the reasoning behind those decisions and act upon that knowledge in a timely fashion, the American Dream is within our grasp. 

  Every stock price that is quoted has both a bid and an asking price rather than one single price. There is someone who is actually bidding the bid price and someone else who is actually asking the asking price. The price you see when you look up the price of a stock is really the price that was transacted on the last trade, not the current bid and ask price. In order for that last trade to have occurred, there had to have been an agreement on price between a buyer and seller. If buyers are locked at the bid price and sellers are locked at the asking price, then trades would never occur. And if no trade ever occurred, there would be no volume in that stock. The act of trading is what creates volume.

  Seeing the volume charted along with the stock’s price provides me with a clue in determining the amount and direction of the activity occurring in the stock. Another clue is knowing what the average volume is for a given day so I can know if today’s trading volume is above or below that daily average. Since I know that trading creates volume and volume only occurs when one of the traders breaches the spread between the bid and ask, I know that someone had to have flinched. As the trading volume increases I am seeing an increasing number of people who are flinching and completing the trade. 

  If volume starts to increase and the price starts to rise, I’m seeing buyers cross the spread and bid the stock higher. If volume starts to increase and the price starts to fall, I’m seeing sellers cross the spread and push the stock lower. Regardless of why these traders are creating volume and pushing the price higher or lower is something I may never know but I can visibly see what they are doing right there in the chart. I can see people act upon decisions they have made right there on the chart in real time. And the more volume I see tells me that an increasing number of traders are coming to the same decision and acting on that decision by trading the stock. Charts are a fascinating view on the decisions and behavioral patterns of stock traders. 

  Remember how all your life you were told to be a leader and not a follower? In the stock market being a leader is the quickest way to bankruptcy. At some point I’ll write more about the concept of trend following but for now the idea is to figure out which way the price and volume are moving and trade in that direction. If traders are pushing a stock higher I want to be long that stock and if traders are pushing a stock lower I want to be short that stock. I really don’t want to be on the wrong side of a trade. That’s detrimental to my financial health.

  I can and have traded successfully throughout my career using only price and volume as indicators. But I’ve done this only when no other indicators were available. Today there are so many additional indicators that I can use to confirm my trading decisions that I rarely trade using only these two things - price and volume. Today I use momentum indicators and oscillators to confirm my trading decisions. I have my favorites and they’re wonderful tools to increase my probability of success and I’ll explain the ones I use in a future post. 


0 Comments



Leave a Reply.

    Print Friendly Version of this pagePrint Get a PDF version of this webpagePDF

    Picture

    Author

    I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.


    RSS Feed


    Picture
    Top 100 Blogs for Dividend Investors

    Picture
    Follow Me on StockTwits!



    Dividend Growth Stocks
    Dividend Growth Investor


    Picture
    I'm on Seeking Alpha too!

    Archives

    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013


    ADDITIONAL RESOURCES:
    4 Month INDU Chart
    Dividend Ex-Dates
    Bidness Etc
    SharpCharts Voyeur
    StockCharts.com

    FINVIZ
    Seeking Alpha
    BDC Reporter
    Roadmap2Retire
    DivHut
    Dividend Growth Investor

    Dividend Yield

    Stock Market Mentor
    Chart Swing Trader
    Dividend Announcements
    IBD TV
    Stocks to Watch Today
    Dividend Detective

    DISCLAIMER
     I am not a licensed investment adviser, and I am not providing investment advise for you on this site. Please consult with an investment professional before you invest your money. Any opinion expressed here should not be treated as investment advice. I am not liable for any losses suffered by any party because of data or information published on this blog. Past performance is not a guarantee of future performance. Unless your investments are FDIC insured, they may decline in value.

    Picture
Powered by Create your own unique website with customizable templates.