Stock Market Cycles

If a person wants to understand stock market cycles and develop a focused, thoughtful, and solidly grounded valuation approach to the stock market must read this book. Bolten explains the causes and patterns of the cycles and identifies the causes of stock price changes. He identifies the sources of risks in the stock market and in individual stocks. Also covered is how the interaction of expected return and risk creates stock market cycles. Bolten talks about the industry sectors most likely to be profitable investments in each stage of the stock market cycles, while identifying the stock market bubble and sinkhole warning signs. The role of the Federal Reserve in each stage of the stock market cycle is also discussed.

back testing

Maybe a PC tells you that a given trading system would have made or lost X dollars over the past 6 months. So what? Isn’t the market always in motion, always changing? If it is so easy to just figure out what worked over the past month and apply it toward the coming month, then wouldn’t the market be showing us some phenomenal trends right now with everyone pushing stocks in the same direction rather than the back-and-forth choppy action we see so much of?
Instead, we’re getting a LOT of program trading that keeps things choppy as dips are bought and rallies are sold. With the trendless market, it has truly become a market of stocks. Good swing trading right now is about doing your homework to locate good technical patterns and then keeping your risk/reward in check.
Don’t let glossy advertising from software vendors fool you into thinking that your trading strategy just isn’t complicated enough. Remember Gartman’s rule and the simplicity it offers. Keep tabs on the market environment and adjust your trading plan accordingly. If a good trend exists, then look for some continuation setups like flag patterns and triangle patterns. If prices are stuck in a range, then consider some reversal setups like the double top or trade a channeling stock. Your ability to adapt to existing conditions is what will add to your P&L, not your ability to backtest effectively.

Selection of trade

Successful trading is about managing trades once you are in them, regardless of where they came from. I think a great trader could probably turn a profit taking random trades, as long as he manages them well. Now I do believe that finding quality chart patterns is essential, mostly because trading good setups in liquid stocks allows for the best risk/reward relationship on the front end. That is why I run my swing trading website – to highlight the best charts in the market for potential trades. My trade selection process is based on my ability to manage those trades, therefore I want to find only the best. Why not predetermine your stop in case you are wrong by taking the trades with a natural stop-loss nearby?Having said that, let me touch on the last comment regarding stops. One of the first things I want to know before I take a trade is how much I am likely to lose in case I am wrong (and I will definitely be wrong some of the time). This helps me to determine two things: position sizing and profit expectation. If I am willing to lose $1000.00 on a trade and the natural stop is 1 point away, then a position size of 1000 shares will be obvious.

How to find stock for trade

Producing a stock newsletter every night requires finding good chart patterns on a regular basis for members of my service. My inbox is frequently full of inquiries of just how to go about finding chart patterns for trading. The short answer is that I look for them!Each afternoon following the market close, I use TCNet by Worden Brothers to scan for stocks which meet a variety of criteria. This tool is essential to my finding good trade setups for my own trading and for my newsletter. Because I trade the stocks in my newsletter, I want to find and highlight only the best technical setups.The scans I run are basic, filtering out the low volume stocks and cheap stocks which don’t move enough for short-term trading. I generally will cut out all stocks below $10.00, and will rarely look at a stock with less than 250,000 shares/day average. This leaves me with a large list of stocks which have adequate volume for getting in and out of trades with minimal slippage, as well as stocks which have a larger range of movement.From this point, I sort the list according to how strong or weak the stocks closed that day. Stocks which finished at their highs for the day are at the top of the list, and stocks that closed at their lows of the day are at the bottom of the list. Sorting stocks by this method helps me to find more long trading candidates at the top of my list, while finding more shorting candidates (weak stocks) at the bottom of my list.

The New York Stock Exchange (NYSE) uses an agency auction market system which is designed to allow the public to meet the public as much as possible. The majority of volume (approx 88%) occurs with no intervention from the dealer. Specialists (specs) make markets in stocks and work on the NYSE. The responsibility of a spec is to make a fair and orderly market in the issues assigned to them. They must yield to public orders which means they may not trade for their own account when there are public bids and offers. The spec has an affirmative obligation to eliminate imbalances of supply and demand when they occur. The exchange has strict guidelines for trading depth and continuity that must be observed. Most academic literature shows NYSE stocks trade better (in tighter ranges, less volatility, less difference in price between trades) when compared with the OTC market (NASDAQ). On the NYSE 93% of trades occur at no change or 1/8 of a point difference. It is counterintuitive that one spec could make a better market than many market makers (see the article about the NASDAQ). However, the spec operates under an entirely different system. The NYSE system requires exposure of public orders to the auction, the opportunity for price improvement, and to trade ahead of the dealer. The system on the NYSE is very different than NASDAQ and has been shown to create a better market for the stocks listed there. This is why 90% of US stocks that are eligible for NYSE listing have listed.
A specialist will maintain a narrow spread. Since the NYSE does not post bid/ask information, you need to check out the 1-minute tick to figure out the spread. In other words, you'll need access to a professional's data feed before you can really see the size of the spread. But the structure of the market strongly encourages narrow spreads, so investors shouldn't be overly concerned about this.
There are 1366 NYSE members (i.e., seats). Approximately 450 are specialists working for 38 specialists firms. As of 11/93 there were 2283 common and 597 preferred stocks listed on the NYSE. Each individual spec handles approximately 6 issues. The very big stocks will have a spec devoted solely to them.
Every listed stock has one firm assigned to it on the floor. Most stocks are also listed on regional exchanges in LA, SF, Chi., Phil., and Bos. All NYSE trading (approx 80% of total volume) will occur at that post on the floor of the specialist assigned to it. To become a NYSE spec the normal route is to go to work for a specialist firm as a clerk and eventually to become a broker.

Brief history of Shanghai stock exchange

Established in late 1990 as a nonprofit organization, regulated by the China Securities Regulatory Commission. A shares are restricted to domestic investors, while B shares are open to all investors. Bonds traded on the exchange include government, corporate, and convertible. Trading hours for B shares are 9:30 A.M. to 11:30 A.M. and 1 P.M. to 3 P.M. Monday through Friday.

Auction Exchanges

TheAMEXand NYSE are both primarily auction-based, which means specialists are physically present on the exchanges’ trading floors. Each specialist "specializes" in a particular stock, buying and selling the stock in a verbal auction. These specialists are under competitive threat by electronic-only exchanges that claim to be more efficient (that is, execute faster trades and exhibit smaller bid-ask spreads) by eliminating human intermediaries. The NYSE is the largest and most prestigious exchange. Collectively, as of December 31, 2007, its listed companies represent about $30.5 trillion in market capitalization. Listing on the NYSE affords companies great credibility because they must meet initial listing requirements and also comply annually with maintenance requirements. For example, to remain listed, NYSE companies must keep their price above $1 and their market capitalization (number of shares x price) above $50 million. Furthermore, investors trading on the NYSE benefit from a set of minimum protections. Among several of the requirements that the NYSE has enacted, the following two are especially significant:
Companies must get shareholder approval for any equity incentive plan (for example, stock option plan or restricted stock plan). In the past, companies were allowed to sidestep shareholder approval if an equity incentive plan met certain criteria; this, however, prevented shareholders from knowing how many stock options were available for future grant.
A majority of the members of the board of directors must be independent. However, each company has some discretion over the definition of "independent", which has caused controversy. Furthermore, the compensation committee must be entirely composed of independent directors, and the audit committee must

NASDAQ

The Nasdaq, an electronic exchange, is sometimes called "screen-based" because buyers and sellers are connected only by computers over a telecommunications network. Market makers, also known as dealers, carry their own inventory of stock. They stand ready to buy and sell Nasdaq stocks, and they are required to post their bid and ask prices. Among several high-technology sections, Nasdaq lists the most companies. Although the NYSE has a far greater total market capitalization, Nasdaq has surpassed the NYSE in the number of both listed companies and shares traded. Nasdaq has listing and governance requirements that are similar but slightly less stringent than those of the NYSE. For example, a stock must maintain a price of $1 and the value of the public float (number of traded shares multiplied by stock price) must be at least $1.1 million. If a company does not maintain these requirements, it can be delisted to one of the OTC markets discussed below.

Nigerian stock exchange

Transactions on the floor of the Nigerian stock exchange are done through the automated trading system(ATS). Before it became functional, the call over system was what was in effect. The ATS is a security trading arrangement whereby transactions are achieved through a network of computers. It was established in April 27, 1999 .

Colambia stock exchage

stock exchange organized market for the trading of stocks and bonds . Such markets were originally open to all, but at present only members of the owning association may buy and sell directly. Members , buy and sell for themselves or for others, charging commissions for their services. A stock may be bought or sold only if it is listed on an exchange, and it may not be listed unless it meets certain requirements set by the exchange's board of governors. There are stock exchanges in all important financial centers of the world; the New York Stock Exchange (NYSE, in nearly continuous operation since 1792), which had a trading volume of $7.3 trillion in 1998, is the largest in the world. Tokyo, London, and Frankfurt also have major facilities, and Euronext, an inter-European exchange that merged with the NYSE in 2007 and combines facilities in Amsterdam, Brussels, Paris, and other cities, is also significant. By providing a centralized, ready market for the exchange of securities, stock exchanges greatly facilitate the financing of business through flotation of stocks and bonds. However, speculation in stocks can sometimes accentuate the instability of an economy. The reality of the Great Depression was emphasized by the stock market crash in 1929. The interstate sale of securities and certain stock exchange practices in the United States are regulated by federal laws administered by the Commission . Today, a large percentage of stocks are traded through such over-the-counter organizations as Nasdaq (National Association of Securities Dealers Automatic Quotations) and its European equivalent, Nasdaq Europe (formerly Easdaq). Through these organizations, many securities not listed on a major stock exchange may be traded by dealers using computer and telecommunications technology; in 1994, Nasdaq, on which many computer and other high-technology stocks are traded, surpassed the NYSE in annual share volume.

Organized Stock Exchange

Stock exchange organized market for the trading of stocks and bonds (see bond ; stock). Such markets were originally open to all, but at present only members of the owning association may buy and sell directly. Members, or stock brokers , buy and sell for themselves or for others, charging commissions for their services. A stock may be bought or sold only if it is listed on an exchange, and it may not be listed unless it meets certain requirements set by the exchange's board of governors. There are stock exchanges in all important financial centers of the world; the New York Stock Exchange (NYSE, in nearly continuous operation since 1792), which had a trading volume of $7.3 trillion in 1998, is the largest in the world. Tokyo, London, and Frankfurt also have major facilities, and Euronext, an inter-European exchange that merged with the NYSE in 2007 and combines facilities in Amsterdam, Brussels, Paris, and other cities, is also significant. By providing a centralized, ready market for the exchange of securities, stock exchanges greatly facilitate the financing of business through flotation of stocks and bonds. However, speculation in stocks can sometimes accentuate the instability of an economy. The reality of the Great Depression was emphasized by the stock market crash in 1929. The interstate sale of securities and certain stock exchange practices in the United States are regulated by federal laws administered by the Securities and Exchange Commission . Today, a large percentage of stocks are traded through such over-the-countr organizations as Nasdaq (National Association of Securities Dealers Automatic Quotations) and its European equivalent, Nasdaq Europe (formerly Easdaq). Through these organizations, many securities not listed on a major stock exchange may be traded by dealers using computer and telecommunications technology; in 1994, Nasdaq, on which many computer and other high-technology stocks are traded, surpassed the NYSE in annual share volume. After the deregulation of the British securities market in 1986, the London Stock Exchange saw a decline in business due to a new computerized market similar to Nasdaq.

Start of Stock Exchang

The primary function of an exchange is to provide liquidity; in other words, to give sellers a place to "liquidate" their share holdings. Stocks first become available on an exchange after a company conducts its initial public offering (IPO). In an IPO, a company sells shares to an initial set of public shareholders (the primary market). After the IPO "floats" shares into the hands of public shareholders, these shares can be sold and purchased on an exchange (the secondary market). The exchange tracks the flow of orders for each stock, and this flow of supply and demand sets the price of the stock. Depending on the type of brokerage account you have, you may be able to view this flow of price action. For example, if you see that the "bid price" on a stock is $40, this means somebody is telling the exchange that he or she is willing to buy the stock for $40. At the same time you might see that the "ask price" is $41, which means somebody else is willing to sell the stock for $41. The difference between the two is the bid-ask spread.

Geogarphy of stock exchange

While most people are aware of the stock exchange in their respective country, the concept of one single Stock Exchange is misleading. There are several Stock Exchanges which conduct business daily, and usually interact. If one exchange begins to see a significant shift in buying or selling, it usually causes a ripple effect in most or all of the remaining exchanges. There are Stock Exchanges located in many parts of the word including Africa, South America, Canada (Toronto), the US (both NYC and Philadelphia), Australia, India (Bombay), China (Hong Kong, Shanghai, Shenzhen), Japan (Tokyo), Europe (Frankfurt, Germany; London, England; Madrid, Spain; Milan, Italy; Moscow, Russia; Switzerland and Norway).

Function of Stock Exchange

The Stock Exchanges of the world play multiple roles in the economics and economy. This includes such issues as raising capital for business expansion; moving savings into investment; facilitating the growth of companies by merger agreements and takeovers using the stock market as a means of financing. It also includes distribution of assets and profits of a business; providing for corporate governance through shareholders; allowing smaller investors to purchase and sell stocks; selling government issue bonds to help government fund projects and being a barometer to the economy by providing a record of shares bought or sold and how fast