Online Trading With The Head and Shoulders Top Pattern

By Chris Blanchet

When it comes to technical analysis, the Head and Shoulders Top is a classic pattern. It is arguably one of the most popular and reliable patterns, period. The reason for its popularity has to do with the fact that new and veteran investors alike can easily recognize it. Is it reliable? You bet. This pattern rarely produces false positives.

Recognizing a Head And Shoulders Top Bluntly, the Head and Shoulders top patterns looks like a human head with two shoulders to each side. The left shoulder reaches a peak, then pulls back before rallying higher than the previous peak, then pulling back, and rallying a third time, though not higher than the second rally (the head). Each shoulder should rally to approximately the same levels as one another.

Technical analysis will take this one step farther by stipulating volume requirements. Essentially, the first peak (left shoulder) will see the heaviest volume as the stock increases. The head and right shoulder will show diminished volume.

Technical Considerations In addition to the visual representation of the three rallies with the second reaching higher and the volume requirement, the head and shoulders top should also have a degree of symmetry where the two shoulders peak at approximately the same price levels. In addition, the neckline, which joins the pullbacks between rallies, can slope up or down, with downward sloping necklines being more bearish and, therefore, more ideal for investors looking to profit from weakness.

Another key point is that the pattern should take shape above a comparable moving average (MA). Typically, the 50-day moving average will work just fine, but investors are advised to use the 200-day moving average for longer-term patterns. And speaking of Moving Averages, the MA should be trending in the same direction as the Head and Shoulders top. If it doesn't, then it simply means the pattern is less reliable.

Trading The Head and Shoulders Top Since this is a bearish pattern, investors are advised to sell their position or take a short position in the underlying security. Investors who look to make trades based on the head and shoulders pattern should understand that the longer it takes for the pattern to develop, the longer it will take for the price to reach its target level. With this in mind, investors should also look at the inbound trend to determine whether it simply a period of consolidation or a legitimate head and shoulders. The rule of thumb here is that the inbound trend is longer than the trend of the pattern itself.

There are literally hundreds of securities that create head and shoulders tops after every trading day. The strength of this pattern will differ from security to security, which makes it difficult for investors to trade. As well, considerable knowledge of technical analysis is generally needed to properly identify the pattern. Consequently, for beginners or hands-off traders, trading software is often recommended. - 23226

About the Author:

With more than 16 years of experience as a Financial Advisor for one of the world's largest commercial banks, Chris Blanchet is responsible for the Free Technical Analysis Course at Online Trader Today.com. He also maintains a Debt-Free Blog at How To Repay Debt.com.

Why Small Businesses Should Trade In Gold?

By James Goldman

We humans have always been fascinated by gold for centuries now. Gold is regarded as the store of true value. People have now a different perception of gold " it is the actual form of money. However, we can easily feel challenged by one fact- gold doesnt yield interest and is hence not regarded as a wise investment asset. But it needs to be noted that if you trade gold or invest in gold, you can actually capitulate fair interests in the form of real storage of the intrinsic values. Still there is a question here " why should the small companies trade gold always? Why should these companies get a smaller portion of their wealth allocated as gold bullion? The answer is here

We investors usually have various forms of vehicles for investment including bonds, equities, properties etc. But there is one prominent asset class which is missing and that includes precious metals like gold, platinum, silver and others.

If you consider the figures of investment in the year 2006 during which investors rushed into various commodities funds, you can see how people realized that gold, which is a class of investment, has been potentially underweighted in the portfolios. But finally it was found that gold bullion, a natural resource, is known to be the best investment tools for small companies.

During the year 1999-2000, internet companies came in with negligible earnings, while gold was trading fairly well with USD 200-300/oz. However, people who trade gold have benefited more than the ones who have invested in internet companies.

Gold was not really loved as a class of investments then; it only opened an opportunity for all those small companies who had faith in the value of gold. But companies who had accumulated gold bullion then are richer now. Also, accumulating gold can really do wonders for you and your company " it helps your company get richer fast.

As you buy gold, you will note the difference it makes. Try investing in gold every moth- spend $X on gold each month. Hold the value as the wealth management of the company to see the results when you sell gold. While some people consider this to be a silly proposition, but it has paid off.

If your decision is affirmative, measure the value of gold every month and you would see your net income flow every month " you would be amazed to see that your monthly income flow would track the value of your gold and your net worth would increase steadily.

There isnt any right time to buy gold or sell gold as the value of gold is ever-rising. You can invest whenever you feel its the right time for you. - 23226

About the Author:

All information to gold bullion and ways to trade gold can be provided by Atlantgold.com for the small enterprise owners

What is Right For you Value Investing or Growth Investing?

By Michael Swanson

I know you want to generate capital gains in the stock market. You need to use a strategy that fits the current market environment and your own personality to do that.

There are two basic investing methods that successful investors use to make money. They either use a growth or value oriented approach to investing, which looks for companies whose earnings are rapidly growing or whose stock is undervalued, or they employ technical analysis, which examines prior price and volume movements in order to forecast the future price movements of financial assets. Some investors use a combination of strategies, such as William O'Neill who combines a growth and technical approach to investing in his book How to Make Money in Stocks and in his newspaper, Investor's Business Daily.

Growth investors base their investment decisions on a study of the earnings of a company, but completely disregard valuations. They don't care if a stock is highly valued, only that earnings are growing quickly. William O'Neill is the most popular proponent of growth investing. He looks for companies whose quarterly earnings are up at least 20% from a year ago, whose annual compounded earnings per share should be between at least 15% for the past five years, and who have a new product or service that will help it capture market share. Although O'Neill then takes into consideration how strong the stock is when compared to the rest of the market and the general phase of the market, most pure growth stock investors do not worry about the position of the market or the stock itself.

Growth stocks usually do better than other stocks in bull markets, but can fall hard in a bear market. There are some dangers to growth investing. If all of a sudden the growth in the earnings stops the stocks can fall very hard, because investors are all betting on the big earnings growth to keep going on.

At some point this is going to happen, because nothing goes up forever, not even a rocket ship. The big companies we all know about all grew fast when they started out, but most don't grow as fast anymore so they are no longer growth stocks. Think about GE for example.

Most growth stocks go up a lot, because people like to bet they keep going up. It is a big momentum play. But when bad news hits then the momentum can switch and go to the downside. So to play growth stocks you have to know what you are doing when it comes to trading and putting in your buy and sell orders.

Value investing is the other way investors make money in the stock market. Warren Buffet is the most well known value investor. Value investors like buying stocks in companies that have big book value, pay out dividends, and do not have much debt on their balance sheet. In the best cases they can find a stock that is actually priced lower than the company itself, meaning the company could be sold for more than it stock price say it is worth. It is a bargain.

In a bear market or a big stock market correction you can find bargains and that is when it is time to think about being a Warren Buffett. It happens all of the time. Investors always get scared from time to time and sell stocks at a stupid price. That is when you can buy.

When you buy really cheap though sometimes it can take a long time before the stock goes up since investors can stay scared for a long time. It takes times in bear markets for the stock to go up too. So you have to be patient sometimes to be a value investor.

You need to know that it is the growth stocks that go up the most in bull markets, but they fall the most in bear markets too. It is the value investor who knows when to get in cheap and sell high. You have to figure out which strategy you like the most. I combine them both and talk about both. - 23226

About the Author:

For more articles from Mike Swanson sign up to his stock trading basics weekly newsletter.

Declaring your dividends

By Wolfgang Vanguard

Dividends are payments from shares, unit and investment trusts, which, investors hope, are not only regular (usually twice a year) but also rise over time to reflect the companys (or trusts) growing fortunes. Dividends are taxable as income.

The good news is tax on UK share dividends is deducted before you get it. If you are a basic rate taxpayer, you dont have to do anything else. Nontaxpayers and ten per cent taxpayers dont need to do anything either. But theres bad news here: You cant reclaim the deducted tax under any circumstances. Even though its called a tax credit by HMRC, we refer to it as a deduction to save confusion.

Top-rate taxpayers have to declare dividends on their self-assessment form and have the cash ready to pay the gap between the 40 per cent rate and the tax deducted.

Whether you get income from unit trusts, investment trusts, or individual shares, look at the date the dividend was declared and ignore the period for which the dividend applied. A 10p a share dividend for the year ending 31 December 2006 declared on 1 May 2007 and paid on 1 June 2007 counts as part of your 2007 " 08 return, not the 2006"07 calculation.

If you invest for long-term growth in shares that pay low or no dividends, youll pay less income tax. But dont forget these shares tend to be riskier. And you can get hit for capital gains tax on your profits.

Dont forget if you are near the top of the basic rate ladder " earning around $36,000 a year " your dividends can push you into the top tax bracket. For instance, if you earn $36,500 and have $3,500 of dividends youll be over the $39,825 (in 2007"08) basic rate tax limit for a person aged under 65.

Dividends from stocks traded in foreign markets can be tough to deal with. You may have to convert dividend payments into sterling as well as account for them separately.

You need to fill out the foreign income pages of the self assessment form. The UK has double taxation agreements with most foreign countries. The effect of these agreements is to cap the tax due on foreign-sourced income so you are no worse off as a result of possibly being taxed twice.

Many stock market companies have schemes by which shareholders can opt to receive new shares to the value of their dividends rather a dividend cheque. Even if you choose this option, you still have to declare the value of the new shares and any balance carried forward in cash because it is not large enough to buy a share. Youre liable for tax on re-invested dividends in just the same way as a cash dividend. - 23226

About the Author:

Learn How to Invest Today from the basics to advance. Find financial freedom from debit and other money issues by learn how to invest and learning to control your money.

Get Rolling in Forex Trading

By John Eather

Investors who realise how to apply a proven system can benefit from the foreign exchange market. This article's aim is to get you set off on your way with Forex basic principles so that you can make the best of this unbelievable market.

In bygone days, foreign exchange trading was restricted to banks and big companies. All of this shifted in the 80's once the rules were altered to permit investors of small-scale capital to jump in by utilising margin accounts. Margin accounts are the reason Forex trading has skyrocketed in popularity. With a 400:1 margin account, you'll be able to use $400,000 with an investment of only $1,000.

Forex can be challenging, so it's important to gain the knowledge you need in order to make good investment decisions. While it's easy to get started in Forex trading, it does carry some risks. As a beginner, you need to learn as much as possible about the Forex market before beginning to trade.

Forex traders typically require a broker to manage transactions. Almost all brokers are respectable members of large financial institutions. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) for protection against fraud and predatory trading practices.

Opening a Forex account is as simple as completing a form and providing the required ID. This form will include a margin agreement that explains that the broker may interrupt any trade that seems too risky. This is designed to protect the broker's interests, since most trades are carried out using the broker's funds. Once your account has been accepted, you are ready to fund it and get started with trading.

Many brokers provide a number of different types of accounts to accommodate the needs of individual investors. Mini accounts let you get started in Forex trading with a little as a $50 investment. Standard accounts have minimum deposit requirements ranging from $1,000 to $2,500, depending on the broker. The amount of leverage available varies from one kind of account to another. High leverage accounts let you control greater sums of currency.

Trades are free of commission, allowing you to make multiple trades daily without having to pay lofty brokerage fees. Brokers make their money based on the "spread"; the difference between bid and ask prices.

New traders are strongly encouraged to get some practice in Forex by carrying out "paper trades" for a time. Paper trades are essentially practice transactions that don't involve real capital. They provide a way for you to learn how the Forex system works while you learn how to utilize the vast array of software tools at the disposal of almost all Forex brokers. - 23226

About the Author:

Before you begin trading forex online, please check out John's fantastic ecourse and reports about Online Forex Trading. Get the latest info regarding trading forex online. Click on MoneyMakingFxTrader.com to learn more.