Stochastic Oscillator

 

A stochastic oscillator is a momentum indicator.

Trading Strategy:

• recognise the trend:
• In a trendy market only open position in the direction of trend.
• In a range market you can use both buy and sell signals.
• Upper band and lower band indicating different things in different market conditions:
• In a trendy market upper and lower bands show the momentum in the market for example in an uptrend if the indicator is above 80 it means that buyers have the momentum.
• In a range market, however upper and lower bands showing the overbought and over-sold areas. So, we may go long if we see oversold in a range market and go short if we see a over-bought situation. 
• Divergence is another important strategy to adopt when using stochastic indicator as a divergence may indicate a trend reversal.

Stochastic Momentum Index (SMI)

We can use this indicator to get the following information.

Overbought or Oversold: Above the overbought and below the oversold lines.

Trend: More oversold in compare to overbought indicates a downtrend.

More overbought in compare to oversold areas indicates a downtrend.

Trading Signals: Crossing the lines inside the extreme areas.

standard Deviation Indicator

Standard deviation is an indicator that measures the size of recent price movements of an asset, to determine the current volatility or predict how volatile the price may be in future. It can help you decide whether the volatility of the price is likely to increase or decrease as normally big price moves followed by small price moves and vice versa. Strategy: 1- Recognise the overall trend. 2- Look for the volatility with price movements against the overall trend. 3- Open a position in the direction of the trend after the high volatility happens.

Wealth Management Terms

1.  Rights Issue: https://g.co/kgs/SvDstx  Good to raise capital. A rights issue or rights offer is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive pro-rata way to raise capital.
2. Scrip Only Dividend: https://en.wikipedia.org/wiki/Scrip_issue The company issuing the scrip shares has now expanded the number of shares in existence, but not increased the value of the company
3. Open Offer: An open offer is a secondary market offering, similar to a rights issue. In an open offer, a shareholder is allowed to purchase stock at a price that is lower than the current market price. The purpose of such an offer is to raise cash for the company efficiently. https://www.investopedia.com/terms/o/openoffer.asp#:~:text=An%20open%20offer%20is%20a,cash%20for%20the%20company%20efficiently.
4. Closed-End: Organisations such as companies which are a fixed size as determined by their share capital. Commonly used to distinguish investments trusts (closed-end) from unit trusts and open-end investment companies (OEICs) (CISI glossary of terms)
5. Commercial Paper (CP):Unsecured bearer securities issued at a discount to par by PLCs with a full stock exchange listing. CP does not pay coupons but is redeemed at par.(CISI glossary of terms)

Diversification in Online Trading

 The importance of portfolio diversification. 

To have a diversified portfolio you should follow these rules:

1. Spread your risk to increase your portfolio’s success.

• Invest in assets that will react differently to the same market factors. 
• For example, do not hold different travel industry related securities, as these assets have a high correlation. You can read about correlation here. This is not diversification. Holding highly correlated assets increases your risk.
• Instead invest in different assets which are not correlated to each other geographically, industry base, type. For example have some tech ( Google, etc), travel (Airlines, Cruise lines, etc), Oil related (petroleum companies), medical (Vaccine, marijuana etc) and many other industries.
• Consider investing in different categories like Cryptocurrencies, Stocks, Indexes, FOREX, EFTs and commodities.
• Money management is an important part of diversification.
• For example, if you have different assets which are not correlated but invested 90% of your portfolio in the Technology industry then your diversification is not perfect.
• Try to introduce a limit for each category in your portfolio. 
• Do not put all the eggs in one basket. Diversify your portfolio as much as you can.

Schaff Trend Cycle - STC

 Leave the settings unchanged! Signals:

• Go long (Buy) whenever the STC surges above 25 from below.
• Go short (Sell) whenever the STC plummets below 75from above.
• STC can stay in overbought or oversold territory for a long time. 

RSI (Relative Strength Index)

RSI = Relative Strength Index

Is fluctuates between 0 and 100

·         A momentum Oscillator

·         Increasing RSI when: Average gains are greater than average losses = Bullish

·         Decreasing RSI when: Average gains are less than average losses = Bearish

How to use:

1.       Trend recognition: trading in the direction of the trend

1.1   Above 50: Uptrend

1.2   Below 50: Downtrend

2         Overbought and oversold entry signals.

2.1   In an uptrend look for oversold areas and open a long trade after the pullback above 30.

2.2   In a downtrend look for overbought areas and open a short trade after the pullback below 70.