The stochastic oscillator is one of the first generation tools in technical analysis. It was created in the 1950s, when personal computers were not yet invented. Consequently, its structure is very simple however; it is quick when giving a change in the direction of prices. Today there are several variants. Here we look at the classic stochastic using %K and %D.
.

This article describes a hedging strategy whereas the possibility exists to benefit from an inaccurately priced option based on the difference between implied and historical volatilities. Investors also learn, through these volatilities, how to recognize if options are priced above or below their fair value.

This article describes the main drawbacks of the performance of leveraged and inverse exchange-traded funds. These instruments are popular for their apparent high performance, but they involve major risks in the long term. So much so, that these products should preferably be traded on a daily basis and for speculative purposes only.

A portfolio’s components each carry specific risks. In portfolio management, a vital need is to rebalance the portfolio to maintain overall risk at a level deemed acceptable. Dynamic asset distribution is one aspect of this need. Here we explain two of the four classic methods used.

For months now, the U.S. Federal Reserve has been increasing the money supply at an extraordinary pace to stimulate economic activity. This money has not yet reached the real economy. The stock market, and markets for raw materials such as oil and gold, are where the benefit is being felt. This is all creating a climate of uncertainty and increased volatility.

Summary The so-called “Greeks” (referring to their symbols in the Greek alphabet) help predetermine premiums on call and put options (an example is shown here) and modulate portfolio risks. There are currently 14 “Greek” variables, and their use is mainly institutional. However, the three most important ones are of interest to all investors.

Since the summer of 2007, a number of banks have faltered due to shortage of capital. Governments have offered them money, but some have refused, preferring to sell their assets. Such is the case for Barclays, who have put BGI and iShares, the producer of the XIU, on the market. CVC, a private equity firm, has agreed to buy iShares, but until mid-June 2009, nothing is certain. 

To use an option strategy, you must formulate scenarios by answering the question: what is the relatively near-term outlook: up, down or neutral? This can refer to a stock market index, a specific security, gold, oil, interest rates, etc., because today there are options for almost any exchange-listed product.

Second-generation Exchange Traded Funds are officially called ETF futures. They are also called beta multiples. In the literature, they are often referred to as 2x ETF, 3x ETF, etc. for 200% and 300%. 

According to Standard & Poor’s, since 1926, capital gains have accounted for about two thirds of the equity return on US stocks, with dividends accounting for the remaining third. In Canada, securities have paid dividends since...

The 31st president of the United States was a Republican, Herbert Clark Hoover. He was elected president in 1928 and was defeated in 1932 by a Democrat, Franklin Delano Roosevelt. During Hoover’s mandate, the stock market...

In the world of options, there are three basic hedging strategies: Buying a call Buying a put Selling a covered call, also known as covered call writing (CCW).

Let's call our first character "Mr. Snow." This highly successful man was one of my colleagues; he worked as a trader on the floor of the Montreal Stock Exchange, at a time when the exchanges...

Wilder’s Parabolic SAR is a very good technical analysis tool that can show impartially if the trend, even in the very short term, is up or down. It can be used as a daily stop loss order. It works well with the SAR method to help investors profit from both uptrends and downtrends. It can also be used in day trading.

Bollinger Bands (BB) are one of the few indicators that combine volatility and price action. They are based on the fact that when volatility is high, prices are in a congestion phase, and when it is low, prices are in a trending phase. BBs often identify changes in volatility that signal a transition from price congestion to a price trend, and vice versa.

The Chaikin Money Flow and the Chaikin Oscillator are two indicators that analyze the strength of a price trend based on trading volume. They are represented by charts: a divergence between the price trend and these indicators shows that most investors believe less and less in the current price trend and that a trend reversal is in the making.

The MACD (Moving Average Convergence Divergence) is a valuable indicator, with many interesting aspects. In this article we will show how it is constructed and how it can identify a trend reversal, enabling the investor to buy and sell more profitably (and also more frequently) than with the two-moving-averages method.

The Advance/Decline (A/D) indicator is one of the oldest indicators used in technical analysis. It shows whether the movement of an index (which is composed of a limited number of stocks) is representative of most stocks, or whether there is a divergence. It is also a strong predictor of price trends.

Candle charts show in each candle the relationship between close and open prices. Two, three or more candles can offer a significant indication of market tops and bottoms. Candle charting techniques can be used with any kind of period: five minutes, one hour, one day, etc. In this first article on candle charts, we will look at the most common types of candles.