Many people disregard fundamental analyses as it is "difficult to learn" so they start using technical analyses.
The question really is: what is your trading edge over others? Everybody can use technical analyses these days. All you need is a click of a button and you have a technical study drawn for you. You don't even need to understand how to calculate it these days, it is so easy to use.
So are you sure that technical analyises is enough for a trading edge?
The basics
Fundamentals simply mean that underlying foundation on which other things built (for example the price of the share).
If a company keeps growing, the price will grow above every limit no matter what a graph shows. If a company keeps making greater and greater losses and shrinking, no level in price is low enough to "support" it.
Long-term
Fundamental analysts tend to invest on the long-term because on the short term greed and fear changes the price. That is supply and demand changes the price. But it is fundamentals (the basics) are need to support a price.
Option Selling Strategy
The following if a simple zero risk strategy of investment.
- You buy 1.000 shares.
- You sell a 2-month option (let say a call)
- You buy a 1-month option (let say a put)
The time factor of the option impacts price of the option. So the one month difference between the two option prices above is your profit with no risk.
What if somebody "calls" your shares? Nothing, you still pay as much money for it as you have purchased it. You can use various exit strategies one the 1-month option start expiring. You can decide to exercise it, sell the 2-month option, etc. maximizing your profits or future adantages.
There are variations of this strategy. Like doing it without purchasing shares or both of the options. However, these entail a hire level of risk.
Here is a possible various on this strategy. You buy a one-year put option and keep selling 1-month call options till you make profit.
This strategy is most profitable in a non-trending share.
[TODO: Examples]
Realistic Daily Share Price Change
A well-managed business grows over time. Let's say 20% each year.
What does it mean for daily chart? A share price move over 0.055% is out of alignment with the growth of the business - so out of alignment with the fundamental data. This out of alignment makes intra-day changes unreliable for fundamental analyses.
What does it mean for daily chart? A share price move over 0.055% is out of alignment with the growth of the business - so out of alignment with the fundamental data. This out of alignment makes intra-day changes unreliable for fundamental analyses.
On Astrology
Seems like there is even a company http://http://www.mmacycles.com/ that uses "Financial Astrology".
Actually, there are some "cosmic" events that are already statistical proven to impact stock market. Here are some example:
Actually, there are some "cosmic" events that are already statistical proven to impact stock market. Here are some example:
- Different months of the year
- Full moon
- Each day: the opening hour, the noon boredom, the afternoon, etc. cycles :-). The point of this one that everyone who is trading uses this information in trading, maybe we just did not thought about that this is astrology after all.
Correlations
If you download historical data into Excel. It is possible to calculate "correlation". A mathemtacal figure that tells how much one item "zig or zag" in the graph is reflected in the other graphs "zig or zag". 1 means they are equals. -1 means they are opposites. 0 would be "no correlation".
Correlation value change over time so the values provide here are only valid in the mid of 2006. A good example of this is Canadian dollar that sometimes correlates with gold, sometimes with oil, etc.
Use any correlation value that is above .5 or below -.5 as it gives a trading edge.
(Each correlation is only listed ones. I don't mention non-correlating items)
Australian Dollar: Understandable correlates to Gold (0.84) since Australia is an important gold exporter.
Corn: Eurodollar (CME traded index) (0.81). Five-year notes (Chicago Board of Trade) (0.77). Thirty Year Treasy Bonds (Chicago Board of Trade): 0.77. Weat (0.93).
Euro Dollar: Five-year Notes (0.96). Japanese Yen (Chickage Merchantile Exchange) (0.68), Thrity Year Treasy Bonds 0.91. Weat (0.71)
Five-Year Notes: Japanese Yen (0.74), Thiry-Year Treasy Bonds (0.97), Weat (0.75).
Gold: Japanes Yen (0.74), S&P 500 (0.62), Wheat (0.62)
Yapanese Yen: Thirty Year T-Bonds (0.71).
Weat: 30 year T-bonds (0.8).
Stock Prices
Here are some examples how S&P correlates with DEL (0.82), and DOW Industrial (0.978).
EUR, USD anD YEN:
In my Forex trading I often use EUR, USD and YEN due to the excellent leverage I can get with my money on Yen.
For trading Euro, it is good to watch: Five-year Notes (0.96), Yen (0.68), Thirty-year t-bonds (0.91).
For trading Yen, it is good to watch: the Euro (0.68), Five-year Notes (0.74), Gold (0.74), Thirty-year T-bond (0.71).
Correlation Between Currencies
EUR: CHF (0.96), GBP (0,80), JPY (0.63), Aud (0.67)
JPY: EUR (0.63), CHF (0.65), Aud (0.75), Nzd (0.5)
Unfortunatly, the hour corrleation between even highly correlated currecnies like EUR, CHF can vary greatyl. However, EUR & CHF correlations are very high on the long term.
Here again with currencies, it is good to calculate correlations using Excel from time to time.
Correlation value change over time so the values provide here are only valid in the mid of 2006. A good example of this is Canadian dollar that sometimes correlates with gold, sometimes with oil, etc.
Use any correlation value that is above .5 or below -.5 as it gives a trading edge.
(Each correlation is only listed ones. I don't mention non-correlating items)
Australian Dollar: Understandable correlates to Gold (0.84) since Australia is an important gold exporter.
Corn: Eurodollar (CME traded index) (0.81). Five-year notes (Chicago Board of Trade) (0.77). Thirty Year Treasy Bonds (Chicago Board of Trade): 0.77. Weat (0.93).
Euro Dollar: Five-year Notes (0.96). Japanese Yen (Chickage Merchantile Exchange) (0.68), Thrity Year Treasy Bonds 0.91. Weat (0.71)
Five-Year Notes: Japanese Yen (0.74), Thiry-Year Treasy Bonds (0.97), Weat (0.75).
Gold: Japanes Yen (0.74), S&P 500 (0.62), Wheat (0.62)
Yapanese Yen: Thirty Year T-Bonds (0.71).
Weat: 30 year T-bonds (0.8).
Stock Prices
Here are some examples how S&P correlates with DEL (0.82), and DOW Industrial (0.978).
EUR, USD anD YEN:
In my Forex trading I often use EUR, USD and YEN due to the excellent leverage I can get with my money on Yen.
For trading Euro, it is good to watch: Five-year Notes (0.96), Yen (0.68), Thirty-year t-bonds (0.91).
For trading Yen, it is good to watch: the Euro (0.68), Five-year Notes (0.74), Gold (0.74), Thirty-year T-bond (0.71).
Correlation Between Currencies
EUR: CHF (0.96), GBP (0,80), JPY (0.63), Aud (0.67)
JPY: EUR (0.63), CHF (0.65), Aud (0.75), Nzd (0.5)
Unfortunatly, the hour corrleation between even highly correlated currecnies like EUR, CHF can vary greatyl. However, EUR & CHF correlations are very high on the long term.
Here again with currencies, it is good to calculate correlations using Excel from time to time.
Historical Data
The following website gives historical Forex data in simple downloadable files: http://ratedata.gaincapital.com/
In Russian:
Interestingly no timestamp in the file.
http://www.forexite.com/free_forex_quotes/forex_history_database.html
DealBookFX at GFT supposed to have.
Metatrader
www.premiumdata.net
MarketCast-Australia
IDEALPRO
In Russian:
Interestingly no timestamp in the file.
http://www.forexite.com/free_forex_quotes/forex_history_database.html
DealBookFX at GFT supposed to have.
Metatrader
www.premiumdata.net
MarketCast-Australia
IDEALPRO
Gold vs my appartment
Some people believe that gold is the only money that this planet have. So let's count how much my appartment in Budapest worth currently in gold.
First, I use http://www.oanda.com/convert/classic to convert the value to USD. The reason for USD that USD is still the most important currency of the world, so it is easier to count with it.
Purchase price: 2000 November: 5.500.000 HUF
Current value: 2007 Jan: 7.200.000 HUF (about).
First, I use http://www.oanda.com/convert/classic to convert the value to USD. The reason for USD that USD is still the most important currency of the world, so it is easier to count with it.
2000 November: 5.5 M HUF = 17.710 USD.
2007 January: 7.2 M HUF = 38.050 USD
In USD, the appartment increased over double (114% increase). Sounds good isn't it?
Let see gold prices using the same currency converstion tool. (1 oz. = 28.349 gram).
In 2000 November, 5.5 M HUF buys 66.64287 oz. Gold
In 2007 January, 7.2 M HUF buys 59.4911 oz. Gold
In Gold, the appartment lost 11% of its value. That is not so good after all.
What if I would have invested in Gold?
If in 2000, November, I would have buy gold on the 5.5 M HUF, I would have now 8.1 M HUF worth of gold and no appartment to stay in Budapest.
So in this case, financally buying gold might seem to be a better choice. For me, buying the appartment seem to be the better choice after all. Not because it is a great invesment but simply one needs a place above his/her head when staying in Budapest.
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