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Advanced Trading Techniques 


Are you ready to learn some advanced ways of making trades in the securities markets? If so, and if you have at least a few months of experience behind you, five of the most common advanced techniques include those that essentially combine other methods. A few are stand-alone strategies designed for experienced investors.

It's important to spend at least a few hours practicing on a simulator with an advanced technique before putting it into practice. For example, in order to use the concept of volume in your decision-making process, you first need to learn how to find the relevant statistics in real time, identify high vs low levels, and avoid periods of frantic activity. Here are three methods you can try out. Be patient and don't expect to use all of them at once. Some people spend years becoming intimately familiar with just one or two complex techniques.

Volume-Based Decisions

The philosophy behind many volume-related systems is that prices are only one piece of the overall puzzle. The thinking goes if only a few people buy in to a big rise in a stock's price, then there's little confidence that the stock is actually worth that amount, and the rise is only temporary. Volume watchers pay attention not only to prices but to the number of shares bought and sold within a given time period. When a major pricing move is accompanied by huge volume, that's said to be indicative of a true move in share value.

Premarket Trading

Premarket trading, if your brokerage firm allows it, means any activity that takes place before the official opening bell of a major exchange. For instance, the NYSE opens at 9:30 a.m. EST every day of the week, except on holidays. However, there are electronic markets (called ECNs) where you can buy and sell securities from 4:30 a.m. until the opening bell.

One advantage of this technique is that premarket hours are a less crowded time, so there's less noise in the price charts. However, most people who opt for premarket buying and selling do so to take advantage of news that broke since the prior day's close. If you think your favorite stock is set for a big rise, perhaps based on a late-evening news event, making a premarket buy could be an effective way to play the situation for a nice profit. Keep in mind that all premarket trading is considered rather volatile and risky, compared to placing trades during regular hours.

The Trailing Stop

Careful traders use stop-losses, but a more complex move is to use trailing stops. How do they work? Say you buy 100 shares of XYZ Corp. at $20 each, and expect an upward surge within the week. If you want to protect your profits, you could set a trailing stop-loss $1 behind each new high. Then, if XYZ moves to $27, your new stop would sit at the $26 point. If it moved again, say, up to $30, you'd have a stop at $29. Once the chart moves against you to the tune of $1 or more, you're automatically out of the position.

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