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Many traders use Bollinger Bands to help them identify different stages of a market move including breakout points, continuation patterns, corrections and tops and bottoms.

There are some patterns that can forecast possible price movements that form during different stages of a move and when used with other indicators can raise the probability of that forecast.

Starting at the point where prices are in a squeeze and for this example we'll assume prices decline. (Remember a squeeze is when prices are generally moving sideways and the bollinger bands squeeze together, when prices breakout of the squeeze the bands expand and move apart in opposite directions.) As prices move down, the bands will continue to widen, at the point when the top band begins to stop moving up and turns lower, prices tend to correct. Depending on the severity of the decline this could be a bottom, but is not necessarily. The more severe the decline the more the probability prices are in a correction. The top band will then continue moving lower with prices.

At the point when the bottom band begins to turn up is when the probability of prices bottoming increases dramatically. Prices are likely in another correction at this point and will move back to the 20 period moving average.

Other variables to keep in mind are the severity of the price decline, the steepness of the moving average, volume and the conviction of the correction. Also, momentum indicators are helpful to determine if a bottom is being made. Momentum will be sharply negative by this time, but if it begins to make a B-line for zero it raises the probability of a bottom.

In a steep decline the moving average is likely falling very steep as well. If the correction is relatively flat, rather than a V type correction, the probability of prices falling again after touching the moving average is high. What happens next is important, does the closing bottom bollinger band provide support as prices decline or does it turn lower. This will forecast prices for the short term. If the band provides support, price will move above the moving average and to the top band and a new squeeze and breakout point will emerge.

Remember, there is no pattern that is 100% full proof. Each pattern has its own characteristics, but similarities exist and with study, identifying these similarities will become easier.

Author: John C Morgan
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Even as a young child, I remember being fascinated by and interested in money.

* How to earn it.

* How to keep it.

* How to multiply it.

My interest in money has led me down some interesting paths. I've bought bank-owned homes and flipped them for profit. I've worked overseas for a big Fortune 500 company. And I've even been the owner/operator of a couple tattoo parlors.

Here's the craziest part. To this day, I haven't found anything quite as easy, exciting, and lucrative as option trading.

Please let me share with you eight clear reasons why I prefer option trading to any other money-making method:

1. You can get started even if you don't have much cash to play around with.

2. There are no products or inventory to keep track of.

3. You don't have to pay rent to a landlord.

4. There are no employees to take care of, no salaries to pay, and no HR issues.

5. You can trade options just about anywhere on earth--even on a tropical beach.

6. You can minimize your risk and win 7 out of 10 trades... IF you're educated and know what you're doing.

7. No glass ceiling! The sky is the limit to how much you can make.

8. And, get this: You can earn a full-time living in only 30 minutes a day.

It is important to note that I didn't become wealthy overnight. I invested many months learning everything I possibly could about option trading.

Still, where else can you get enough leverage to turn $5K into a million bucks in only three short years?

I really can't think of many opportunities that provide as much leverage and profit potential as option trading has provided for me.

And get this: Despite how much my trading "business" has grown, I'm still able to do everything from the relative comfort of my spare bedroom in a quiet Colorado town.

It's just me, my two pet cats, and an accountant who helps me update my books a few times a year.

If you're new to option trading, I strongly recommend that you learn everything you can and stick with it for the long term.

Drink up all the education you can, figure out who to listen to (as well as what really works), and -- most importantly -- make option trading an integral part of your daily wealth routine.

The pay-off? Three years from now you could be 100% financially secure and living the life of your dreams.

Author: Arnold Brown
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There are significant advantages in trading an index over individual shares.

Here are seven of them:

1) When trading an index you are trading a more reliable indicator than when trading a share. The share price can be manipulated but it is harder to manipulate an index. The reason for this is an index consists of a number of different companies that represent billions of dollars. The Dow Jones Index (DOW) consists of only thirty companies, but they are thirty of the top companies in USA. If they go broke, the USA is bankrupt overnight. This will not occur because only companies in good standing are represented in the index. If a company does not comply with the conditions to be included in the index, it is removed. Besides the DOW, there is the S&P 500, the FTSE 100, the Eurostoxx 50, Nikkei 225, the Heng Seng, the SPI 200 and many more. All these indices are comprised of quality companies.

2) Because these indices represent quality companies there is considerable volume being traded in the derivatives as funds and large private investors hedge their investments in individual companies.

3) When investing in a company, you need to be like Warren Buffet and make a business decision based on sound fundamental facts. This means doing research into the company, the competition and the industry. It also pays to have an understanding of the management, as well as much inside information as possible. This requires quite amount of time, Unless you are going to buy a business, or intend to be a major investor in a company, there is really no need to invest time and energy in researching and seeking out this information, when all you have to do is understand how to read a chart.

4) An index can be traded during market hours and outside market hours. Because of this indices can be traded virtually around the clock. This gives a lot more flexibility for the smaller trader, who cannot buy and sell shares outside market hours.

5) The indices enable you to get greater leverage for your dollar, which means you are able to make more money on a market move. In fact, using cfds you can get leverage up to 2000%. What this means is you have access to $200 leverage for every $1 outlaid. With $100 you are leveraging $2000 and this can mean significant profits. Instead of having to find $200,000 cash to play an index with to make a living, you can have the same purchasing power $10,000 because of the power of leverage. This means that you can trade an index with $10,000 and invest your $190,000 elsewhere. Or if you do not have $200,000, at least you can have the same trading power with only $10,000,

6) There are no issues about short selling indices. You can just as easily take a position where you can make a profit in the shares going up or going down. There is no complicated formula. There is no need to borrow shares. There is no need to pay interest. When there were bans put in place on short selling shares, there were no bans on the indices. This is because the indices do not affect the sharemarket, instead they reflect what is happening in the sharemarket. When share prices fall, then the value of the indices fall with them. The indices themselves cannot be manipulated, since they rely on the underlying sharemarkets to determine their value.

7) The indices provide a better reflection of market psychology than individual shares. Individual shares may rise and fall with the general mood of the market, but they will all not rise and fall in the same way. Different shares in the same industry sector will vary in performance, but this will not affect the index because it reflects the overall position, so there is no concern about being on the worse performing stock. This means all that a trader needs to do is understand how to read a chart that reflects the psychology of market participants and utilize money management techniques.

Author: Happy Riches
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Some people will claim that trading is legalized gambling . Is it? Let's answer a related question first: what's the difference between investing and gambling?

On a well-known investor web site cites that stock investing is inherently different from gambling because in gambling there is always a winner and a loser and nothing is created, but when investing in a company the company uses that investment to create products and services.

In my opinion this reasoning doesn't hold water. If I buy shares of XYZ company on the public stock exchange I am buying them from another investor, not from the company whose name is on the stock. If the price goes up in the next week then the seller who sold the shares to me was a "loser" and I was a "winner." I can't see how this is different from playing a winning hand at poker and taking the other player's money.

I did notice that the investor web site article inserted the little phrase "initial stock offering" when describing how investing in a company's shares is not gambling. OK, so they're saying that the initial private investors and the investors who participated in the initial public offering were the only ones really "investing." The vast majority of the trades for company XYZ were post-IPO transactions in which there is a winner and a loser.

But let's look at this initial investment more closely. At the initial offering, investors give the company money in exchange for stock. The company hires employees, buys equipment, and engages the services of expensive management consultants. From this activity a new product or service is created and progress (with a capital "P") is made.

Now look at the "gambling." Jim wins the poker game and takes the money to buy whiskey. The saloon and the whiskey maker use their profits to pay employees, buy equipment, and hire expensive management consultants (OK, maybe not that). So their profits fund continuation of a product and a service. Doesn't sound much different from investing to me, from a strictly economic perspective.

Turning this gem around to look from another angle, take Jed, who came into a bit of money and opened up an account with an online brokerage. Jed doesn't know much about investing, but he tells a friend of his about his new account and this friend is happy to supply advice about what stocks to buy. Jed gets excited and takes the friend's advice on which companies to buy. He doesn't set stop losses. His whole account is invested in just three companies. Is this investing or gambling?

Now take Ricky, who's been playing and studying poker for fifteen years. He goes to a game with some friends of friends who don't know him. High rollers. Ricky takes some of his money out of savings to play. He's good at reading people. Knows how to control risk. Knows how to conceal his skill and how to control his ego. He stays calm. Investing or gambling?

My point is that many activities can be more or less risky depending on the skill of the person engaging in the activity. There's a saying: "The risk is more in the investor than in the investment."

Of course, there are games of chance in which it isn't possible to become more skillful. But even there if you understand your odds and work your position sizes according to the laws of probability you can use increased skill to lessen the risk.

So, trading is gambling if you don't carefully evaluate your trading method, or if you don't trade a method that fits your circumstances and temperament, or if you don't manage the method well, letting fear and greed run you.

Author: Justin Souter
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