What are support and resistance of a stock?
"Support and resistance points indicate price levels where there have been a large amount of trading activity, usually from institutions, that tend to stabilize the price of a stock. Support is a temporary FLOOR, where people have been buying in large quantities. That means there's a good chance that the stock won't go below this level in the near term. (But if it does, watch out.) Resistance is a temporary CEILING where people have been selling. When the stock price hits this level, people tend to sell, and push it back down. Until there are ""no more"" sellers at this level. Then the price could skyrocket if there is enough buying." You should check out existing resources like Investopedia for definitions, and ask questions if there is something you do not understand, instead of asking folks to spit out definitions. A good book for you to read might be Wall Street Words
https://www.hussmanfunds.com/wmc/wmc171009m.png  &gt;The following charts will provide a sense of where the U.S. equity market currently stands. The first chart shows our margin-adjusted CAPE, which as noted above has a correlation of about -0.89 with actual subsequent market returns across U.S. market cycles since the 1920’s.  https://www.hussmanfunds.com/wmc/wmc171009.htm  It will turn, downside potential is historic. The issue with trading stocks vs. mutual funds (or ETFs) is all about risk. You trade Microsoft you now have a Stock Risk in your portfolio. It drops 5% you are down 5%. Instead if you want to buy Tech and you buy QQQ if MSFT fell 5% the QQQs would not be as impacted to the downside. So if you want to trade a mutual fund, but you want to be able to put in stop sell orders trade ETFs instead.   Considering mutual funds it is better to say Invest vs. Trade.  Since all fund families have different rules and once you sell (if you sell it early) you will pay a fee and will not be able to invest in that same fund for x number of days (30, 60...) Yep, you have it pretty much right.   The volume is the number of shares traded that day. The ticker is giving you the number of shares bought at that price in a given transaction, the arrow meaning whether the stock is up or down on the day at that price.   Institutional can also refer to pensions, mutuals funds, corporates; generally any shareholder that isn't an individual person. Up until your strategy's money losing leg is stopped out, you have zero PnL, while a straddle has lost time value but may gain from price movements - all the PnL at that time you cannot capture with your strategy. Also stop loss cannot guarantee your price. Ok, so disregarding passivity, could you help me through a simplified example?   Say I only had two assets, SPY and TLT, with a respective weight of 35 and 65% and I want want to leverage this to 4x.  Additionally, say daily return covar is:  * B/B .004% * B/S -.004% * S/S .02%   Now, if I read correctly, I should buy ATM calls xxx days in the future.  Which may look like: Ticker, S, K, Option Price, Delta, Lambda  * TLT  $126.04  $126.00  $4.35  0.50  14.5 * SPY  $134.91  $134.00  $6.26  0.55  11.8  ^ This example is pretty close but some assets are far off.   I feel like I'm on the wrong track so I'll stop here.    I just want to lever up my risk-parity. Margin rates are too high and I'm docked by Reg-T. From what I read, if the monthly average of the stock falls below 1 dollar, it can be delisted from the NYSE, which of course means you lose everything.  I've been playing this same stock on a day by day basis.  Twice I've finished up 15% on the day, with AMR, but  I don't plan on being able to do this for much longer though.  I dumped it all today just in case they decide to remove it this weekend. all of these examples are great if you actually believe in fundamentals, but who believes in fundamentals alone any more? Stock prices are driven by earnings, news, and public perception. For instance, a pharma company named Eyetech has their new macular degeneration drug approved by the FDA, and yet their stock price plummeted. Typically when a small pharma company gets a drug approved, it's off to the races. But, Genetech came out said their macular degeneration drug was going to be far more effective, and that they were well on track for approval. "There needs to be a buyer of the shares you are offering.  There are a lot of feature rich options for buying and selling.  I don't understand them all in depth, but for example on TD Ameritrade here are some of the order types ""Limit"", ""Market"", ""Stop Market"", ""Stop Limit"", ""Trailing Stop %"", ""Trailing Stop $"".  This web page will explain the different order types https://invest.ameritrade.com/cgi-bin/apps/u/PLoad?pagename=tutorial/orderTypes/overview.html Stock with a higher volume will allow your trade to execute faster, since there are more frequent trades than stocks with lower volume. (UPDATE: More specifically, not more frequent trades, but more shares changing hands.) I'm a bit of a noob myself, but that's what I understand." "fennec has a very good answer but i feel it provides too much information. So i'll just try to explain what that sentence says. Put option is the right to sell a stock. ""16 puts on Cisco at 71 cents"", means John comes to Jim and says, i'll give you 71 cent now, if you allow me to sell one share of Cisco to you at $16 at some point in the future ( on expiration date).  NYT quote says 1000 puts that means 1000 contracts - he bought a right to sell 100,000 shares of Cisco on some day at $16/share. Call option - same idea: right to buy a stock." "Ditto to MD-Tech, but from a more ""philosophical"" point of view: When you buy stock, you own it, just like you own a cell phone or a toaster or a pair of socks that you bought. The difference is that a share of stock means that you own a piece of a corporation. You can't physically take possession of it and put it in your garage, because if all the stock-holders did that, then all the company's assets would be scattered around all the stock-holder's garages and the company couldn't function. Like if you bought a 1/11 share in a football team, you couldn't take one of the football players home and keep him in your closet, because then the team wouldn't be able to function. (I might want to take one of the cheerleaders home, but that's another subject ...) In pre-electronic times, you could get a piece of paper that said, ""XYZ Corporation - 1 share"". You could take physical possession of this piece of paper and put it in your filing cabinet. I'm not sure if you can even get such certificates any more; I haven't seen one in decades. These days it's just recorded electronically. That doesn't mean that you don't own it. It just means that someone else is keeping the records for you. It's like leaving your car in a parking lot. It's still your car. The people who run the parking lot doesn't own it. They are keeping it for you, but just because they have physical possession doesn't make it theirs." "Yes, there is a very good Return vs Risk graph put out at riskgrades.com.  Look at it soon, because it will be unavailable after 6-30-11.  The RA (return analysis) graph is what I think you are looking for. The first graph shown is an ""Average Return"", which I was told was for a 3 year period.  Three period returns of 3, 6 and 12 months, are also available.  You can specify the ticker symbols of funds or stocks you want a display of.  For funds, the return includes price and distributions (total return), but only price movement for stocks - per site webmaster. I've used the graphs for a few years, since Forbes identified it as a ""Best of the Web"" site.  Initially, I found numerous problems with some of the data and was able to work with the webmaster to correct them.  Lately though, they have NOT been correcting problems that I bring to their attention.  For example, try the symbols MUTHX, EDITX, AWSHX and you'll see that the Risk Grades on the graphs are seriously in error, and compress the graph results and cause overwriting and poor readability. If anyone knows of a similar product, I'd like to know about it.  Thanks,  George" Pivots Points are significant levels technical analysts can use to determine directional movement, support and resistance. Pivot Points use the prior period's high, low and close to formulate future support and resistance. In this regard, Pivot Points are predictive or leading indicators. There are at least five different versions of Pivot Points. I will focus on Standard Pivot Points here as they are the simplest. If you are looking to trade off daily charts you would work out your Pivot Points from the prior month's data. For example, Pivot Points for first trading day of February would be based on the high, low and close for January. They remain the same for the entire month of February. New Pivot Points would then be calculated on the first trading day of March using the high, low and close for February. To work out the Standard Pivot Points you use the High, Low and Close from the previous period (i.e. for daily charts it would be from the previous month) in the following formulas: You will now have 5 horizontal lines: P, R1, R2, S1 and S2 which will set the general tone for price action over the next month. A move above the Pivot Point P suggests strength with a target to the first resistance R1. A break above first resistance shows even more strength with a target to the second resistance level R2. The converse is true on the downside. A move below the Pivot Point P suggests weakness with a target to the first support level S1. A break below the first support level shows even more weakness with a target to the second support level S2. The second resistance and support levels (R2 & S2) can also be used to identify potentially overbought and oversold situations. A move above the second resistance level R2 would show strength, but it would also indicate an overbought situation that could give way to a pullback. Similarly, a move below the second support level S2 would show weakness, but would also suggest a short-term oversold condition that could give way to a bounce. This could be used together with a momentum indicator such as RSI or Stochastic to confirm overbought or oversold conditions.  Pivot Points offer a methodology to determine price direction and then set support and resistance levels, however, it is important to confirm Pivot Point signals with other technical analysis indicators, such as candle stick reversal patterns, stochastic and general Support and Resistance Levels in the price action. These pivot points can be handy but I actually haven’t used them for trade setups and entries myself. I prefer to use candle sticks together with stochastic to determine potential turning points and then take out trades based on these. You can then use the Pivot Points Resistance and Support levels to help you estimate profit targets or areas to start becoming cautious and start tightening your stops. Say, for example, you have gone long from a signal you got a few days ago, you are now in profit and the price is now approaching R2 whilst the Stochastic is approaching overbought, you might want to start tightening your stop loss as you might expect some weakness in the price in the near future. If prices continue up you keep increasing your profits, if prices do reverse then you keep the majority of your existing profits. This would become part of your trade management. If you are after finding potential market turning points and take out trades based on these, then I would suggest using candlestick charting reversal patterns for your trade setups. The patterns I like to use most in my trading can be described as either the Hammer or One White Soldier for Bullish reversals and Shooting Star or One Black Crow for Bearish reversals. Below are diagrams of where to place your entries and exits on both Bullish and Bearish reversal patterns. Bullish Reversal Pattern   So after some period of weakness in the price you would look for a bullish day where the price closes above the previous day’s high, you place your buy order here just before market close and place your initial stop just below the low of the day. You would apply this either for an uptrending stock where the price has retracted from or near the trendline or Moving Average, or a ranging stock where price is bouncing off the support line. The trade is reinforced if the Stochastic is in or near the oversold and crossing back upwards, volume on the up day is higher than volume on the down days, and the market as a whole is moving up as well. The benefit with this entry is that you are in early so you capture any bullish move up at the open of the next day, such as gaps. The drawbacks are that you need to be in front of your screen before market close to get your price close to the market close and you may get whipsawed if prices reverse at the open of the next day, thus being stopped out with a small loss. As the price moves up you would move your stop loss to just below the low of each day. Alternative Bullish Reversal Entry  An alternative, entry would be to wait for after market close and then start your analysis (easier to do after market close than whilst the market is open and less emotions involved). Place a stop buy order to buy at the open of next trading day just above the high of the bullish green candle. Your stop is placed exactly the same, just below the low of the green bullish candle. The benefits of this alternative entry include you avoid the trade if the price reverses at the open of next day, thus avoiding a potential small loss (in other words you wait for further confirmation on the next trading day), and you avoid trading during market open hours where your emotions can get the better of you. I prefer to do my trading after market close so prefer this alternative. The drawback with this alternative is that you may miss out on bullish news prior to and at the next open, so miss out on some potential profits if prices do gap up at the open. This may also increase your loss on the trade if the prices gaps up then reverses and hits your stop on the same day. However, if you choose this method, then you will just need to incorporate this into your trading plan as potential slippage. Bearish Reversal Pattern   So after some short period of strength in the price you would look for a bearish day where the price closes below the previous day’s low, you place your sell short order here just before market close and place your initial stop just above the high of the day. You would apply this either for an downtrending stock where the price has retracted from or near the trendline or Moving Average, or a ranging stock where price is bouncing off the resistance line. The trade is reinforced if the Stochastic is in or near the overbought and crossing back downwards, volume on the up day is higher than volume on the up days, and the market as a whole is moving down as well. The benefit with this entry is that you are in early so you capture any bearish move down at the open of the next day, such as gaps. The drawbacks are that you need to be in front of your screen before market close to get your price close to the market close and you may get whipsawed if prices reverse at the open of the next day, thus being stopped out with a small loss. As the price moves down you would move your stop loss to just above the high of each day. Alternative Bearish Reversal Entry   An alternative, entry would be to wait for after market close and then start your analysis (easier to do after market close than whilst the market is open and less emotions involved). Place a stop sell short order to sell at the open of next trading day just below the low of the bearish red candle. Your stop is placed exactly the same, just above the high of the red bearish candle. The benefits of this alternative entry include you avoid the trade if the price reverses at the open of next day, thus avoiding a potential small loss (in other words you wait for further confirmation on the next trading day), and you avoid trading during market open hours where your emotions can get the better of you. I prefer to do my trading after market close so prefer this alternative. The drawback with this alternative is that you may miss out on bearish news prior to and at the next open, so miss out on some potential profits if prices do gap down at the open. This may also increase your loss on the trade if the prices gaps down then reverses and hits your stop on the same day. However, if you choose this method, then you will just need to incorporate this into your trading plan as potential slippage. You could also trade other candle stick patterns is similar ways. And with the long entries you can also use them to get into the market with longer term trend following strategies, you would usually just use a larger stop for longer term trading. To determine the size of your order you would use the price difference between your entry and your stop. You should not be risking more than 1% of your trading capital on any one trade. So if your trading capital is $20,000 your risk per trade should be $200. If you were looking to place your buy at 5.00 and had your initial stop at $4.60, you would divide $200 by $0.40 to get 500 stocks to buy. Using this form of money management you keep your losses down to a maximum of $200 (some trades may be a bit higher due to some slippage which you should allow for in your trading plan), which becomes your R-multiple. Your aim is to have your average win at 3R or higher (3 x your average loss), which will give you a positive expectancy even with a win ratio under 50%. Once you have written down your trading rules you can search stock charts for potential setups. When you find one you can backtest the chart for similar setup over the past few years. For each setup in the past jot down the prices you would have entered at, where you would have set your stop, work out your R, and go day by day, moving your stop as you go, and see where you would have been stopped out. Work out your profit or loss in terms of R for each setup and then add them up. If you get a positive R multiple, then this may be a good stock to trade on this setup. If you get a negative R multiple, then maybe give this stock a miss and look for the next setup. You can setup watch-lists of stocks that perform well for both long setups and short setups, and then trade these stocks when you get a new signal. It can take some time starting off, but once you have got your watch-lists for a particular setup, you just need to keep monitoring those stocks. You can create other watch-lists for other type of setups you have backtested as well. Okay I don't know where my disconnect was, in my mind I was viewing that as a negative for some reason haha. Thanks! That makes sense.  What is your perspective on the large amount of companies buying back shares right now? "Buying pressure is when there are more buy orders than sell orders outstanding.  Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order.  When there's buying pressure, stock prices rise.  When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure.  That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for.  Here's an explanation from InvestorPlace.com about ""buying pressure"": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!" Daily &gt; Weekly &gt; Monthly. This statement says that if you use daily returns you will get more noise than if you used weekly or monthly returns. Much of the research performed uses monthly returns, although weekly returns have been used as well. For HFT you would need to detrend the data in order to spot true turning points.