Pro Trader 1 DAY 1 Flashcards
what does Cover mean?
Buy to close a short position
3 Elements you need to enter a trade
Low risk High Profit potential High Probability that trade will go your way
Reasons why you may not be able to SHORT
- Limited Liquidity or Float - small companies may not have stocks for you to short - No inventory carried by the brokerage house - small brokerage firms may not have stocks to sell you. - IPO’s for the first 30 days : can’t short first 30 days of new stock (futures/forex do not have short restrictions)
Reward to Risk Ratio
Reward divided by Risk 2/0.5=4 4:1 thus 4R
Important Economic Reports
GDP Car/Truck sales Capacity Utilization - how much factory being used New Home Sales Housing Starts/constructions/Permits Retail Sales Consumer confidence Employment Report
What economic Reports explain Inflation
Law of Supply and Demand Consumer Price Index (CPI) - CPI is the most widely cited inflation indicator Producer Price Index (PPI) - measures prices of goods at the wholesale level
What economic reports explain Interest Rates?
Federal Open Market Committee (FOMC) Affects the cost of doing business : Increase interest, lowers economy, decrease interest, stimulates economy Affects demand for goods/services
Trading announcements
as beginners should stay out of market when data is released as gain more experience, will learn how to take advantage of data releases
where do market prices turn?
The origin of any move in price is where s/d are OUT OF BALANCE This is where we find low risk, high reward, high probability entry points into markets
Momentum
the strength of the trend measured by the angle or pitch
2 key buying mistakes
- buying after a rally in price 2. buying at a price level where supply exceeds demand
2 key selling mistakes
- selling after a drop in price 2. selling at a price level where demand exceeds supply
