Rolling Stocks and Stock Trading

Stocks that exhibit a rolling pattern are known as rolling stocks; rollers or channeling stocks, are bought at their cyclic low and sold at their high for profit.

Often, stocks reach their high or low for the day in the first 20 minutes of trading. Do you see what's wrong with this picture? These investors are a day late. They're reacting to yesterday's news. Now, after this goes on for about 20 minutes, the day traders come in. Let's assume they've been holding yesterday's hot stock overnight hoping to get a little more profit in the morning from the amateur buying. What do they do now? Well, they sell into all this buying, increasing their profits (at the expense of the amateurs) and driving the price of the stock back down. This can go on for another 10 to 20 minutes.

After that, the stock will start moving up or down as a result of today's trading. If the stock starts moving in your direction, that's the time to buy. (This is not to say you should never buy near the open, but you should wait to see how the stock opens and make sure it has found a trading range. I would say that you should never put in a market order before the open.) One other thing to keep in mind is that most options don't open for trading until the stock has traded for fifteen or twenty minutes. If you place an order before that, you can bet that you'll be filled at the highest possible price.

Stock traders/investors usually need a stock broker, such as a bank or a brokerage firm, as an intermediate. Since the spread of the Internet banking, it is usual to use an Internet connection to manage their own financial portfolios, including ordering the sell/buying orders, set stop losses prices and define buying/selling prices. Using the Internet, specialized software and a personal computer, stock traders/investors make use of technical analysis and fundamental analysis to help them in the decision process. They utilize also several advising and information resources based on the Internet and the media, such as financial/business news and data firms (Reuters, Bloomberg, Financial Times, Yahoo! Finance, MSN Money, AFX News, Newratings, Forbes, BusinessWeek, Hoover's). They exclusively trade on their own behalf, as a principal, investing money on a share or other financial instrument, which they believe will increase in price aiming to sell it later with earnings. According to the trading techniques and strategy adopted, or the investing profile of each individual, its trading style can be called value investing, growth investing, day trading, swing trading, or trend following.

Expenses, costs and risk

Trading activities are not free. First of all, they have a considerably high level of risk, uncertainty and complexity, especially for unwise and inexperienced stock traders/investors seeking for an easy way to make money quickly. In addition, stock traders/investors face several costs such as commissions, taxes and fees to be paid for the brokerage and other services, like the buying/selling orders placed at the stock exchange. According to each National or State legislation, a large array of fiscal obligations must be respected, and taxes are charged by the State over the transactions and earnings. Beyond these costs, the opportunity costs of money and time, the currency risk, the financial risk, and all the Internet Service Provider, data and news agency services and electricity consumption expenses must be added.

Stock Picking

Although many companies offer courses in stock picking, and numerous experts report success through Technical Analysis and Fundamental Analysis, many economists and academics state that because of Efficient market theory it is unlikely that any amount of analysis can help an investor make any gains above the stock market itself. In a normal distribution of investors, many academics believe that the richest are simply outliers in such a distribution (e.g. in a game of chance, they have flipped heads twenty years in a row).

For this reason most academics and economists recommend that investors invest in funds that follow an index in the market, i.e. long-term and well-diversified investments.

Dart Board Method

Financial journals and newspapers such as the Wall Street Journal have done articles on stock picking in the past. One famous article involved a stock picking contest between a panel of Wall Street experts, the public and a dart board. One member was elected to throw darts at the Journal's stock page in order to select a portfolio. At the end of the experiment, the public and the dart board both beat the board of Wall Street experts. Was the dart board more savvy? The dart board's triumph over the Wall Street experts can be attributed to chance (one could also attribute the dart board losing to the experts to chance as well).