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When do my Good until Canceled (GTC) and Good until Date (GTD) orders expire?
Tips of the Trade
Stagger the maturity dates of your bond portfolio with Scottrade's easy-to-use customizable bond laddering process. The Bond Laddering Tool is under the Trade tab in your account in the CDs & Bonds section. Simply mouse over the Bonds tab and then select Bond Laddering Tool from the drop-down box. Once you create a bond ladder investment using the tool's six-step process, click Buy This Ladder to purchase all the bonds you selected.
Bonds involve risks including, but not limited to interest rate risk, reinvestment risk, inflation risk, call risk, liquidity risk, credit risk, market risk, default risk, event risk and a risk of loss of principal. New issue offerings are sold by prospectus or offering circular available at www.scottrade.com. Investors should read these carefully.
There are two ways to fund your OptionsFirst account: transfer funds electronically from your bank, or mail a check to Scottrade OptionsFirst.
To make an electronic (ACH) deposit, click the Transfer Funds button along the bottom of your OptionsFirst window. Make sure ACH is selected at the top, and specify the amount and the bank account you would like to use. If you do not currently have a bank account associated with your OptionsFirst account, click the Establish a New Relationship button in the bottom right corner of the Funds Transfer window and follow the instructions provided.
To mail a check to Scottrade OptionsFirst, send your payment to Scottrade OptionsFirst, P.O. Box 31542, St. Louis, MO 63131-0542. Include your account number on the check.
Mind Your Indicators
By Ross Brayton, Scottrade Branch Manager, Cape Coral, Fla.
For many technicians (chart watchers), there is an allure to using a variety of technical indicators to determine when it is time to buy and sell. It's easy to become overly dependent on indicators to drive trading decisions rather than defaulting to the primary indicator: the trend. Indicators all have strengths and weaknesses in different price movement situations, and the key is to use the right indicator at the right time in the trend to avoid false signals.
Technical Analysis Basics
For those that are not avid users of technical analysis, I would recommend reading over the following material within Scottrade's Knowledge Center. As a small recap, technical analysts draw trend lines on charts above or below the current market price, depending on the direction. Trend line breaks are indicators of a change in direction either toward a period of consolidation (sideways movement) or a reversal of the existing trend altogether. However, these trend changes can wreak havoc on traders using technical indicators who are not sure what to look for.
Market Example
Consider an investor following a company that has recently moved out of a consolidation (sideways) pattern. What are common indicators likely to read at the time the trend begins to change? Let's look at the company's price history over five months with Bollinger Bands and Stochastics plotted on its chart.
In the chart, you can see a defined sideways movement in the stock until the first part of March. The stock's sideways trend then breaks as the stock moves higher, but based on the readings from Bollinger Bands and Slow Stochastics, it looks like the stock is overbought and should be sold, when it really continues the upward trend through the rest of the month.
Does this mean that those indicators are bad indicators? No. It simply means that those indicators might not be appropriate for the current market trend. This is why Dow Theory states that the trend should be considered the primary indicator of future market direction. From that point in the decision-making process, you can add in secondary indicators to help confirm the trend by understanding how the indicators work and adjusting your readings based on known shortfalls.
Why Didn't the Indicators Work?
In our example above, it would help to know that Bollinger Bands are calculated as two standard deviations from a 20-day moving average. For those who are not into statistics, that means we would approximately expect 95% of all recent stock prices to be within the lower and upper lines. However, the error occurs because the mean, or average, values used to define those upper and lower levels are lagged by 19 previous days of data. Simply put, the indicator will not immediately reflect the new trend and its respective change in volatility.
As for Stochastics, this indicator measures the recent closing price relative to its more recent lows. By measuring the gap between recent highs and lows, the indicator (oscillator) tries to define when momentum is leaving the stock and beginning to form a bottom or top. This typically means that in sideways markets, Stochastics will help you reaffirm bottoms and tops relative to known support or resistance levels. However, once a stock starts trending up or down, you will likely find periods where the indicator stays in the overbought or oversold range for an extended period. This can clearly be seen in the highlighted section of Stochastics around the time of the recent change in trend.
Using Indicators Effectively
Understanding the weaknesses inherent in various technical indicators can work to your benefit. The extended overbought or oversold readings themselves are a sign that the trend may be changing and that a more thorough review of the underlying trend is warranted.
In our example, the price for our selected stock was moving out of a trading range and into a new uptrend. Consider the same chart after we switch to indicators that help define entry and exit points for stock in an up or down trend:
With moving averages laid over the price, you typically buy when a stock moves above the average and sell when it falls below. Notice that pattern of trading would have led to very small losses in the period prior to the stock breaking out above $24.00. This result runs completely opposite to the experience the investor would have while using Bollinger Bands during that same period. However, once the break-out took place, the average did not give a sell signal until the price fell below approximately $27.00, while Bollinger Bands gave a sell signal through the entire rally.
Moving Average Convergence-Divergence (MACD) is also an indicator used for trending stocks. The zero line represents the price of the stock and the remaining two lines are moving averages drawn relative to how close or far they fall from the current stock price. Two different buy and sell signals are generated from the MACD indicator. The first is a buy or sell signal based on a move up or down below the zero line. The second is when the two moving average lines cross over themselves. Again you can see how the signal to buy or sell is very weak during the sideways potion of the trend, but that the buy and sell signals during the trending portion are very useful to the investor.
Picking the Right Tool
Knowing the strengths and weakness of each indicator is half the battle in correctly using technical analysis. It is akin to knowing which tool to grab from your tool chest based on the job you are trying to get done. First, you want to understand the current trend in the market and then select proper secondary indicators to help you confirm the strength and timing of that trend.
To learn more about individual technical indicators and how they are used, visit the Indicators section of the Knowledge Center.
The analytical tools, and strategies, described in this article are for information purposes only and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision. (Securities are subject to market fluctuation and may lose value.)
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| New York - Learn Strategies to Plan Your Next Move | 10/20/12 |
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