October 15 th 2012

Common Cents Investment Group October, 2012 Agenda  FX on Investopedia  Today in the market  Technical Analysis – Part II  Pick a stock!

Common Cents Investment Group October, 2012 FX on Investopedia  Our apologies, FX is not trading in our simulator  ETFs that follow FX indices  FXKing on Investopedia…  100k  100:1 leverage 

Common Cents Investment Group October, 2012 Today in the Market

Common Cents Investment Group October, 2012 Today in the Market

Common Cents Investment Group October, 2012 Today in the Market  How does the stock market impact the presidential election  If the market is good…the incumbent has the upper hand & vice versa  How does the presidential election impact the stock market

Common Cents Investment Group October, 2012 Today in the Market  How the presidential election can affect the stock market:

Common Cents Investment Group October, 2012 Useful Definition  Entry Level: The price at which you buy the security  Stop Loss: A trade entered that limits the potential loss of value in a security  Support: Price level at which demand is thought to be strong enough to prevent the price from declining further  Resistance: Price level at which selling is thought to be strong enough to prevent the price from rising further

Common Cents Investment Group October, 2012 Technical Analysis Recap  Not an exact science  Based on the assumption that all market information is reflected in the price  Three simples steps  Determine market bias  Pick a trading strategy based on bias  Use technical indicators to capture best entry point

Common Cents Investment Group October, 2012 Determine Bias  Uptrend: Markets that continuously make higher highs and higher lows.  Look for a buying opportunity at the supports

Common Cents Investment Group October, 2012 Determine Bias  Downtrend: Markets that continuously make lower highs and lower lows.  Look for a selling opportunity at the resistance

Common Cents Investment Group October, 2012 Determine Bias  Range Trade: Markets that are not in an uptrend or downtrend  Look for a selling opportunity at the resistance and buying opportunity at the supports

Common Cents Investment Group October, 2012 Trading Approach  Choose between Long or Short  Downtrends => Go Short  Uptrends => Go Long  Entry points can be at either the Resistance (Short) or Support (Long) for simplicity  Further indicators are used to create a trading strategy

Common Cents Investment Group October, 2012 Trading Approach  Indicators are used to determine:  Entry levels  Stop Loss levels  Profit taking (Limit) levels  Organization is half the battle!

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators  Trend Line: A straight line connecting consecutive higher lows and consecutive lower lows  These are highly watched by most traders and corporations  Good basis to use with or without other indicators to find good entry point

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators  Phychological Numbers: Price levels that are considered important by the markets  These numbers are generally round numbers like 10, 20, 25, 50, 100, etc.  A number of traders place orders at round numbers, thus providing support or resistance to price movements  Use to identify an entry point

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators  Relative Strength Indicator (RSI): An oscillating indicator  Can have values from 0 – – 30 => Oversold markets (undervalued) 70 – 100 => Overbought markets (overvalued)  Place trades on a confirmed move out of a certain condition  RS = Average number of days with ‘up’ closes divided by average number of days with ‘down’ closes

Common Cents Investment Group October, 2012 Technical Indicators  Prepare to sell short once RSI moves above 70 and goes into downtrend  Book profits when RSI touches oversold levels (~30)

Common Cents Investment Group October, 2012 Technical Indicators  Moving Averages: Calculated by averaging the closing prices of the market over a specified time  Simple Moving Average (SMA): Places equal weight on every price point over time  Exponential Moving Average (EMA): Places higher weight on more recent price points  Commonly over 200 days, 100 days, 10 days

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators  Bollinger Bands: use a simple moving average of a price standard deviation around that moving average to generate trading signals  Usually a 20 period moving average and a 2 standard deviation band around the moving average

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators  Moving Average Convergence Divergence (MACD): uses a combination of moving averages to generate a trading signal  Plots the difference between 12 period & 24 period EMA (called the MACD)  Plots a 9 period EMA of the MACD (called the MACD signal)  Look at the crossovers of the MACD and MACD signal lines to sell/buy

Common Cents Investment Group October, 2012 Technical Indicators

Common Cents Investment Group October, 2012 Technical Indicators  Stochastic: Another oscillating indicator that takes values of 0 – 100  0 – 20 => Oversold markets  80 – 100 => Overbought markets  C = most recent closing price  L14 = the low over the last 14 trading sessions  H14 = the high over the last 14 trading sessions

Common Cents Investment Group October, 2012 Technical Indicators  The transaction signal occurs when %K crosses through the %D

Pick a stock!

Common Cents Investment Group October, 2012 Membership  Cost is only $20 for the whole year!  Benefits:  Member of a very beneficial and informative club that will inevitably be valuable in your future  A network of friends who share a similar interest in investing and personal finance  A virtual portfolio challenge that will strengthen your confidence in investing

Common Cents Investment Group October, 2012 Membership  Make sure to check out our website for the presentations Monday night | ccig.osu.edu  Get on our Facebook page and like us!

Common Cents Investment Group October, 2012 Questions?  Questions, comments or concerns?