Stock Trading tips - Trading Strategies for The Active Trader

Technical analysts are familiar with breadth indicators. This is a class of indicators designed to measure how broad the participation in a price move is.  The general idea behind breadth indicators is that a healthy trend will have broad participation. In a bull market, for example, most stocks should be in uptrend's. This is based on the theory that a market with just narrow leadership is likely to reverse. This was seen in 2000 when just a few stocks were moving higher. These stocks carried a great deal of weight in the indexes and pushed the indexes up. Breadth warned of a problem and the bear market was a problem. A popular breadth indicator is the advance-decline line which is calculated by subtracting the number of stocks declining every day from the number of stocks advancing. A/D line = advancing issues – declining issues Every day, technicians complete this simple calculation and chart the result, adding today’s result to the data. Generally, we see a ...

In a recent article, we looked at the traditional approach to a trading strategy known as the  Dogs of the Dow . Several readers have questioned how a simple strategy like the Dogs can work. In this article, we will explain why the Dogs of the Dow can work and look at a variation of the   Stock trading tips that can be implemented at a relatively low cost. A common question among investors is how a strategy can work when a large number of investors already know about it. Researchers have shown that if a strategy is based on sound investing principles, it can work no matter how well known it is. This idea applies to the Dogs theory which has been well known for many years. Although most investors believe the theory dates back to the 1991 book  Beating the Dow  by Michael B. O’Higgins, we showed in our earlier article that the strategy was actually first written about in the June 1951 issue of the  Journal of Finance . Although the strategy has been ava...

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