The Ins and Outs of the SEC’s Tick Pilot Program

Getting into the weeds with day trading can be fun for some, excruciatingly boring for others. For me and the traders at Warrior Trading, it is fascinating. All the little rules and loopholes and math that affect how money moves around the globe every day. It is really pretty crazy when you think about it.

There are a whole bunch of SEC rules and regulations that affect how much profit a day trader can make and how quickly he or she can make it. Understanding these rules requires quite a bit of reading and studying. But the payoff is great. It will give you insight into how markets works and how you can make money from day trading in those markets.

Let me tell you about tick size, for one thing. Basically, before April 2001, all stocks on the U.S. exchanges were traded in fractions of either ⅛ or 1/16. What that meant was that stocks trading at ⅛ spreads had a 12.5-cent spread, while those at 1/16 had a 6.25-cent spread. Not very conducive to computer trading. On April 9, 2001, all stocks above $1.00 began to trade with 1-cent increments. Which means that stocks that used to have 8 price points or 16 price points now had 100 different price points. Decimalization was upon us.

Not everyone was happy about it. Lots of market watchers and traders complained that the move forced people away from small-cap stocks to large-cap stocks and long-term holds because the spreads on small-cap stocks got so small.

What does that mean for today? Well, the SEC has picked 1200 stocks to participate in a tick pilot program, where in October 2016, all those stocks began trading at a minimum of 5-cent ticks. The spreads got a little bigger and the theory is that investment banks might get back into the game of actively making markets on these stocks, which would improve liquidity.

The first responses to the program have noted that it has reduced volatility in the small-cap markets. Which can be good for large investment banks that want to get involved, but, maybe not so good for day traders that make money off big daily movers in the markets.

To understand more detail about the tick pilot program and the 5 cent tick pilot, go to http://warriortrading.com/5-cent-tick-size-pilot-program/. It has a long history decimalization, the reactions to it at the time and the run-up in this decade to the SEC studying a tick pilot program and implementing a solution.

XTrade Europe and Impact of Trading Platforms

Forex trading was extremely difficult in the past. Just a few people really understood what was going on the global market back then. It is not surprising. We just have to understand that Forex market (the same as other forms of online trading) was particularly “designed” for big financial institutions and other big global players. In other words, it was not so popular among private investors. Everything has changed with the expansion of the Internet and appearance of various online brokers. Today, it is one of the most popular online businesses, with more than million active “members”.

The thing is that everything is far easier today. We do not have to visit or even call our broker if we want start trading. Everything can be done from the comfort of our home these days. You want to buy Euro or US Dollar? Fine! Just press a few buttons and these currencies will be added to your portfolio.

The Platforms For Trading by XTrade Europe

Besides the Internet expansion, among things that really made trading easier are trading platforms. These modern trading platforms are user- friendly and can be used without any previous experience and knowledge. Of course, you will have to take some time and learn the basics, but almost all of them are designed in a way to be easily used by complete newbies. For example, XTrade Europe offers a platform that can be adjusted to almost all our trading needs and plans. There is no need to waste your time on looking at the irrelevant information. Just choose options you want and enjoy. These platforms will provide you exactly what you have specified.

One of the best things about modern online trading is that you do not have to be physically present at your home or office. In fact, you can buy or sell your assets from any location on the planet. The only condition is having an access to the global net. This means that you can use XTrade Europe trading platform and access the global market not only from your PC, but also from smartphone or tablet. Working while traveling around the world is not the privilege of chooses ones anymore. It also can become your reality. By opening account at XTrade Europe, you can start living your dreams.

What Are The Costs?

But how much does it cost? If you open your trading account and deposit a small initial sum, you will get it for free. Yes, you heard it well. You will not have to spend a dollar on these high-end trading platforms if you choose appropriate online broker. After you register your account, you will be able to download your own copy and use it without any restrictions.

We already said you can use these platforms on your PC, tablet or smartphone. And this is not all. Almost every broker has specialized versions particularity designed for different operational system such as Windows or Mac. The same is with mobile version. Just think which version would be the best for you and your trading strategy. After this, only the sky is the limit.

Dow Jones – Trade this Index the Right Way

The idea behind the development of indices was initially to provide benchmarks in order to enable investors to have a more efficient evaluation of its components. By comparing the performance of your selected security to the index, which gives you the average performance of its components, you are able to establish how your chosen asset shapes up against its peers. When we talk about the Dow Jones, we are generally referring to the Dow Jones Industrial Average or DJIA, the second oldest index around, the oldest being the Dow Jones Transportation Index.

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The Dow Jones is a price weighted index which means that it tracks the price changes of its components, unlike an index such as the S&P 500 (SPX) which tracks the market cap of its components. The Dow Jones Industrial Average is also no longer representative of purely industrial securities, but comprises 30 blue chip securities selected by the editors of the Wall Street Journal. There are no set rules for selection as a component of the DJIA, other than that they should be large, and respected enterprises representing a significant portion of the economic activity of the United States.

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Trading the Dow Jones Index

Because the Dow Jones is comprised of the relatively small number of 30 securities, big price movements by any one of its components has an exaggerated effect on the index which has often led to many investment professionals considering it to be a volatile index, risky for investment. This volatility in itself provides investment opportunities, firstly, by using Dow Jones linked exchange traded funds as an investment vehicle and secondly, as an underlying asset for binary options trading where brokers, such as  Option.FM, provide investors with excellent trading opportunities.

 

The companies that comprise the Index are probably 30 of the strongest companies on the New York Stock Exchange (NYSE) and as such, there is very little business risk attached to investments although their stock might be subject to intense fluctuation over short periods. These fluctuations in turn reflect on the Dow Jones, which as an investment vehicle replicates the volatility of the Index which can also experience short term gains and losses.

 

Other index based investment vehicles include index mutual funds, index linked notes and bonds, and index options contracts or futures contracts.  While mutual funds are a managed investment, the others are far more complicated investment vehicles. We will examine exchange traded funds and binary options as index based investment products.

Exchange Traded Funds (ETF)

While many investors opt for managed mutual funds where investment professionals invest in selected individual securities, investing in index funds gives you the advantage in that you have an investment that includes all the components of the index without any of the costs involved in mutual fund management. The absence of any costs when trading in ETFs gives you an immediate advantage over mutual funds where you would have to pay management fees. Another advantage over mutual funds is that ETFs allow you much more flexibility as well as giving you more options and leeway when dealing with volatile market conditions. ETFs are a well-considered investment product because of the fact that they trade on a real-time basis and so they have a low tracking error relative to the index. Other advantages attached to ETFs are that you are able to hedge them by using Call or Put options and they can also be sold short. Most importantly, exchange traded funds can be leveraged which means that your actual cash amount laid out does not have to be very large.

etf

You are able to employ a protective Put strategy by taking a long position and purchasing a Put option on the same ETF. This strategy pays off when the Dow Jones goes up and protects your funds if the Index falls.

The opposite scenario of the above means that you can sell short the Dow Jones ETFs and buy Call options on the same underlying ETF. You will be ‘in the money’ if the Dow Jones goes down, while your investment is protected in the event of an upsurge in the index value.

Binary Options

The very nature of binary options trading, in which the investor or trader is dealing with price changes over specific time periods, makes the use of an index such as the Dow Jones, with its potential for volatility, an excellent underlying asset for binary options trading. Despite the volatility however, the DJIA does not generally exhibit accentuated peaks or troughs, but tends to move in a smoother pattern. The other feature of the Dow Jones is that it generally maintains an established trend for longer periods which reduces price directional risk when used as an underlying asset. This makes analysis much less complicated and enables you to benefit from an established trend which you can expect to be maintained for some time.

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Conclusion

By trading ETF’s that are tied to the Dow Jones Industrial Average or by trading binary options with the Dow Jones as your underlying asset, you start gaining a greater in depth knowledge and understanding of the components of the DJIA. In this way, you will begin to increase your knowledge of the market generally and should become a better-rounded investor which can only be to your advantage.

Culture, the Unquantifiable Factor that Makes a Big Investing Difference

Trying to figure out which companies will yield excellent returns over the long haul certainly isn’t easy, even though your average investor certainly looks for those that will outperform.

One of the most intangible assets about corporate foundations is culture, and knowing the culture of a corporation can give you a powerful and competitive advantage that can provide a significant edge over other investors.

Here’s the problem however; grasping exactly what culture means is quite difficult. Many experts will tell you that one of the most important factors about culture is simply how the management at a company interacts with its employees, and vice versa. Another is “stakeholder friendliness”, and, simply put, the corporations and companies that take care of their stakeholders, as well as take care of the world around them, usually have employees that are happier because they feel better about what they’re doing.

Culture is difficult to quantify, to say the least, and that’s why many investors tend to dismiss it. You can’t break it down in a financial statement and, frankly, it’s more art than science, but ignoring the role of culture in the overall equation can be a serious investing mistake.

How to find companies with the best culture

One of the resources that many investors use these days to determine a company’s culture is the annual Best Places to Work rankings from Fortune magazine. It makes sense that happy employees who are pumped up about the company that they work for will help that company transcend paychecks and time cards.

Don’t forget that intangible factors like so-called “goodwill accounting” aren’t exactly unknown in the investing community. Goodwill accounting takes intangible assets on company balance sheets and gives them a value and, while it’s been argued for years about how to treat these intangible assets, their value can’t be dismissed.

Goodwill also strengthens a brand or a company over their rivals, as their cultural policies impact consumers who see them as more socially responsible and thus tend to purchase more from those companies. .

One mistake that investors continue to make however is that they assume these goodwill companies, who have more expenses because they are taking better care of their employees, customers and suppliers as well as the environment, are doomed to underperform. While this isn’t always the case, it’s difficult to prove that it isn’t in the eyes of many investors.

Culture certainly isn’t the only factor that will lead to outperformance, far from it. Even some corporations that have a truly fantastic culture can, if mishandled, still fail. A company that uses an improper strategy, for example, doesn’t innovate or takes on a debt load that is too heavy can have an incredibly marvelous culture but still not be successful.

That being said, the fact is that how consumers feel about a company or corporation have real-world effects on their success, and any investment philosophy must take into account the risk that a negative corporate culture can have. An area like employee satisfaction might go unnoticed but it can most assuredly decide a company’s fate.

In the end, an investor needs to be both artist and scientist when it comes to figuring out there investing strategy, and melding the two is a very good, albeit difficult, way to be successful. When you’re looking for excellent long-term returns, the art of investing is nearly as important as the science, meaning that it’s not a waste of time at all to focus on corporate culture. In the end, a positive culture helps to build a strong foundation and excellent,