How To Stock Trade And Have An Advantage Over Most Other Traders

The NYSE (New York Stock Exchange) repeatedly called the senior exchange, partially because it has been the longest established stock exchange and partially because companies listed on that exchange tend to be among the biggest and most recognized corporations in the country.

Nasdaq, which has inferior standards for listing than the New York Stock Exchange, used to be thought of as an exchange for simply smaller, speculative companies. Although stocks of that nature continue to be set up in this trading sector, lately, major businesses such as Microsoft and Intel, among others, have preferred to remain on Nasdaq instead of seeking a listing on the NYSE. Several companies consider jointly listing on both Nasdaq and the NYSE. Although the number of Nasdaq's bigger corporations listed is ever-increasing, Nasdaq-listed companies, as a collection, tend to be more speculative, more technology leaning, and smaller in size than those listed on the NYSE. The total daily trading volume on Nasdaq, though, now regularly surpasses the daily trading volume on the NYSE.

Both indices tend to be intimately correlated in the direction. The Nasdaq Composite Index tends to rise and drop at rates that are between 1.5 and twice that of the New York Stock Exchange Index. Similarly, the Nasdaq Composite Index is expected to drop more rapidly than the NYSE during declining market periods.

Relative strength associations involving both indices are regularly affected by the nature of public opinion concerning the stock market. When investors are confident about the economy and stocks, they are more apt to place funds into speculative growth companies and to take risks with smaller, emerging corporations and technologies. When investors are moderately gloomy about the economy and stocks, they are more apt to cluster investments into more recognized, stable, defensive companies and to look for dividend return as well as capital appreciation.

The stock market produces larger gains during periods when the Nasdaq Composite Index leads the NYSE Index in relative strength. That's true not just of the Nasdaq Composite Index. The NYSE Index, the Dow Industrials, and the Standard & Poor's 500 Index all are apt to perform best during periods when the Nasdaq Composite Index leads the NYSE Index in relative strength. This is not to say that circumstances are automatically bearish when the NYSE Index leads in strength. Market action has typically been neutral when the NYSE Index outperforms the Nasdaq Composite Index. There are winning periods when the NYSE leads in relative strength. Nevertheless, these also are likely to be the periods when most serious market declines take place. Investments made during periods when the NYSE Index leads the Nasdaq Composite Index in strength are likely, on balance, to more or less just break even.

Here are the steps involved in creating the Nasdaq/NYSE Index Relative Strength Indicator. These are carried out at the conclusion of each trading week. When established, the signal of this indicator stays in effect for a full week, until the next computation takes place.

To construct the Nasdaq/NYSE Relative Strength Indicator, you need to divide the weekly close of the Nasdaq with the close of the NYSE Index. Luckily, we possess a tool that can automatically perform this for us.

Using Stock Charts website, you can break up two tickers by a colon to automatically divide the two. Enter $compq:$nya. Set the chart time frame on Weekly, and add a 10 period (week) moving average. That's it!

When the line moves up, the Nasdaq is outperforming the New York Index, and when the line moves down, the New York Index is outperforming the Nasdaq.

If the Nasdaq/NYSE Index relative strength ratio stands above its ten-week moving average, consider the Nasdaq Composite to be leading the New York Index in relative strength. This is the time to buy or go long. If the Nasdaq/NYSE Index relative strength ratio stands below its ten-week moving average, consider the Nasdaq to be lagging the New York Stock Exchange in relative strength, which means you ought to sit on the sidelines.

You should add this amazing trading technique to your munitions store.

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