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CAN SLIM ®, Supply and Demand Our study of the greatest stock market winners validates what most investors understand.when demand for a stock outpaces supply, the price usually heads north. The best way to measure a stock's supply and demand is by watching its daily trading volume. When a stock rallies up in price, you want to see volume rise at the same time, which may represent institutional buying that can really power a stock's move. When a stock pulls back in price, you want to see volume dry up indicating no significant selling pressure.

Online Trading Stock And (AXcess News) Columbus, OH - A couple of university professors say they think they know why stock prices show strong momentum - the tendency for prices to continue in the same direction -either rising or falling, based on a study they conducted of investor psychology which they found plays a bigger role than you'd expect.

As an informed investor, your first question should be the price at which the stock was purchased. Frequently stocks are purchased by new investors during an upswing with a subsequent decline anticipated by all but the most novice investor. More than likely they heard the stock was hot and jumped in with the full expectation of the stock going up in value even further. Instead, the stock reached its resistance level and turned downward. No big surprise.

Stock Investing Course While stock analysts and researchers have long known about stock momentum, there has been debate about what causes it, said Bing Han, co-author of the study and assistant professor of finance at Ohio State University's Fisher College of Business.

Stock System Trading "We found that it is a type of psychological bias on the part of many investors that seems to drive momentum," Han said. "Investors tend to hold on to their losing stocks too long and sell their winners too quickly. This triggers momentum."

CAN SLIM ®, New Products, New Services, New Management, New Price Highs Explosive stock growth doesn't happen in a vacuum. Usually, new products, new services, new management or new industry conditions propel stocks to new heights. In its study of the greatest stock market winners, IBD discovered that more than 95% of the successes in American industry met at least one of the above criteria. And, contrary to the beliefs of many investors, stocks that make the biggest price advances start their moves when they are already at or near new price highs. By following the old adage, "buy low, sell high" investors would have missed out on most of the biggest stock successes in market history.

Stock Investing Game Han conducted the study with Mark Grinblatt of the University of California at Los Angeles. Their results appear in a recent issue of the Journal of Financial Economics.

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Market Stock Trading The tendency to hold on to losing stocks and sell winners is called the disposition effect, Han said. If many investors fall prey to this type of bias, it will affect stock momentum.

Online Stock Trading Canada What happens is that the stock price for a company may go down because of some bad news about the company. But many investors don't want to sell their stock at a loss, so they hold on, hoping the price will rise later. But if too many people hold on to their stocks, that means the stock price does not accurately reflect the bad news about the company.

Stock Investing Basics This prompts some investors, noting that the stock is overvalued, to "short sell" the stock, betting that prices will fall. This cycle continues to push prices of the stock down, creating a momentum effect.

Day Online Stock Trading A similar situation occurs when a stock is rising because of good news for a company. Many investors may decide to sell the stock quickly, to capture the gains before prices fall. But if they sell quickly, the price may not rise to the level it should, based on the good news. This will prompt more investors to buy the stock, creating upward momentum in prices.

Online Stock Trading Game "The disposition effect plays a very important role in explaining this stock momentum," Han said.

Stock Investing Software Most momentum investors measure momentum by comparing a stock price today to what it was at a point in the past, such as six months or a year ago. If the price is higher now, then the stock has upward momentum; if it is lower then the momentum is downward.

Online Option Stock Trading But if investors are swayed by the disposition effect, Han said the important issue would be to compare what the price is now to the price an investor paid for it - whether it was three months ago, a year, or 10 years ago.

India Online Stock Trading "There's nothing special about a stock price six months or a year ago. Investors want to make sure that the current price is high relative to what they paid for it," Han said.

Stock Investing For Dummy To test their theory, the researchers examined all shares traded on the New York and American stock exchanges between July 1962 and December 1996.

Software Stock Trading Han and Grinblatt developed a complex statistical model that allowed them to calculate the average price investors paid for each stock, and compare that to prices at later dates. In that way, they were able to see how the disposition effect was related to stock price momentum.

Online Stock Trading Review The results showed that their model was a better measure of momentum than other, simpler models.

Stock Investing Tip "We now have a better idea than ever before about what is driving stock price momentum," Han said.

Comparison Online Stock Theoretically, with the information in this model, investors could measure price momentum more efficiently and earn more in the stock market, Han said.

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