1.
Some traders consider trading as a sort of gambling. Without planning and calculations, they throw money at the market. They should distance themselves from gambling behavior. Why a scientific approach is applicable? Markets echo similar patterns over and over again. It allows identify reliable trends and select good trading vehicles.
2.
Think in terms of probabilities and act upon them.There are no certainties in trading. You can keep yourself out of trouble by thinking in terms of probabilities. Get comfortable with approximate predictions and interpretations.
3.
Hope, fear and greed are not strategies: they are emotions. Simple emotions are not an effective strategy. Positive emotions could cause us to fail to apply riskprecautions. Negative emotion could cause us to hesitate.
Trading is a psychological game. Most people think that they're playing against the market,but the market doesn't care. You're really playing against yourself.
4.
Prices have memory.
5.
Bulls live above 200-day moving averages, bears live below and try to eat up all rally attempts.
6.
Big volumes kill substantial price moves.
7.
Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
8.
Bottoms take longer to shape than tops. Greed acts more quickly than fear and pushes stocks to drop from their own weight.
9.
Losses are a simple cost of doing business. Don't try to justify a bad trade by convincing yourself that it will sooner or later turn into a good trade. Accept losses easily! Successful traders are able to ride through downturn periods. The confidence in their methods reassures them about their future success.
The markets offer endless and plentiful possibilities. Missed opportunities exist only in your mind. Prices keep changing and generate other opportunities. The goal of trading is make a net profit after a sequence of trades. It is, therefore, necessary to accept some losses and to look forward without punishing oneself.
10.
Don't be a hero. Don't fight the trend. Follow the money flow.
11.
Forget the news, remember the chart. The chart already knows the news is coming.
12.
Predetermine maximum losses in every potential trade. Do not risk more than 5% of your capital on any trade. Don't average your losses.
13.
Do not buy a stock because it is low priced (or sell because the price is high).
14.
Buy on rumors; sell on news.
15.
Trade active stocks, avoid thinly traded markets.
16.
Prepare your action plan before the market hours and follow it. Do not formulate a new opinion during market hours. Option trader must forecast for:
a price change in the underlying,
a change in implied volatility.
Option traders must understand and keep an eye on implied volatility. Implied volatility is the volatility percentage that justifies the option price and reflects the market's perception of the risk.
17.
Learn to monitor yourself and draw conclusions from your mistakes.
18.
Take a part of the profit to reward yourself.
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By Gareth Soloway on April 26th, 2010 11:42am Eastern Time
After being crushed in recent weeks, metal stocks like Southern Copper Corporation (NYSE:SCCO), United States Steel Corporation (NYSE:X) and AK Steel Holding Corporation (NYSE:AKS) are jumping. The fact that these stocks are getting a bounce is not surprising at all. They have all seen massive amounts of selling in the last couple weeks. The surprising factor is that with the market at the 52 week highs, these stocks have been sold so heavily prior to the bounce today.
The recent selling in these stocks makes me pause and just wonder if the recovery is all the markets think it is. Common sense dictates a recovery would be headed by a stock like Southern Copper Corp or U.S Steel.
When all is said and done, we will have to watch and see what type of bounce these stocks get. My thought process initially is to look for a bear flag bounce on them and then look for more downside. As they say, the trend is your friend. Should they eclipse the January highs, continued upside is likely.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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By Gareth Soloway on April 21st, 2010 12:08pm Eastern Time
The markets opened slightly higher, inching up throughout the morning session towards the 52 week highs. The SPDR Dow Jones Industrial Average (NYSE:DIA) hit $111.50, just $0.12 off the 52 week high while the SPDR S&P 500 (NYSE:SPY) hit $121.23, just $0.33 off the 52 week high. The tech laden PowerShares QQQ Trust, Series 1 (NASDAQ:QQQQ) hit the exact 52 week high at $50.19. The markets now sit back down on the flat line, barely able to hold any gains. The top is in on this market.
Why would I make such a statement? Mainly because of the price action we are seeing today off of earnings from companies like Cree, Inc. (NASDAQ:CREE), Yahoo! Inc. (NASDAQ:YHOO) and of course Apple Inc. (NASDAQ:AAPL). CREE and YHOO are seeing nice declines after reporting solid earnings but the real significant piece of data comes with AAPL. AAPL had unbelievable earnings and huge increases in sales of IPODS and IPHONES. However, the market is trading flat to lower. If Apple cannot prop up the market, what else can?
This seems like the first time in the last year where great news is not able to shoot the markets higher, especially from a company like Apple. I think this could be significant. Apple is the leader among leaders. It is up 5% on the day and the Nasdaq is flat. The price action speaks for itself in this Chief Market Strategist opinion. We will watch and find out in the coming weeks.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
To get more in-depth analysis, along with exact entries/exits, swing trades, and scalp trades, join our Research Center or Intra Day Stock Chat NOW and join the ranks of the Pros!
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