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Tuesday, June 21, 2005
Market Recap
A mixed market today with the indices barely moving at all. The DOW lost 9 points, the NASDAQ gained 3 points, and the S&P lost 3 points. The 2100 level on the NASDAQ is proving to be a stone wall. The NASDAQ is having trouble getting through it but the good news is that the markets are holding up well in the face of this resistance rather than crumbling down and reversing. This means that there are no sellers wanting to lock in profits. If the indices can hold up here and build a nice base, it could explode up when this 2100 level on the NASDAQ breaks through. When we do break through, watch the volume, and if it is not strong, it could be a fake out. Keep in mind that everybody and their brother is watching the same level so it could get tricky. The logical thing for the NASDAQ to do once above 2100 is to breakout but, as we have seen before, when everyone is expecting the same thing to happen, the market has a way of making the majority wrong and acting illogical at times.
Never Doubt Yourself
This thing called trading is pretty simple. You find yourself a chart pattern that presents good odds of producing a gain and then you take a position and wait for the pattern to produce the expected gain and you profit from it. Nothing to it right? You wonder why most people fail at trading when it is such an easy thing to master. It sounds so simple yet is so difficult to achieve.
During the long and difficult process of learning to master our trading, every trader will reach a stage where they will begin to doubt themselves and their abilities. This has happened to all of us at some point. This self doubt will come during a streak of several losses in a row. At times these losses are produced by a faulty use of a certain strategy but they are also produced at no fault of the trader. By this I mean, a little bad luck can result in losses and it is not the fault of the trading system used. A good example of this is the RADS gapping down on us yesterday. These losses can be produced because of simply bad luck, even if the trade was a well placed entry. In some cases it will just be the product of bad timing caused by some unpredicted economic or geopolitical event or a news release from a particular company. In any event, the trader will begin to doubt their abilities to enter and produce a winning trade or even to execute stop loss orders fearing another loss.
Consistency is Key
For example, let's say, due to inexperience or maybe a faulty use of a learned strategy in the wrong market conditions, or just as consequence of odds, you have 4 or 5 losses in a row. Emotions start to take over and you fail to stick to your plan. The next time a trading opportunity appears, you may let it pass since you may be afraid of having another loss on top of the prior losses. But what happens most often, is that this one trade happens to work out as you expected it would. So does the next couple in a row. This is because you have a sound trading strategy but because you are in a slump, you are afraid to trade. You have looked at what would have been, if you had only made the trade and now you gather some confidence. You now have enough courage to trade again and you take the next entry but this one fails and you now have another loss. If you had taken the 3 in between, you would have had 3 out of 4 winners.
The point I am trying to make here is consistency. You have to be consistent and trade your plan. Do not pick and chose what trades to take. If your possible trades fit your criteria, then you should trade each and every stock that meets that criteria. This is the consistency needed for a winning system. If your criteria is causing too many possible trades, you should then narrow the criteria to pick up only a few and then trade those few. It is like playing Power Ball half the time. If you only play every other week, would not you just get sick if your numbers come up on the week you did not play?
Time is Gold
The above example has several obstacles that you must overcome in order to become consistent. The most important obstacle is the understanding that each trade is just a part of the big master plan in a life time of trading activity. When you look at 4 or 5 losing trades in a row as part of the larger plan, these few losers would not seem so bad in the grand scheme of things. If after a decent amount of trades, say 30 or 40, you have discovered that you have had a large percentage of losing trades then you should evaluate the system and admit that it needs to be refined. Even the most astute trader will have several losing trades in a row. In order to figure out the odds of a new strategy, you must give it enough time and enough trades to figure out if it will work or not. We cannot judge a trading system on just 3 or 4 losing trades. Give your system some time and trade with smaller size blocks of shares at first while you are testing and refining your system. Once you have developed a winning system through your back testing, then you can increase the size of your trades. Always remember, there is no rush, the market will always be here so you have time. Time to perfect your system while conserving your cash. Then, after you have mastered the market with a proven trading style and plan, you will have plenty of cash to put to work and the possibilities of future wealth are unlimited.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts Listing
Please vote for us once a day at stockcharts.com.
http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting.
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