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Monday, September 12, 2005
Market Recap
Not much action in the indices today but many stocks were on the move such as GOOG, NTES, BIDU, REDF, RTSX, LIFC and CELG, just to name a few. Four of these big movers came from our Day Trade Watch List posted before the bell on our message board and all could have been bought near the open with very small or no gaps. Internet stocks were on fire today as oil stocks retreated. This is not the end of the oil stocks; they are just pulling back a bit which is only natural and healthy after their big runs. Meanwhile, the indices barely budged while these stocks were making big moves. The DOW gained 4 points, the NASDAQ gain 7 points and the S&P was down a fraction. As mentioned in last nights update, the market is heading into resistance levels near the highs of the year and will need a big volume day to punch through those highs. If it cannot not get through and make new highs, the danger will be a reversal. Therefore, be on your toes with tight stops on your open positions. You must stick with your trading discipline at all times and especially when markets are near making double tops. Last week we mentioned that we would have a commentary on trading discipline, we did not get a chance to have that as planned but we have that for you tonight.
Trading Discipline
Tonight we identify some steps to do right now to make you a stronger person and a better trader.
1. Develop Consistency - You can create a mindset of consistency by developing beliefs which support you in obtaining this result. In order to develop consistency, there are a number of things which you must do: identify your edges, define the risk in each trade in advance, accept the risk, and exit a position quickly when the desired movement in the stock does not happen. These key mindsets will help you in taking a trade, managing the trade and executing the exit.
2. Trading is a probability game - You cannot be a perfectionist and expect to be a great trader. The fact is, even the best traders have many losing trades. Nobody can win on every single trade they make. Knowing this is a very important step to becoming successful. Your losses (that you hope will return to breakeven) will wipe you out, if you do not cut them short.
3. Jumping in too soon or getting in too late - These mistakes come from traders not having a well defined plan of how they will enter a trade. Unplanned trades are nothing more than reactive instead of the much preferred proactive trade. Reactive trades increase the level of emotion and we all know that trading on emotion is very dangerous.
4. Not taking profits on winners and letting winners turn to losers – Again, this is a function of not having a properly thought out plan. Entries are easy but exits are hard. You must have a plan for how you will exit the trade, both on your winners and your losers. Then execute that plan precisely.
5. Great traders do not place their own expectations on to the market's behavior, whereas poor traders expect the market to give them something. The market does not know who you are and owes you nothing, period. A trader can only take what the market gives. Poor traders try to take what is not there and end up forcing trades at the wrong times.
6. Emotional pain comes from expectations not being realized - When you expect something and it does not deliver as expected, disappointment is imminent. By not having expectations of the market, you are not setting yourself up for this inner turmoil. The market does not inherently generate pain or pleasure; the market only generates upticks and downticks. It is how you perceive and respond to these ticks that determines how you feel. This perception and feeling is a function of your beliefs. You should not feel pain if a loss is a result of following a disciplined plan of action. However, if you feel pain for a loss that occurred as a result from a deviation of your plan, you should be feeling the pain and the only way to correct it is to get back to your plan.
7. The Four Major Fears - Fear of Losing Money, Being Wrong, Missing Out, and Leaving Money on the Table. All of these fears result from thinking you know what will happen next. Your trading plan must approach trading as a probabilities game, where you know in advance that you will win some and lose some, but that the odds will be in your favor over time. If you approach trading thinking that you cannot take a loss, then take three losses in a row (which is to be expected in most trading methods), you will be emotionally devastated and will give up on your plan.
Trading is a nothing more than chance. It is a game of probabilities and to be a winning trader, you must have the discipline to only take the trades that give you the highest probability for success.
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
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http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting
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