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Tuesday, September 27, 2005
Market Recap
A mixed market today that saw the DOW gain 12 points, the NASDAQ lose 5 points, and the S&P trading flat once again. Not much excitement these days but there were some bulletin stocks that moved up well today; HOLX, NGAS, NWRE, AMLN and CERN to name a few. The Day Trade watch list from the pre-market alert had some good movers as well.
Tonight I would like to share an email that I received from a member, name withheld, of course. My response is below. I am sharing this with you tonight because he brings up a great point and I think all could benefit from his request. I think that my response may be of help to many of you who are in this same situation. In my response I did not add the examples but I will do it here so that you will know what I am referring to.
Email
Dear Dave,
Over the past few years, I have learned a lot from you. The more I trade, the more I do not seem to be making money. I would win some and lose some. I know that these past two years were very hard to trade. Most of the swing trades are from the bulletin and some from mine. Maybe I am not seeing the right thing or am learning how to trade the wrong way.
I am at a point in my life that I must decide if I want to continue trading or find another job. I was selling real estate but since the beginning of this year, I have stopped. What am I to do, Dave? Do I need to erase all that I have learned about trading and start over paper trading until I get it? How do I know when I have got it? I know you probably went through this before. I see what you show but I do not know if I truly understand it to be successful. Would you help me Dave? I want to keep my dream alive. What homework can you give me to make me a better trader and see what you see?
Response
I would hate for you to have to go get a job. Although trading is difficult, and one of the most difficult ways to make a living, it becomes almost easy to take money out of the market each day, once you have a system that works.
Here are a couple of suggestions. It sounds like your problem has been "when to sell". If you follow the comments in the bulletin and enter the stocks at the buy points, you should be okay, as long as you lock in the profits and do not let them slip away.
As a swing trader, try to stay in a stock for at least 3 or more days in order for the trade to work. But if there is a big gain the first or second day, lock it in and forget about holding it.
If you choose to day trade, narrow your stocks to just a few that have a large trading range daily. You cannot day trade stocks that move less than 50 cents a day, it is very hard to make a living with such small moves. Pick 6 to 8 stocks and stay with them. Learn trading patterns of those stocks like the back of your hand and day trade only those. Do not day trade any others until you are successful with those few. Once you are successful with those few, you would not want to trade anything else anyway.
As these 6 to 8 stocks slow down and do not have such a wide range, you can rotate them out, one at a time for new stocks with wide daily trading ranges. Over time, you will rotate these stocks and your list will eventually change to include the hottest stocks during any particular time. Right now for example, my day trading stocks include: NTES, ISRG, GOOG, HOLX, MYOG and MNTA. Those are the ones at the top of my day trading screens right now. Over time, these stocks will slow and new stocks will replace them.
Lastly, trade with only a small portion of your capital to start with. A small amount of shares and keep track of your trades using a trading journal. Document why you entered the trade and why you sold. Review this journal each week on the weekends. After awhile, you will discover that you are making the same mistakes over and over. Then you can eliminate those mistakes by simply not doing the things that you are doing on your losing trades. You will also find what you are doing right and you can do more of that. By eliminating the mistakes and concentrating on the techniques that are working for you, your trading will dramatically improve. Once you start trading well, slowly increase the amount of shares you trade and the capital at risk. It will take time to be successful but it can be done if you are patient and determined to learn.
Examples of My Trading Journal
Ticker - KOSP
Shares - 500
Date Open - 6/30/2005
Price Bought - $62.20
Cost - $31,000
Date Closed - 6/30/2005
Price Sold - $64.45
Proceeds - $32,225
Net Gain - $1,125
Reason for Buying - Intra day pullback to 20 EMA
Reason For Selling - Fed rate hike. Did not want to give back intra day profit. Stock closed at 65.50 and ran to above 70.00
I will not list all of the trades but by listing one above, you can see my format. However, I will list a variety of reasons below of why I bought or sold because I believe the reasons are what is most important. Below are other reasons for buying and selling taken directly from my trading log. These are comments from actual trades that I have made and taken from my trading log so you can see what reasons I had for both buying and selling.
Buy = Market closing strong need to be long. Stock At HOD.
Sell= Stopped out. Stock fell big after stop filled.
Buy=Flag on pole, looks ready to breakout.
Sell=Trailing stop protected profit.
Buy= Bounced off 9 ema day before. Late entry on the bounce.
Sell= Stopped out below yesterday's low.
Buy=Bought break above base. Light volume.
Sell=Fell below 20 ema. Had to sell it.
Buy= Breaking out of base in strong biotech sector.
Sell= Not moving, Time stop.
Buy=Bounced off 9 EMA after pullback from big move up.
Sell=Trailing stop hit protected profit.
Buy=Bought near support and 9 ema.
Sell=Failed to bounce off 9 ema stopped out LOD.
Buy=Bought near 9, same pattern as IPII and DSTI big bounces.
Sell=Failed to bounce stopped out LOD.
Buy=Breaking above a flag.
Sell=Sold for profit, stock extended.
Buy=In Flag and bought before it broke out above flag.
Sell=Fell from flag, bought too early, stopped out.
Buy=Breaking out from long base pattern. Bought new HOD.
Sell=Stopped out, no follow through buying.
Buy=Breakout of H&S neckline and C&H on the monthly.
Sell=Shook out like an idiot. Stock closed near HOD.
Buy=Bottom of Flag and was trying to bounce.
Sell=Stopped at LOD.
Buy=Bounced of 9 EMA.
Sell=Stopped out, protecting gain.
Buy=Played bounce off LOD.
Sell=Sold before close/earnings. Down $2.50 AH.
Buy=Nice triangle ready to breakout.
Sell=Stopped out protecting gains.
Buy=Bought bounce off LOD, over sold.
Sell=Stopped out protecting intra day profit
Buy=Added to position on breakout.
Sell=Sold when new breakout position failed.
Buy=Breaking out right at the close. Bought in AH.
Sell=Not moving like breakout should. Closed trade at breakeven.
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
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