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Monday, October 10, 2005
Market Recap
It was a slow day on Wall Street as many traders decided to take Columbus Day off. The markets did not do much of anything and there were very few stocks worth trying to trade. Movement was lackluster until the end of the trading day when stocks started to drift south. The indices finished the day at the session lows with the Dow dropping 53 points, the Nasdaq down 11 points, and the S&P down 8 points. Tomorrow, when traders get back to business, we will see which mood they are in (buying or selling). Nothing has changed from yesterday's report. The indices are still in the middle of some technical damage that will take a lot of work to fix. Maybe earnings season can go along way to fix it but I would not bet the farm on that idea.
Trading with the House's Money
Trading is all about finding quality charts with great setups, acutely managing risk with stop losses, and managing the portfolio of stocks you currently have open positions on to get the most possible gain out of each trade.
Novice traders on a winning streak get cocky or complacent thinking they are better than the market, and because of this winning streak, they feel they cannot be beat and start to over trade (greed) and justify entering poor quality setups. Because they are ahead, they think this profit they have accumulated is the “house's money” and not theirs. They justify poor management of open positions, on the basis that the gains are not theirs – it is free money, profits from the house like a gambler would think of it as. This gambler's mentality has no place in trading.
Open profit and loss is realized by a simple click of the mouse to close the positions. So if you have a profit, it is YOUR money, NOT the house's money! Think of it this way: if you have a loss, it is YOUR loss, NOT the house's loss right? If the loss is not the house's money then how can a profit be? I like to lock in profits as much as I can. I may take profit too early in many cases but at least it is a profit. I am not taking the chance of letting that profit slip away and be reduced to nothing or even a loss. It is your money at risk; it is never the “house's money”.
Novice gamblers who have quickly lost money they had just won are familiar with this phenomenon. They do not really care they lost it because they were playing with profit (house money). Some traders have this mentality and it is the wrong way to think in my opinion. The danger of this thinking lies in the fact that people assume additional risk when they are in the green and have not yet perceived the gains as their own. They perceive this newly gained money as not really theirs yet but as money of the house. They subsequently take higher risks with the house money and endure losses more easily.
More Risk When Ahead?
Most traders take higher risk trades more aggressively after a positive winning steak. It is human nature, we all do it. We feel good about our trading and want to trade more while we are hot even if there is no compelling reason to take the next trade. It works in reverse when you have a losing streak. You end up gun shy and will not pull the trigger on a set up you find that you know you should be on like “white on rice” but because of your losing streak, you do not take the trade. You turn extremely risk-adverse after defeat, and turn extremely over anxious and more risk tolerant after success.
Each trade must be viewed independently, and start from an unbiased point of view regardless of previous gains and losses. Each trade should stand on its own merit. The last trade does not matter, it is over and we must think only about the next potential trade. If you are managing the trade correctly the amount of open profit or loss is irrelevant. Just plan the trade and trade the plan! But under no circumstances should you undertake this novice view that you are playing with the house's money, it is YOUR money at all times. Your trading is your business of generating consistent cash and you have to lock in YOUR profits when you have them.
STHQ Chart Index - If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this 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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For New Members:
For all 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 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. |
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