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Tuesday, October 18, 2005
Market Recap
Today the San Francisco Fed Governor Yellen was quoted as saying “the main risk to our economy is housing prices” and called housing a “bubble element” of the economy. Shortly after her statement housing stocks took a dive and the market started to drift lower with selling accelerating in the last hour. The Dow lost 61 points, the Nasdaq was down 14 points and the S&P lost 12 points. All three closed at the low of the day with volume heavier then yesterday for the Nasdaq.
We cannot get excited about this market on the long side right now with bear flags all over the indices along with many indexes and individual stock charts. We have these chart updates for you tonight so you can see why we have been bearish lately and non-believers in the pitiful two day rally that started last Friday. We are beginning to see some very bearish set-ups from which to trade. Many of the stocks we want to short have earnings due soon and we do not want to hold these positions through earnings so we are shorting stocks that do not report earnings for at least a couple of weeks from now.
After the bell, INTC and YHOO reported earnings and both are trading down in after hours trading. It will take some incredible earnings to move this market up and I do not think we will see enough great reports to do it. It will most likely be a “sell the news” scenario when earnings are good and “Oh crap” when earnings are bad. Under these circumstances, there is no way to win holding any stock long through earnings.
The Paper Trade Part 2
While many people will refuse to take the step of paper trading while they are learning to trade, this step is a very important step for beginning traders. Although there is a downside to paper trading, it is still a great learning tool to use. The downside to paper trading is that emotions are not involved so it cannot accurately gauge whether you will be come a good trader when real money is on the line. Your paper trading results will in no way reflect or predict what you will be able to make in real money. However, what we want to point out to new traders is the other side to the coin here. If you cannot make money on paper first, you most likely will not make money when your real money is on the line. In other words, why not give yourself the test first. If you pass the test paper trading, then you can at least go to the next step, real money on the line with limited shares to first get started. If you do not pass the paper trade test, then you are pretty much guarantied failure when you put real money into your trades. Why waste money learning what you could learn for free on paper? Paper trading is the time to perfect your trading plan, improve your money management program, and prove to yourself that you can execute automatically, without hesitation.
If you pass this test, the next step is to move up to trading with real money, but as mentioned above, with only a very small risk amount. At this step, a couple very important things will happen. First, your results will probably be worse than those of your paper trades. Why? Because you will no longer be faking the entries and exits. In real trading, there is no going back and putting in the 'pretend' number. The entries and exits will be real, they are locked in stone. When you refuse to stop out because you have lost real money, you will hope for a bounce that may not come and instead, the stock will head lower resulting is a bigger loss. In that same paper trade, you have no problem stopping out because, it is not a real loss and you are not emotionally attached to the trade. On the flip side, you may let a good winning paper trade run, because selling for a small profit is not really a profit to you where as, in real money terms, you may want to lock in the small profit when you have real cash on the line instead of letting that winner turn into a big winner.
The second step in the learning process after the paper trade is trading with real money but with fewer shares then your paper trading plan called for. In other words, this training period should include trading in say no more than 30% of the amount of shares you would buy normally. This step alone can save you a ton of cash as you begin your trading career. Commissions nowadays are very low so it costs the same whether you trade a few shares or a lot of shares. In this step, the commissions will cost you more in relation to your returns simply because you are trading fewer shares but you must realize that commissions at this point are a learning expense. At this point in your training, the goal is to see if you are trading well enough to increase the share size. Not to actually profit yet so saving on commission costs is not the priority.
Here is a test you could do while in this second step of your learning curve (trading small amounts of shares): After trading with limited real cash on the line after you have successfully passed the paper trade test, using your real money trade figures, go back to your paper trade record and refigure your real trade record bottom line using the shares size that your paper trading plan called for you using. This should be equal to the amount of shares you plan to trade 'someday' when you are ready to be a full time trader. If the increased share size results in a profitable bottom line, then you are proceeding on course. If you are not making money when you use the paper trading figures, then do not proceed to increase your real money share size until you are making money. If you follow these steps, it will be difficult to lose large sums of money while you are in the learning process.
Stock charts listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting
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
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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