Stock Trading with StockTradersPlace

Trading Research in Motion post Q1/2009

2009-04-04T19:41:00.002-04:00

Research in Motion (RIMM on the Nasdaq and RIM on the TSX) had its latest earnings announcement on Thursday, April 2, 2009 after market close. Results were good, having exceeded analysts expectations, so excitement and optimism are back in the air. The stock gained 19% on Friday. On Wednesday and Thursday, the stock had up-candle days in anticipation of the earnings announcement. Since Tuesday’s close, RIM has climbed from $54.49 to Friday’s close of $72.80 for a 33% rise.

I did my last day-trade on RIM on Tuesday which was a down-candle day. For once, I stuck to my rule of not holding a stock past earnings announcement. Therefore, I avoided trading RIM after Tuesday because I did not want to risk holding the stock. It was tempting as the stock kept rising. In retrospect, it would have been a good move to hold but I did not take the risk. There were also short positions held on RIM at the $54 level; look where they are now. It is not worth the risk, long or short, to hold short-term trading positions past earnings announcement. That’s my appetite for risk.

On Friday, analysts were busy changing their previous estimates on the stock and at least 10 analysts had either upgraded their recommendations or bumped up their price targets for the stock, or both. Oh, the life of an analyst, making such bold recommendations! Do something worthwhile such as performing due diligence prior to earnings announcement and make your recommendations before, not after, earnings announcement.

Research in Motion did a good job of managing expectations, even issuing a prior warning that they will come in at the low end of company projections. The reverse effect may happen here with analyst upgrades and good news all around propping up the stock price and keeping the momentum up. Are expectations being set up for disappointment?

I’ve taken RIM off my active trading list. I will wait a while to see where all this hype and euphoria settles, in terms of the stock price. In my view, it is extremely risky to buy after a 3-day 33% rise. Also, it is not a shorting opportunity as there is good news and momentum holding up the stock. After all, the company did perform well. I think upside is limited in the short-term. It may not drop off either. I think it moves sideways in the next little while, unless there are other dictating factors such as the direction of the overall market.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis. Use the buy/sell commentary to guide your trading decisions. Empower yourself to execute winning trades.

RIM Earnings Announcement after Market Close

2009-04-02T09:01:00.007-04:00

For once, I’m sticking to my short-term trading rule to avoid holding stocks across an earnings announcement. With Research in Motion (RIM on the TSX and RIMM on the Nasdaq) due to report earnings after market close today, it is time for me to trade something else.

Yesterday, I took RIM off my watch-list and stopped looking at the stock. Yesterday was a market rise day so I could have traded RIM but chose not to take the risk. In the past, I have day-traded RIM near earnings announcement time only to be caught holding the stock because I was unwilling to take the loss and held past earnings. And the last time that happened, I took a big hit with RIM tanking after earnings announcement.

Options trading in RIMM was heavy yesterday. If one is to speculate and take the risk, options trading is a good vehicle as it allows trading with limited loss potential. Strict adherence to stop loss on the stock is another way to contain the loss.

All the signs were there to day-trade RIM yesterday with the market rise and the increased options trading volume. The stock closed Wednesday's regular session up some 6%. However, I resisted and I will do the same today. Even if the market responds well to the earnings announcement and RIM takes a pop after today, my risk-reward management decision stands.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis. Use the buy/sell commentary to guide your trading decisions. Empower yourself to execute winning trades.

Comparing Day Trading with Other Trading Timeframes (March/2009)

2009-03-27T16:46:00.006-04:00

From March 10 to March 26 of 2009, the market indices showed a tremendous climb. The S&P 500 was up 22%. The DOW was up 21%. The NASDAQ was up 19%. The S&P/TSX was up 17%. As of the March 27 close, the indices have retreated, likely due to profit taking to lock in gains after the rise in the past couple of weeks. This may be a pause, or it could be the beginning of a trend reversal. We do not yet know.

I day traded 3 stocks on the TSX, employing long and short positions. I traded in 1000 shares of K (Kinross Gold) and TLM (Talisman Energy) and 500 shares of RIM (Research in Motion). The objective is to take price changes of $0.05 to $0.10 per position to yield $50 to $100 gains less $14 commission. My own rules are to take the gain if it is there. The shorter the time period, the better. Shortest duration was under a minute to buy, then sell a long position for an $86 net gain. Longest duration trade was held until the following trading day which is clearly not day trading! My rules are there for me to break and I ultimately have to account for my own actions and the resulting consequences. If I could hire a trader that follows rules without exception and whom I can trust to return gains of 15% per month, I would. Until then, I will have to do. Seriously, if I can only suppress my emotions and follow rules without exception, I would be far better off in trading performance.

From March 11 to March 26, I made 15% net gain in my margin account. For that same period, following candlestick technical analysis, StockTradersPlace showed a 22% gain in K, 13% gain in TLM and 17% gain in RIM. So, my day trading under-performed the short-term candlestick indicators as well as the indices.

I have stated this before and I say it again. If on March 11, I knew that the markets would go up by 20%, I would have entered into 1 trade on March 11 and sold out on March 26. Since we never know ahead of time how far a stock will climb and the precise timeframe, we resort to various trading techniques – day trading, short-term trading, longer-term buy and hold, options trading, technical analysis, etc. In retrospect, I can say that I under-performed with my day trading. However, day trading is a safe way to avoid the volatile inter-day price movement of stocks which is what an active trader has been facing prior to the recent run-up. Even during this run-up, you can see that it wasn’t an up candle every day. There were dips that suggested a reversal at a few points along the way.

For me, I will continue to utilize day trading along with short-term inter-day trading as per candlestick indicated trends. I utilize whatever works, including equity options in the future if and when I figure out how to succeed with that.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Trading Observations and Evaluation (March/2009)

2009-03-27T16:27:00.004-04:00

Caught in the uncertain and volatile markets of the past couple of months, I was finding it extremely difficult to yield consistent returns in short-term trading. My options included:

Getting out of trading (for now) and take a break.
Go with buy and hold strategy (at least consider it).
Go with equity options (to accommodate a dwindling capital base).
Go with day trading.

I stopped trading in my margin account for about 2 weeks until I realized that I need to finance my monetary needs. The risks and the losses were wiping me out monetarily and psychologically. Cash was safe but it guaranteed a zero return.

I reviewed my trading methods and strategies and concluded they were sound. So why was I not succeeding? The basic answer is that I was caught on the wrong side of trends as well as being subjected to the stock market volatility. And when I got into trouble, I would not take my losses early enough; I wait and get bigger losses, then I am left with no choice but to rationalize a paper-loss and wait for recovery. Most of these things are within my own control, so I need to shape up. The one area that is not within my control is the volatility. That is the market sentiment at the moment – too much uncertainty where news and rumor would drive the markets to swing in the opposite direction. You can try to react to the volatility (flipping trends) by taking early losses but the fact remains that the markets are volatile.

The thought of a buy and hold strategy lasted for a few minutes until I realized it just will not work. If I knew this is the market bottom and if I knew that we were entering into a long-term bull market, then sure, buy and hold and collect my profit a year from now. Nobody has a sufficient crystal ball.

I started looking at equity options and realized that there is way too much uncertainty and risk associated with options trading. The leverage is there for a big percentage gain requiring a smaller capital outlay – that is an attraction for sure. But the underlying requirement is to get the stock trend direction right. Just as easily as you can make the 50% options gain, you can lose 50% if you are on the wrong side of the trend. Oh, options have an expiry date so the options trader has time. That time costs you in terms of the erosion of the options premium due to the time component. And doing combinations (spreads and straddles) is complex and I’ve never been able to see the light on making them work. I have not given up on using equity options for stock market trading gain; I simply have not been convinced it is my best choice.

Then I got to looking at various sites offering services and systems for day trading as well as options trading. Both were inspiring with claims of 15% per month gains. That got me thinking about day trading since I was already staring at the real-time candlestick minute charts for my short-term inter-day trading. The only difference was to take as many gains as the market would give me with the view of taking $0.05 to $0.10 per position. On a 1000 share trade, that translates to $50 to $100 gain less the $14 commission to open and close a position.

Without getting into the nuances of day trading along with strategies and methods, I ended up making 15% net gain in my margin account from March 11 (after my 2-week break from trading) to March 26 (I was away from trading on March 27). I continue to crank the day trading machine to see if I get continued success in this volatile and uncertain market.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Ranting on Stock Market Day Trading (March/2009)

2009-03-27T16:18:00.006-04:00

With the month of March largely over, I want to describe my trading progression for the month. Near the beginning of the month, I read professional analysts saying it was time to sell as the market bottom has not been reached, with plenty of signs for continued stock market downturn. From an economic standpoint, some of that analysis had substance. From the candlestick technical analysis standpoint, I saw signs of a trend reversal. After all, the trend line is the life-line of my trading foundation.

Not to be deterred, I proceeded with caution, as always, especially with professionals saying “sell”. And I suppose they get hefty bonuses for what has turned out to be a wrong call. Oh, but the financial industry needs to reward risk taking – no risk, no gain; no pain, no gain. I need to find myself a job where I get bonuses for making the highest risk calls, no matter the outcome. To be fair, perhaps they meant in the longer term, the stock markets are heading lower and that March was just incidental. Or as some have said, a bear market rally.

I don’t directly pay for professional analysts recommendations although I do get reports from my brokerage company. And I can’t help but find the various freely available news and articles on the topic. And as time goes on, I continue to heed their recommendations less and less. They are wrong so many times, I am not sure if it is worth my trouble to even read their advice.

Well, I made a net positive gain on day-trading in March. I need rises and drops in the stock market to gain trading profits. I need price movement where I trade on the trends to make trading profits. I was long and short in three stocks to garner a 15% overall gain in my margin account. I tried to adhere to the day trading paradigm but at times I was left holding my positions on an inter-day basis. I should never have put myself in the situation of holding past closing but my reluctance to take the initial loss led to a bigger loss which finally led to holding past closing. Fortunately, because of the volatility (there were plenty of gap-up and gap-down scenarios), I was able to recover at or shortly after the open on the next trading day; from there, I continued my day-trading routine. I had losing trades which is how it should be if I am wrong on the direction of the stock price. The most important matter is to emerge with a net gain after all trades are tallied. My brokerage company appreciates the trading commissions.

Main lessons to be remembered:

Watch the short-term trend lines for price direction and movement.
Use the short-term trend lines as a basis for day-trading. If the short-term trend line shows upward movement, it makes day-trading a long position a risk-reward justified trade.
If you are wrong on the stock price direction, close the position and wait for another opportunity. Accept the loss. In day trading, there are plenty of opportunities to profit on the rise and drop of the stock price.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

IBM Acquisition of Sun Microsystems - Trading JAVA

2009-03-22T16:02:00.004-04:00

With the doubling of the JAVA stock price on March 18, 2009 based on a Wall Street Journal report that IBM is bidding to buy Sun Microsystems, and with the StockTradersPlace sell action commentary on March 21, one open question is “Should the stock be shorted?”. Here is where other factors have to be considered beyond technical analysis. With speculation that other companies such as Hewlett-Packard (HPQ) and Cisco Systems (CSCO), among others, may want to buy Sun Microsystems, a bidding war can emerge. For this reason, it is probably risky to short the stock at this point, although selling the long position holding is the prudent thing to do.

I continue to be amused by corporate acquisitions and the price paid for such actions. I was involved in such a scenario in 2001 (at the onset of the tech/telecommunications industry meltdown) where the company I was working for ballooned to 95,000 employees largely on the contribution of various corporate acquisitions leading up to year 2001. Today, that company has less than 32,000 employees and has filed for bankruptcy protection.

The previous paragraph was not meant to suggest a similar fate for IBM but was simply old memories coming to the fore as this Sun Microsystems acquisition is being reported. The price is high at $8B. There will be corporate culture clashes and integration issues, as well as clear conflicts in technology in terms of Intel and Advanced Micro Devices microprocessors used in IBM server products versus the Sun Microsystems SPARC architecture microprocessors.

And what is the latest craze with Sun Microsystems anyway? Well, Sun’s legacy is in engineering workstations and server products. But in 2007, Sun changed its stock symbol from SUNW to JAVA to clearly re-orient the company strength and leadership in the JAVA programming language. As significant as the JAVA technology is to the Web computing industry, one must continue to question how they intend to make money from this. As an investor/trader, that is the most important question to answer.

It will be very interesting indeed to see how this unfolds if IBM does end up acquiring Sun Microsystems. Will IBM then customize JAVA for its own internal purposes, thereby creating a potential issue with the open JAVA standard? How does IBM intend to recover the $8B spent predominantly on the acquisition of the JAVA technology which rightly belongs in the domain of open standards.

As an investor/trader of JAVA now and IBM now and in the future, the company fundamentals are extremely important to analyze beyond the technical analysis indicators. This is the time to avoid being over-focused on technical analysis alone.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Paper Trading versus Real Trading

2009-03-16T12:47:00.003-04:00

With nothing at stake, you can show that you are able to succeed in paper trading because the psychological element is largely held in check. Whatever trend following method and technical analysis indicators you are using, you are able to apply that without emotion. To the best of your preparation, you make a decision to enter a position. When you see your position is at a loss and is on the wrong side of the trend, you close the position. There is none of the psychological game that people use in trading with real money where they justify that it is just a “paper loss”. And if indeed you are on the wrong side of the trend, that paper loss becomes an even bigger paper loss and your next psychological play tells you to hold on to that paper loss until it recovers. Now you are losing to time and have become a longer-term trader than you first started as.

So, you have graduated from paper trading school. Your credentials are excellent. Your track record is very good. You have confidence that your methods and systems work. You have proven that you can exercise discipline. But will you be able to exercise the same level of performance in real trading? Will you be able to suppress your emotions when dealing with real money?

While talking to my son who is doing simulated stock trading in an accounting class, I learned that he was the leader in gains for the second-time running. In his short time with paper trading, he has very quickly learned the same things that took me longer to learn in trading with real money. I asked him how he made his entry point decisions and he said he looks at the general trend of the market along with the trend of the stock being traded. He has a general notion that the company behind the stock is on solid ground with good fundamentals. He does short-term trading. When he sees his position in the red, he sells immediately. When it isn’t that case, he is making money on his positions which he sells out quickly to take the gain.

Not meaning to stifle his enthusiasm with his great findings and conclusions, I pointed out that the psychological factor is what ultimately hinders trading with real money. When I told him that people end up in paper loss scenarios, he merely retorts in typical youthful fervor that it is just a cover-up for a situation that should not be. He logically states “just close the position and take the loss”. He is of course right.

When I made the point that emotions will get in the way when it comes to real money, and that it tends to be very hard to overcome ones own emotions, the next logical answer he gave me was “I can see myself going to the casino and winning at Blackjack and I would do that before stock trading with real money”. His point being that Blackjack is more calculated and deterministic. I am not conjuring up the notion of stock trading as being equivalent to casino gambling (although others may have done so).

Furthermore, I did not get into the discussion of the equal need to suppress emotions in casino Blackjack. But suffice to say, the psychological factor with real money must be kept in mind when transitioning from paper trading to trading with real money.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Paper Trading Preparation for Real Trading

2009-03-16T12:35:00.003-04:00

There are a number of Web sites out there that allow the prospective stock market trader to learn about stock trading through simulated transactions. Whether through the use of such Web services or simply by a person tracking “paper” buy/sell actions, this activity is generally referred to as paper trading.

I personally don’t like paper trading platforms that are termed as “games” as that sets the wrong tone at the onset. Stock trading is serious business and traders should get off on the right foot at the get-go. Platforms that are termed as “contests” (also misrepresentative) sets up the atmosphere of competition to provide motivation and provides a means of measuring success. They also provide incentive to visit, use and stay at the Web site. However, stock trading is not a competition with other traders; it’s an individual exercise to generate profits. Just because you are in the top-10 in the contest could still mean you have net negative loses. Be mindful of your objective which is to progress beyond the paper trading exercise and onto real trading. Stock trading game/contest Web sites can be so compelling and fun that you simply spend your available time staying there.

The paper trading exercise should be structured and carried out to replicate the real trading conditions and situations. You should practice on the stocks that you actually intend to trade. You should use representative capital so that you can get a true sense of your absolute gain/loss amounts (i.e. truly gauge risk-reward). You should use the actual methods that you will be using in real trading to determine trading decisions – fundamental analysis, technical analysis, trend following, entry/exit points, stop-loss points.

Another factor to keep in mind is the psychological element. In paper trading, you can turn out to be very successful because you are so rigorous in minimizing losses in losing positions. With nothing at stake, you terminate your losing positions early because you conclude that you made the wrong entry point decision. In other words, you are on the wrong side of the trend. In the extreme case, you can start over again with a fresh pot of capital. The important question to address is, will you be able to exercise the same level of rigor and sell losing positions early with real money?

If you cannot succeed in a paper trading exercise, it is likely that you will not succeed in real life trading. Therefore, as a first requisite step, find the proper methods to succeed in paper trading. If you succeed in a paper trading exercise, you may still struggle (i.e. lose) with real life trading due to the psychological factors associated with real money.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Day Trading Experiences

2009-03-13T23:19:00.001-04:00

The markets, prior to this past week of March 9, 2009, being stagnant or drifting down, made me think about even shorter-term trading as in day-trading. The motivation was that I wanted to see profits sooner rather than later (i.e. tired of waiting). I went back to my strategy to nickel-and-dime the market, literally as you will see.

With the market trend showing upward movement since the beginning of the week, I knew I could rely on that underlying up-trend for my day-trading actions. I trade between 1000 and 1500 shares for my day-trading activities involving both long and short positions. My commission fee is $7 per trade. Therefore, it costs $14 to open and close a position. With stocks in the range $10 to $20, a $0.05 to $0.10 price change is very easy to catch as long as you are on the correct side of the trend (i.e. the price movement). And the other nicety is that such catches can happen many times during the trading day.

With a 1500-share trade, a $0.01 price change covers the commission yielding a $1 net profit. A $0.10 price change nets $136. The most accommodating trades happen in a very short period of time. As I see the trend patterns develop in real-time on the charts along with my technical indicators, I can buy at a dip and within minutes I’ve hit my $0.10 target where I close the position to pocket my $136 net profit. Then I look for the next day-trading opportunity to repeat.

As it turns out, there are times when I leave money on the table by closing too early but that is the trade-off (no pun intended) between taking a guaranteed profit versus being greedy and waiting for more only to have the stock retreat thus eliminating the profit opportunity altogether. In the worst case, the price reversal can take my position to a loss situation. Assess your own level of risk-reward along with the magnitude of price movement for the stock that you are trading.

In the event that a trade turns against you, the best thing to do is to take the loss rather than to suffer more monetary or time loss. In a few cases, my entry point was not at a trend reversal so my position turned into a loss situation. Rather than closing the position, I held only to see the stock price continue to drop. Finally, it settles at the day’s low point and sits there for a long time. And now faced with a big loss which I refuse to accept, I lose to time as hours go by without stock price recovery. My capital is tied up without participation in another trade.

Day-trading using 1-minute periods on a candlestick chart is similar to inter-day trading where the day represents the period (i.e. minute candles versus daily candles). The big difference is that day-trading happens a whole lot faster. The same methods and discipline apply to either case.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Stock Market Pulse and Sentiment Q1/2009

2009-03-10T10:48:00.004-04:00

With the general market down 50% and financials and housing down 80% over the past year and the market indices down at 12-year lows, there is market sentiment that we must be near the bottom.

From a long-term investing perspective, this is a good time to buy in, although the entry into positions should be gradual to account for further price drops. Also, dollar-cost averaging (buying a fixed dollar amount at regular intervals) can be employed.

Notable bear market players are saying a bear-market rally is coming and some are even saying a big rally. So, the sentiment is that the markets are due for a bounce with the open question on how big a bounce. Some have disclosed that they have sold their short positions and are making a play on the long side.

For brokers and advisors who are recommending sell at this time, I tend to think they are wrong. It continues to baffle me why people actually pay brokers and advisors for that kind of recommendation. But we don’t know, they could be right and the rally crowd is wrong.

None of this stock market sentiment is to suggest that the recession is over. The underlying economy is still in very bad shape. However, the sentiment of the stock market participants is that the markets have gone low enough (how much lower can it get?) and that it is time to reverse direction.

For short-term traders, it would seem making trades on the long position is the proper move for now and that shorting is on the high-risk side. Follow the technical analysis indicators for the best read on trend reversals to the upside.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Seeking Penny Stock Picks, Finding Amusing Material

2009-03-08T23:03:00.003-04:00

Sometimes, when I get tired with trading, I think about an easier way. Although I should know better that there is no magic formula for instant success (riches), I can’t help myself browsing the web for ideas. It is always good to keep an open mind and refresh it with different approaches and ideas.

I was thinking about penny stocks again, and why there is such an appeal. With the amount of information and offerings on penny stocks, I have to assume there is a big following. I predominantly trade in blue-chip stocks due to the notion of relative safety (e.g. lower risk than speculative penny stocks). But I do see the appeal of penny stocks realistically doubling (e.g. $2 stock going to $4). I took a look at some recent penny stock picks and true enough a doubling of price is definitely in the cards and the trick is to get in at the right time to catch the momentum run. But the charts also show the typical stock price drop following the momentum doubling action. So, it is very much a trading opportunity with caution not to hold (for the long term). This may explain the never ending chase for yet the next penny stock to catch the pop. This would explain the reason for a continuing stream of recommendations offered for free or for fee.

Okay, that was the non-amusing but serious portion. Now for some amusing material.

I came across a service offering penny stock picks. How does it work? They say they run artificial intelligence software developed over 3 years by a team of 15 day traders costing $3,000,000. They go on to quote their major success story of 13,000% annual return, recommending a $0.07 stock that climbed to $9.60. Their pitch is to just listen to their buy and sell recommendations which they issue about 3 times a month. With horrendous gains like that, you just have to trade $500 to turn it into $65,000.

Let’s say they do have such a system. Why would they not just use the system for themselves? With successes like that, they just have to hit the jackpot once and be done with, unless of course greed propels them to repeat 13,000% profit gains again and again. Perhaps they ran out of capital spending the $3,000,000 to develop the software.

Let’s say they do have a system that can detect penny stock opportunities. Why boast so ridiculously to jeopardize believability? Why boast so high to dampen any chance of managing expectations?

I did not sign up. I will look for something more authentic and real. Their pitch does not lead me to trust them. I favor balance over extreme.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

What to Look For in a Technical Analysis System

2009-03-07T11:46:00.009-05:00

Do technical analysis methods work? Or perhaps more appropriately asked, how effective are technical analysis methods?

For those that simply believe that technical analysis does not work without having learned it, tried it and validated it, I submit they are missing an opportunity. For those that don’t have the time or energy to do it because of lifestyle constraints (e.g. they work long hours at a stressful job), it is perfectly understandable that they bypass do-it-yourself technical analysis. For this case, I would think stock trading is also out of the question because of the time and effort needed to prepare and execute winning trades. Here, it is understandable that people partake in long-term investments and listen strictly to their financial advisors/brokers. [Witness the debacle of long-term investors locked into their holdings now awaiting recovery through time.]

For stock traders wishing to leverage technical analysis, they have to find the right technical analysis system. And with so many technical analysis indicators, it can become quite confusing, perhaps even conflicting. For example, trying to apply Bollinger Bands, Moving Average Convergence/Divergence and various Moving Average crossing points, it can become very confusing to validate which ones are effective in yielding winning trades on a consistent basis. [If it works half the time, I suggest it is not effective, because the other half means you have losing positions.]

I have read comments and discussions that certain technical analysis indicators simply don’t work. I have personally performed analysis of certain technical analysis indicators and come to the same conclusion. For curiosity sake, learning about the mathematical theory behind a technical analysis indicator is an intellectually stimulating exercise, if you are so inclined. Beyond that, I think it is far more important to functionally validate the technical analysis indicators. i.e. Do they lead to consistently winning trades?

Leveraging technical analysis can be achieved in at least two ways:

1. Do-it-yourself technical analysis with charting software. You analyse the charts and make your trading decisions.

2. Subscribe to a service for buy/sell signals based on technical analysis. You treat the service as a black-box system and follow the buy/sell recommendations.

As long as the do-it-yourself technical analysis or the black-box technical analysis system (or a blend of the two) produces consistently winning trades, then you have validated the effectiveness of the approach and hence have found a winning formula. If you are making profits but wish for higher yields, then by all means, continue to seek and validate other technical analysis methods/systems. The fact that there are various software products available for the trader to devise their own trading system and back-test the method means people are ever seeking more. [Sometime the quest for more is simply an exercise in finding another way that may or may not yield more. But you don’t know until you try.]

To Conclude:

1. Evaluate technical analysis by validating against historical data. Look at the chart, make your trading decision and do the (retro) paper-trading exercise.

2. Validate against your stocks moving forward in the paper-trading exercise.

3. Answer the question: Does it consistently yield winning trades?

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

State of the Economy and the Stock Market Outlook

2009-03-06T23:46:00.002-05:00

As if the markets going down by 50% over the past year is not depressing enough, the forward looking view needs the markets to go up by 100% to get back to parity of a year ago. The leading question is, when will that happen? It’s safe to say the markets won’t double in the next year. Can it take 10 years for the markets to recover the past year’s losses? An even more provocative thought is, will it ever get back to those levels?

If one were to remain in the stock markets for wealth creation, as opposed to other forms of investment, there are plenty of investment strategies including things such as money management where dollar-cost averaging would be utilized to buy accumulating shares of a stock over time. With the notion that people put money away for long-term savings purposes, it makes sense to accumulate stock holdings as the capital becomes available. Even if they have a big capital base to begin with, it makes sense to use dollar-cost averaging to build the stock holdings. For example, buy more to accumulate a stock when the price dips.

For people choosing to stay in the stock markets but not wanting to wait on long-term investment or wanting to gain back more quickly, trading the trend cycles would seem the most appropriate strategy. It goes without saying that the right stocks in the right sectors need to be found. And if the trader is willing to accept more risk, going long and short on stock trading will maximize the returns.

It is certainly interesting times ahead to see the progression of the economy which of course is the basis for stock price appreciation or further stock price erosion. There is plenty of research to do in order to determine the best stocks to indulge. And when the stock trader is ready to execute, technical analysis is equally important for ultimate success.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Tug-of-War between Emotions and Technical Analysis

2009-03-04T14:55:00.009-05:00

RIMM (Research in Motion on the Nasdaq) had a StockTradersPlace sell action on February 11, 2009. As of March 3, 2009, RIMM had a StockTradersPlace buy commentary. In the period from February 11 to March 3, according to StockTradersPlace candlestick technical analysis, there were a number of candlestick signals for a buy action if the closing price on the next trading day confirms the buy signal.

The choice of RIMM is purely for illustrative purposes only. Any stock could have been chosen to make the points that follow.

So, following the trend using a good technical analysis system would keep the trader in good standing to reap profits from the momentum that is building which appears to be forming an up-trend in RIMM as of March 4 where March 3 in hindsight represents the trend reversal from down to up.

Now, a trader in contact with me said she is selling her RIMM position on the strength of today’s rise (March 4) because it brings the position to be slightly positive. She had apparently bought RIMM a few days ago and had seen her stock position in negative territory. I recall doing the same thing before I started relying on a good technical analysis system that can show me the trends.

This is a good lesson and point of observation. If a trader enters into a position without the guidance of trend indication, then it is understandable that the position may enter into negative territory. Then on a good day such as today (March 4) and yesterday, where there is building momentum for the stock, the trader takes the first opportunity to get out of the position because it relieves the pain (emotions) of the paper loss in prior days.

I would not necessarily say this is a wrong move because it goes to the risk-reward assessment. If the trader is feeling uncomfortable (emotions tugging at the senses), then the trader may conclude that the reward is not worth the risk, hence get out of the stock position.

Well, okay, that was an acceptable decision. But now what? Do you stop trading RIMM altogether? Do you trade another stock? Unless you stop trading altogether, you will be confronted with the exact same question time and time again. Where do you buy to enter a position? Where do you sell to exit a position?

My provoking comment to my contact was “If StockTradersPlace has a buy action on RIMM today because it confirmed the buy signal of yesterday, then you must go with the technical analysis guidance and be in the stock, not out. Why would you sell the stock today?”. Her answer was “I don’t know.”.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Emotion Dominated Stock Trading

2009-03-03T14:46:00.005-05:00

Where do you lose in stock trading? I have asked myself that very question more than once. Looking through my Excel spreadsheet where I keep track of my trades and looking through my trading journal where I capture significant points and lessons, I would say the broad answer for me is “eating the big loss” because I don’t follow my own trading rules which are superseded by emotion.

How does the big loss manifest itself? Well, it could be from entering a position with considerable risk such as holding past an earnings announcement where I assess that the earnings outcome should be good but alas it was not good enough so the stock gets punished by investors/traders.

Rule: Don’t hold a stock past earnings announcement.
Emotion: But they could have a really good earnings announcement.
You tell me which path should be followed without exception.

Once a paper loss is encountered, emotion army #2 appears (the first mistake induced by emotion was to hold a stock past earnings announcement). Well, I can’t possibly sell at this loss. Now we are in territory of “once wrong”, “twice wrong”. But if at first I don’t succeed, try and try again – this should not apply to repeating wrong decisions based on emotion.

I decide to supersede the rule to take the loss. Emotion army #3 kicks in. I come up with rationalizations to will the stock into rising. I must say that I don’t have any evidence of a proven correlation between my will and the stock price direction. I may claim that stocks rise on my will but I don’t admit to the cases where it doesn’t happen.

Well, look at the gap down open on the stock chart after earnings announcement. We know the gap has to be filled according to technical analysis. That is a true statement but the real question is how long will it take to fill the gap!

At this point, I’ve lost count of the armies of emotion attacking my thoughts from every conceivable angle. I make an entry in my trading journal to capture this event and the lessons learned. As I write “don’t take the trade that is known to be risky but if I have to, take the loss at the first point of incidence; don’t let the losses mount”, I face déjà vu all over again!

I won’t make those mistakes again. No, I shall not make those mistakes again. I’ve traded my emotions in exchange for candlestick technical analysis.

As I busy myself with all the post-mortem analysis, I continue to hold onto my losing position …

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Trading K

2009-03-02T19:30:00.019-05:00

See the Trading K blog entry for a previous discussion.

It can be seen in the StockTradersPlace chart that the stock drifted down after the Feb 18 earnings announcement. There were StockTradersPlace signals for a buy opportunity, should an up-trend arise. However, with the overall downturn of the markets and the propensity for gold price to fade back from its $1000/ounce peak, the trend has been down.

From a candlestick technical analysis standpoint, there was an “inverted hammer” signal on Feb 25 that resulted in a confirmation of that signal on Feb 26, hence StockTradersPlace bought K at $20.80. On Feb 27, a “dark cloud cover” formed with the resulting action to watch for a confirmation of that signal on the next trading day. Sure enough, on March 2, the down-turn was confirmed with StockTradersPlace selling at $20.12 for a loss on that position.

It remains interesting to watch where the price of gold and the markets go from here. As of March 2, gold stands at $925. I’ve read reports that suggest gold should find support at $900. But who really knows. My method is to watch for candlestick signals and carry out short-term trades as guided by StockTradersPlace candlestick technical analysis. Staying on trend and on cycle is the key to successful trading.

Impact of Personality Influences on Stock Trading

2009-02-23T14:54:00.004-05:00

You may have read the notion that personality plays a role in how a person views the world in the sense of the “glass half-full, glass half-empty” saying. A pessimistic person has a tendency to think the market is heading lower while an optimistic person has a tendency to think the market is heading higher.

Assuming a person knows one’s own personality traits, that person would be well advised to indulge in behavioural modification – in essence suppressing or controlling that which will be harmful to stock trading actions. This is where discipline is needed to keep psychological (emotional) influences in check. Furthermore, conducting research and analysis is not only good preparation but also beneficial to impose objectivity into stock trading activities.

A person may not be able to change one’s personality and outlook, and a person is not able to control the stock market, but a person is able to control one’s reaction to the vagaries of stock market movements. For a long position, if the trader observes an up-trend, continue holding the position; for a down-trend, continue to be out of the stock; for a trend reversal, open or close the position as the case may be. By observe, I mean through the use of a trend following system.

Those that can control the stock market can skip the next sentence but do so at your own risk. For the rest of us, we must recognize our own personality traits, impose a methodology and system of trading, do our homework and preparation, acquire tools and resources, and proceed with objectivity and confidence.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Applicability of Stock Market Products and Services

2009-02-23T11:44:00.008-05:00

Do you ever wonder about the trust worthiness of stock market information you read on the Internet? Do you wonder about the qualifications of the company, web site or people providing gratuitous advice on stocks? Do you wonder what their motives are? In basic terms, do you wonder about the integrity and quality of the information and offerings?

And then there is this other side of friends, co-workers and family members espousing the virtues of a company, its stock, and in general their opinions about everything stock market wise. And their zealous giving ways may not terminate at stock market talk. After all, everyone is entitled to their own opinion.

Furthermore, we are all enticed to read other people’s comments, peek into message board discussions, search for that yet another stock market site – hoping to glean the world of knowledge on the stock market.

Why do we do this? There are many reasons ranging from general interest and learning to the quest for successful trading. Unless you don’t intend to trade, at some point the action is to make trades based on all the information and wisdom that you have acquired.

To this end, here follow my thoughts or suggestions if you will. They are my opinions based on my experience for my particular trading style. You judge if this helps your stock trading, given your trading style.

Question not only the substance and content but also possible motives for why people say what they say. If they have a motive or agenda, that is not necessarily a bad thing as long as their information or offering helps your bottom-line which is to succeed in stock trading.

Test the statements and assertions with questions such as “Can that work?”, “Does it work for my situation?”, “How can I apply that?”. A blunt test is “Is it better than a coin flip?”. The ultimate test is “Can I achieve winning trades on a consistent basis?”.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Trading Success with Candlestick Technical Analysis

2009-02-22T10:42:00.003-05:00

There are many candlestick patterns in the entire spectrum of the Japanese candlesticks literature in print and on the Internet. It is an enormous task to learn to recognize the candlestick patterns and to interpret the candlestick signals to translate into trading decisions. It is a time-consuming task, or a distraction in the very least, to determine candlestick patterns and to interpret the candlestick signals in order to decide on what to trade and when.

You should research the different types of candlestick patterns and how candlestick technical analysis works in identifying trends and trend reversals. However, you should not spend time deciphering stock charts looking for candlestick patterns and determining if they constitute a valid signal. I submit that your time is better spent on other trading activities such as keeping track of company news and events, and monitoring the pulse of not only the company (and stock) but also the industry that the company is in.

You need to find software for your computer or available through web sites to provide candlestick charting along with candlestick technical analysis where the candlestick signals (patterns) are shown to you. Then you, as the stock trader (not the candlestick technical analyst) can use the software provided information to make your successful trading decisions.

Examine the historical trading performance using the candlestick technical analysis software on your stocks of choice. This will give you confidence that there is credence in the method and that the system works. Begin with paper trading a basket of stocks and monitor your trading performance as you experience and refine your use of candlestick technical analysis. When ready, proceed to real-world trading with your new-found tool. Do not forget or abandon your other trading tools and resources as candlestick technical analysis is a complement to (not a replacement of) your trading tool box and your trading wisdom.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Recognizing and Interpreting Candlestick Patterns

2009-02-21T20:54:00.008-05:00

There are many candlestick patterns in the full spectrum of the Japanese candlesticks literature. It has been written that there are only about a dozen candlestick patterns that a trader has to learn about in terms of recognizing and interpreting candlesticks and how to apply that analysis to make trading decisions. I agree with that assessment given the need for the human to do the recognition and interpretation.

My preference is to use software to perform candlestick technical analysis. That way, I can focus more time on other matters of trading such as keeping track of company news and events, and monitoring the pulse of not only the company (and stock) but also the industry that the company is in.

As it would be ludicrous to have humans plot the charts manually, I feel that doing candlestick technical analysis is best left to computer software. In this age of technology, there is no reason to resort to human recognition of candlestick patterns. On the other hand, the human’s role is ultimately to look at the technical analysis results presented by the software and make the final judgement as it pertains to actual trading decisions.

Having said that, there are those who go one step further and say that trading should be totally automated without any human emotional and psychological interference. In theory that sounds good. In practice, I’m not sure such systems yet exist for the retail trader. That day may come sooner than we think.

In the meantime, I think using software to do the recognition and interpretation of candlestick patterns is the sensible thing to do. The application of the candlestick technical analysis results is left to human judgement. The trader decides whether or not to place the trade once presented with the option to do so as indicated by candlestick technical analysis.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Show yourself that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

What Do Candlestick Patterns Indicate?

2009-02-21T20:53:00.005-05:00

The Japanese candlestick, hereafter simply referred to as candlestick or candle, conveys the open, high, low, close price points for the period in question. For the sake of this article, let’s consider the daily period (using end of day historical data) which is suitable for active and short-term traders.

Candlestick patterns can embrace 1, 2, 3 or even more days. Examples of 1-day candlestick patterns include doji, hammer and harami; 2-day patterns include counterattack, engulfing and separating lines; 3-day patterns include morning star and evening star.

In general terms, the essence of candlestick pattern formations is that they indicate continuance or reversal of an up-trend or a down-trend. This is the basic answer to “What do candlestick patterns indicate?”.

For example, a doji is a candlestick pattern where the open and close prices are at the same level. Following a trend in which the stock price has risen or dropped for a duration of many days, the appearance of the doji is a signal that the trend may be coming to an end, with an ensuing reversal of the stock price direction. Therefore, the trader must take the signal and observe what happens on the next trading day and react accordingly.

Let’s look at that example in more detail. Suppose a doji appears after a 10-day run-up in the price of a stock in which the trader is holding a long position. With the appearance of the doji, the trader should take note of this signal and look for a closing price below the doji level on the next trading day. If that happens, the trader would be well-advised to close the long position and take the profit because it is likely that the up-trend is in reversal progression.

This is only one example from the multitude of candlestick patterns. There are entire books and web sites dedicated to the study and discussion of candlestick patterns, what they mean, the interpretation of the candlestick pattern formations, and the trading decisions to be taken.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Show yourself that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

The Candlestick Period or Timeframe

2009-02-21T20:49:00.010-05:00

The Japanese candlestick, hereafter simply referred to as candlestick or candle, conveys the open, high, low, close price points for the period or timeframe falling into two broad categories – real-time analysis and historical analysis.

Real-time candlestick analysis is particularly relevant to the day-trader in order to interpret, analyze and make trading decisions down to the minute level or even lower (as may be the case for forex currency trading).

Historical candlestick analysis is particularly relevant to traders who engage in active or short-term trading. A commonly used period or timeframe is daily where the candlestick technical analysis is performed using end of day historical data.

Charting software is widely available for displaying candlestick charts, in the real-time (intra-day) sense or in the historical (inter-day) sense. Charting software and access to the stock data come in a variety of forms available on the local computer as well as through web sites, and these may be free or paid services.

Beyond the actual charting function, there is the other side which is the recognition of the candlestick patterns and how they form trends and trend reversals which can then be applied to make trading decisions. Candlestick technical analysis involves the availability of candlestick charting functions along with the recognition and interpretation of candlestick pattern formations. The former is simply provided by computing technology; no one plots charts from stock data anymore. The latter is a function indulged by the human with or without computing technology assistance.

Candlestick patterns may span 1, 2, 3 or even more periods. The recognition of candlestick patterns involves an interpretation aspect as not all pattern formations are strictly defined in precise numerical terms. And beyond that, trading decisions have to be made based on the candlestick patterns.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Show yourself that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Candlestick Technical Analysis : An Introduction

2009-02-21T20:05:00.007-05:00

The Japanese candlestick, hereafter simply referred to as candlestick or candle, is a very effective way to convey the open, high, low, close price points for the period in question, which may be minute, hour, day, week, etc. as supported by the charting software.

The body of the candlestick is defined by the open and close prices. The tails of the candlestick (some call them wicks or shadows) indicate the high and low prices. A color or shading convention is used for the body of the candlestick to convey the up/down direction of the candlestick. An up candle has the closing price higher than the opening price. A down candle has the closing price lower than the opening price. Colors used for the body include red and blue for down candles; green and white for up candles – subject to the convention used in the charting software which may allow user customization.

Visually, candlestick charting is very effective in conveying the up and down periodic movements of the stock price. At a glance, the user is able to see whether a stock closed higher than its opening price (up candle), or vice versa, a stock closed lower than its opening price (down candle). The length of the body as well as the tails show the range of price movement for the stock. And the user is able to follow the progression of candlesticks in successive periods.

There are various candlestick patterns such as doji and hammer (just to cite two from the long list of patterns which may span 1, 2, 3 or even more periods) that are used in candlestick technical analysis where significant conclusions are attached to each pattern.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Show yourself that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Trading with a Trend Following System

2009-02-20T11:49:00.023-05:00

My daughter is in fourth year university taking a Finance course in which the course project is to learn about stock trading using a virtual stock exchange program called Stock Trak. I am providing consulting advice to her and she is using StockTradersPlace for her trend following system. Here is a dialog that shows the thought process of a trader in formative times. I suspect that many traders also go through such a thought process, even if they are not new to stock trading.

Madeline says: I’m up $1300 on THI. Should I sell?
David says: Let me take a look.
Madeline says: I sold. Too late. haha. Got all scared.
David says: It is not a bad thing to have a little fear. It is good to take profit (one of my trading adages). It was good to take the profit but you should consider buying back in on a dip from its high of $31.50.
[At 10:15am, THI on the TSX hit a $31.60 high. At 10:36am, THI pulled back to $30.32. At 11:00am, THI reached back up to $31.00.]
David says: The StockTradersPlace chart shows THI on an up trend. Today will be a StockTradersPlace buy action if THI holds up (closes above $28.66 with an up candle).
[In fact, THI had a gap-up open at $29.00.]
Madeline says: yeah. I don’t understand. Why would I buy back in?
David says: If it is on an up trend as StockTradersPlace shows, then THI will be climbing higher (StockTradersPlace will buy if THI closes above $28.66 with an up candle; so far, that looks like it will happen). Therefore, you buy back in to make more profit for a day-trade, or hold and ride the up trend beyond today.
Madeline says: Why the hell would I buy so high though? It doesn’t make sense.
David says: It is not about how high it is; it's about how high it will get. The only thing that matters in trading is to be on the correct side of the trend.
Madeline says: yeah
David says: If you want to avoid the risk, then it is perfectly fine to wait for the stock to dip back down. But when will you buy back in?
Madeline says: No. I need to take risk. That is what the course is asking for. I don’t know when to buy back in. haha
David says: How low does it need to go before you consider it "buy low"? That is why I keep saying, you need a trend following system that indicates to you what the technical signals are. That way, you have guidance (something to go on) for your "buy low", "sell high" cycles.
Madeline says: yeah
[Then she had to go off to an online test. She is logging all the chat sessions. I hope the lessons sink in. The lessons will be revealed in her report of her trading experiences from the trading simulation exercise.]

Main Take-Aways:

A trader really does need guidance on when to enter and exit positions. Guidance may come from fundamental analysis, technical analysis, listening to your broker, going on analyst recommendations, … throwing darts.
Trend following through technical analysis is a key component in the equation. Getting in sync with the rise and drop cycles is very important. Once on track, a trader will become more confident, execute winning trades more frequently, and will be in a position to repeat the process (ride the cycles) for successful trading.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.

Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.

Show yourself that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.

Trading on Support and Resistance plus Trend Reversals

2009-02-19T22:40:00.015-05:00

What is support and resistance? I’m not going to get into the technical definition of what these are and how they are determined. I am going to say that support and resistance represent levels or areas where the price is stabilizing in terms of its current direction of move.

As the price of a stock rises, it will reach a point where it will encounter resistance to go higher. Often times, the resistance point or the upper bound will be tested a number of times, eventually leading to a breach of that price level. Alternatively, the breach attempt fails and the stock begins to move in the other direction by dropping in price.
Conversely, as the price of a stock drops, it will reach a point where it will encounter support which prevents the price from dropping below that point. And again, there may be a number of attempts to break below support, failing which the stock begins to move in the other direction by rising in price.

Support and resistance levels do not have to be at the historical low and high points. For example, within the low and high points in a 2-year period, there are support and resistance levels that are not at those historical low and high points.

Within a pair of support and resistance points, there will be a number of up and down movements of the stock price. I consider such up and down movements as trends. And where the stock price movements change direction, I consider those the trend reversals.

As the stock price cycles through a series of up and down trends, going through trend reversals, the successive support points will form a trendline. If that trendline is trending upwards (i.e. successive support points are rising), then that represents a broader up-trend. But remember, smaller trend cycles occur within that broader up-trend. Conversely, there is a broader down-trend if the trendline is declining.

To further illustrate the point that smaller trend cycles exist within the broader trendline, money can be made trading long positions in a stock even in a broader down-trend (but a good trend following system is needed). This is a hard way to trade but it illustrates my point.

Trading the trend cycles can be profitable. Further confidence can be gained by using the broader trendline to know if the stock is in an overall up-trend or down-trend.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles. Experiment with the demo stocks as a guest user or sign up for the free trial where you can access all supported stocks.

Trading K

2009-02-17T21:00:00.048-05:00

Today, I traded Kinross Gold (K on the TSX and KGC on the NYSE) twice for a $971 net gain after commissions. For me that was a satisfying gain obviously but more importantly, there are a number of interesting factors and considerations which are worthwhile to bring up.

K had a gap-up open at $24.50. I watched the typical flurry of trading activity take place in the first 15 minutes of trade, as the stock tried to establish where it was headed. The $24.78 high of the day was made within the first half-hour of trading.

At 10:36am, I bought 1500 shares at $24.27 which I sold at $24.73 before noontime for a $676 gain. It tried twice to reach and breach the day’s high but eventually fell back down to test the lows of the day. Support was found at $24.20 so at 2:32pm, I bought 1500 shares at $24.22 and on the first rise attempt, I closed the position at $24.39 for a $241 gain.

Factors that played into today’s trade action with K:

Kinross Gold earnings announcement is scheduled for Wednesday, February 18.
Gold approached $975/ounce, a step towards the $1000 mark.
The markets were down today, 3.5% to 4.5%.
Yesterday, StockTradersPlace had commentary for today to buy K if it closes above $23.76 with an up candle.

Thought Process:

One of my rules from experience is to not hold the stock across an earnings announcement. With that, I decided this morning to day-trade K and I was determined to get out of the position by end of day, even if at a loss.
As the markets drifted down while K held its daily low, I had confidence to trade it long. The underpinnings (earnings announcement, gold price, tendency towards an up candle) were there for K to stay up or even go higher.
There was a big temptation to short K after I closed my long position at $24.73. It would have turned out profitable but I was reluctant to take that risk because of the factors upholding the stock. And if the markets decided to run up, K probably would have breached its then $24.78 daily high.

Points to Consider:

StockTradersPlace had a sell action on Friday with commentary to buy today if K closes above $23.76 with an up candle. It is very important to take note of the up/down candle direction. K closed with a small body down candle today (open $24.50, close $24.39). So, even though the close is higher than $23.76, the candle is a down candle, therefore, the buy was not to be carried out today.
My rule of not holding a stock across the earnings announcement is based on too many experiences with getting burned. Stocks usually run up in anticipation of the earnings announcement. Even if earnings meet expectations, the stock typically drops following the earnings announcement. (“buy on rumour, sell on news”) However, gold price continuing upward and an overall market rise, could propel K higher.

The decisions have been made. The gains have been locked in for today. Tomorrow is another day. Let’s see how things turn out. Even if K goes up after earnings announcement, the next question is how much more does it have to run at this point in time? I still subscribe to the notion that I would rather take an opportunity loss, than to risk taking an actual loss, not to mention forsaken profits (as was locked in today).

Rule of Thumb on How Much Loss to Take

2009-02-16T16:31:00.025-05:00

Today, during this market close day in Canada (Family Day) and the U.S. (President’s Day), I received the following question from a StockTradersPlace visitor/user.

“I like to trade the overall market (QQQQ). Is there a rule of thumb on how much loss to take before I sell a losing position? I'm always scared if I pull the trigger and bite the bullet, as soon as I get out, the market will rally but if I don't, I'll sit on it until I have lost a few thousand dollars. It's frustrating at times.”

QQQQ - Index shares for the NASDAQ 100 Index.

My response follows

It is extremely frustrating and it is very difficult to know the right loss point to take. I understand your feeling.

On the StockTradersPlace Info page, there are some suggestions under "The Need to Cut Your Losses in Stock Trading" and "Is stop-loss needed since StockTradersPlace provides commentary to exit positions?". The first one talks generally about how to determine and deal with loss points, and more importantly to take the loss before more losses mount up. The second one talks a little more specifically about using StockTradersPlace to gauge the right loss point.

Trading is risky and the strategies plus tactics are particular to your individual style and risk-reward ratio (how much are you willing to risk for the reward outcome).

Rule of Thumb for How Much Loss to Take In thinking about a rule of thumb for loss, I would say that following the StockTradersPlace identified trend is the right thing to do because you have determined through paper-trading and examination of the StockTradersPlace method that the system works and you have confidence in it. The better the trend following system, the more confidence you will have in it, and the less second-guessing is needed.

As stated on the referenced information at the StockTradersPlace Info page, it is prudent to follow the StockTradersPlace buy/sell commentary. The rule of thumb for loss: You need to set your sell point in accordance with the StockTradersPlace commentary. Beyond that, you need to set a stop loss in the case of sudden drastic drops in the market. If the market rallies back up after you've taken the stop loss, you will once again catch that trend as StockTradersPlace will spot that.

Not having a stop loss or not following the StockTradersPlace sell commentary can lead to more losses if the market continues to sink. Although it hurts to take the loss, it is often the best thing to do. Psychologically, this is one of the hardest parts of trading - to carry out and take a loss. I can't tell you how many times I've noted to myself to sell at a loss before taking more loss. As for missing out on the ensuing bounce/rally, it is always better to face an opportunity loss (too bad to miss out on a chance to profit) rather than an actual loss (where the loss can be greater than the initial point where I did not take the stop loss).

To Conclude This is not intended to be flippant, but the amount of loss to take is the amount of loss you should take according to your technical analysis system. The StockTradersPlace method/system inherently provides you with loss guidelines through its exit points. And if you additionally use a 10% stop-loss (as a general rule of thumb, broadly speaking), then you should be sufficiently covered.

I know this may not sound entirely clear as to precisely how much loss to take. Perhaps the best notion to hang onto is the fact that if one stays on trend, follows the StockTradersPlace buy/sell signals and has a stop-loss put in place to catch the big and sudden drop, trading success will improve which means there will be net gain.

If the markets are extremely volatile, then you will get caught in the volatility. However, trading an index such as QQQQ should make it less volatile relative to individual stocks.

Trading QQQQ

2009-02-12T23:31:00.008-05:00

QQQQ - Index shares for the NASDAQ 100 Index.

23-Jan-2009 open long position at $28.76
10-Feb-2009 close long position at $31.39 gain $2.63

On January 22, 2009, commentary was issued by the StockTradersPlace trend following system to buy QQQQ on January 23, 2009 if it closes above $28.76 with an up candle (i.e. the closing price is higher than the opening price for the day).

On January 23, 2009, QQQQ closed at $28.90 with an up candle so it was bought at $28.76. From there, an up-trend prevailed until February 9, 2009 when StockTradersPlace issued a commentary to sell QQQQ on February 10, 2009 if it closes below $31.39 with a down candle. (i.e. the closing price is lower than the opening price for the day)

On February 10, 2009, QQQQ closed at $30.34 with a down candle so it was sold at $31.39 for a $2.63 profit.

Check out the StockTradersPlace QQQQ chart.

Trading RIM

2009-02-11T23:40:00.030-05:00

I have traded Research in Motion (RIM on the TSX and RIMM on the NASDAQ) over an extended period of time. I trade RIM using the StockTradersPlace trend following system. I also look for day-trading opportunities using StockTradersPlace to provide the trend basis to support my day-trading decisions.

On Tuesday, January 27, 2009, RIM began an up-trend as identified by StockTradersPlace which provides commentary on trading signals and simulated buy/sell actions. On that day, I followed the system and opened a long position on RIM at $64.25. The up-trend continued through to Tuesday, February 10, 2009, 10 sessions after the position was opened. On that day, I followed the system and closed my long position at $70.95 for a $6.70 gain.

That long position, executed “by the book” following the StockTradersPlace trend following system, served me well. On Wednesday, February 11, 2009, pre-market news came out on RIM’s news warning investors to expect quarterly profit at the low end of its forecast, despite outsized subscriber growth. The stock sold off with a 15% drop for the day.

For my day-trading activity, in another account, I opened a long position in RIM on Friday, February 6, 2009 at $73.02. The day-trade was not successful and I ended up holding the position over the weekend, because I did not want to take the loss. I looked at the StockTradersPlace RIM chart which was still showing an up-trend at that point with a signal to sell if the stock closes below $71.74 on Monday, February 9, 2009. That was the basis for my decision to hold the position.

On Monday, RIM held up and I continued to hold my position. I had an opportunity to take profit at $73.55 but wanted more so I waited. The stock dropped throughout the day and again I was in the red on that position.

On Tuesday, my active-trading activity saw no opportunity to close my position for a profit, so I held my position. Near the close, I looked seriously at closing around $70.90 for a $2.12 loss. The emotion kicked in and I decided to risk holding the position waiting for a pop to occur on Wednesday.

On Wednesday, RIM had a gap-down open of $63.00. I sold out at $62.45 for a hefty $10.57 loss. I then went short on RIM at $61.50, closed my short position at $59.30 for a $2.20 gain to help offset the $10.57 loss. I day-traded other stocks throughout the day to recover part of that big RIM loss.

Points to Ponder

It is very important to follow a good trend following system. Follow it stringently.
Company news can have devastating impacts on the stock’s price movement.
Take what the markets will give you. Don’t be greedy. I had a profit of $0.53 but wanted to wait out for more. Turning down that opportunity led me to face problems.
Take the loss when it is due. Don’t take more loss by holding the stock as it drops further. I had a $2.12 loss which I passed up on and ended up taking a $10.57 loss.
It is very important to be on cycle with the trend from January 27 to February 10. Entering that long position on February 6, off cycle with the trend, was a risky move and it turned out to be a problem.

Stock Trading Discipline

2009-02-10T12:31:00.007-05:00

There are some general “rules” that I try to apply to my trading discipline. These tips have been established through my personal trading experience. If I can ever apply these without emotion and without exception, I may well proceed to even more successful trading. Well, perhaps I can’t conquer the emotion part as there will always be some level of fear, however, I should turn my tips into rules and apply them stringently without exception. A little fear is not necessarily a bad thing as it is protection mechanism against taking overly aggressive and risky actions.

Make the trade based on fundamental and technical analysis. Be confident and committed with the decision. If it turns out to be wrong, get out of the position.
Take what the markets will give you. Don’t be greedy. Taking the profit to protect against losing that profit is better than a lost opportunity (the opportunity is what you are hoping for by holding out for more profit).
Take the loss when it is due. Don’t take more loss by holding the stock as it drops further. Unless you stop trading, this won’t be the last trading loss you will take.
Don’t hold a position past earnings announcement. Quite often, a stock climbs on its way towards earnings announcement only to deflate after the earnings announcement, especially if the outcome is below expectations. Contrarians may do the opposite and buy the position to profit from an anticipated rise in the stock after earnings announcement. The risk is not worth it for me.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to the above mentioned tips/rules. StockTradersPlace technical analysis, presented through candlestick charting, offers the trader clearly defined entry and exit points for stock positions. And the historical view adds to the confidence that the system works. It is true that past performance is not necessarily an indication of future performance. However, the historical backdrop provides credence to the technical analysis method. And the trader applies the StockTradersPlace commentary to look for and execute winning trades.

The Need to Cut Your Losses in Stock Trading

2009-02-10T00:30:00.008-05:00

Would it not be nice to find the ultimate trading method and system where profits are guaranteed and one never has to consider the notion of taking a loss, or when to take the loss? I submit that is more a dream than reality. In practice, stock traders will encounter losing trades – it becomes a question of how often these losses are encountered and the amount of loss on each occasion.

I would say a good trading method or system is one in which losses occur infrequently and that the system provides you good exit points thus establishing a clear price at which to take the loss. Even if you use a good trading system, by the measure just stated, it becomes a task for the trader to follow through with the action of taking the loss. It is as much a fight against one’s own emotions and psychology as it is anything else.

Also bear in mind that while your capital is tied up in a losing trade, you are not able to utilize that capital to make further trading gains. This is a double whammy in that you are losing to time as well as money (if the trend continues to go down, you lose even more money). I like to think that by taking the loss, I am freeing up my capital which can be used to tackle another trade.

The underlying premise is that you are using a good trading method (e.g. strategy plus discipline) and/or system (e.g. technical analysis with good trend following results) without which you will be faced with more stop-loss situations than you would like, which means your net trading result will likely be negative overall.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that allows the trader to react to trend reversal indicators. Information is presented to help you achieve winning trades. Experiment with the demo stocks as a guest user or sign up for the free trial where you can access all supported stocks.

Trading Gold Stocks in 2009

2009-02-10T00:14:00.009-05:00

The price of gold and the trading of gold stocks are hot topics in recent times. The price of gold is a well-studied area with plenty of information and opinions on the secular bull trend in gold. The correlation of gold stocks to the price of gold is a topic of interest for people trading gold stocks. An item of importance is the HUI Gold Bugs index on the AMEX (American Stock Exchange).

If you tried to buy gold stocks in August or September of 2008, you undoubtedly would have found yourself being stopped out as gold stocks were on a decline searching for a bottom. The HUI was around 300 in September and bottomed around 150 at the end of October. Near the end of January/2009, the HUI was back up to 300.

Supposing you did your due diligence and managed to buy gold stocks in the October/2008 timeframe and held it, you would be confronted with an interesting situation in February/2009. Having seen your investment double, what should you do? Should you take profit on your investment now and wait on the sidelines in anticipation of a correction in the price of gold and gold stocks? Should you continue to hold in anticipation of a further rise in gold? The $1000/ounce mark is on the horizon for gold with predictions abound on how high gold will reach, and when.

Let's take a particular gold stock as an example for further discussion. Kinross Gold, KGC on the NYSE (New York Stock Exchange) and K on the TSX (Toronto Stock Exchange), is a HUI component. K on the TSX was at a low of $8.96 on October 24, 2008 and a high of $24.66 on January 20, 2009. Taking profit would yield $15.70 per share. An investor may choose not to take profit and continue to hold for long-term investment.

What if the predictions on the price of gold do not turn out? What if there is a correction in the price of gold? What if Kinross Gold diverges from its correlation with the price of gold, and suffers a pullback on its own? Do you take profits now, wait for the correction and then buy back later?

As an alternative, trading K on the basis of stock price trends (rise and drop cycles) can be equally profitable and allows for profits to be realized in real terms with continuing ability to react to the price movement of the stock. It is vitally important to use a good technical analysis method with the capability to react to price trends. Buy at the "valleys" and sell at the "peaks" in the stock chart.

StockTradersPlace analysis indicates a profit of $17.43 per share of K would be possible based on long and short positions traded during the period from October 24, 2008 to January 20, 2009.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that allows the trader to react to candlestick technical analysis indicators. The information is presented through candlestick charting to allow the trader to examine and visualize the trend following method in order to understand how it works and how it can be applied to successfully achieve winning trades on a consistent basis.

React to Technical Analysis Indicators to Trade the Rise and Drop in Stock Prices

2009-02-10T00:09:00.007-05:00

There are trading strategies where a time horizon is established and a profit target is set. The analysis, both fundamental and technical, will indicate the right conditions and the recommendation will proceed to tell you that it is a good investment with a stated profit target expectation. If this sounds familiar, you may have read similar stock trading reports as I have.

If that kind of trading strategy is not working for you or you are looking for higher profits, an alternative approach is to follow the rise and drop cycles in the price of the stock, and capitalize on trading profits that the market will give you.

Let me illustrate with an example using RIM (Research in Motion) on the TSX (Toronto Stock Exchange). On November 18, 2008 the low was $51.95 and the high was $59.40. On December 24, 2008 the low was $49.51 and the high was $51.19.

A long position held for that period would have yielded a loss of $0.76 per share on the assumption that the buy was at the low and the sell was at the high.

A short position held for that period would have yielded a gain of $9.89 per share on the assumption that the sell was at the high and the buy was at the low.

So, if the crystal ball guided you to a long position, you would have incurred a loss; a short position would have yielded a gain.

In contrast, based on StockTradersPlace analysis, executing 5 trades in that period by reacting to technical analysis indicators, you would have yielded a gain of $19.87 per share, with $9.21 per share gain for 2 long positions and $10.66 per share gain for 3 short positions.

Choosing that period was not intended to favor the results of the short-term trading cycles. It was merely for illustration purpose where technical analysis and trend following indicated the success of the 5 trades.

It should be pointed out that a long-stretch run-up of a stock will typically favor the long-term buy-and-hold strategy. However, clairvoyance or a magical crystal ball would be needed to tell you ahead of time if there will be a long-stretch run-up. In a choppy market, the short-term trading strategy can be shown to be more effective and profitable by watching the technical indicators and reacting to the rise and drop of the stock price. Furthermore, a reactive technical trading method will yield gains in the case of a long-stretch run-up.

You can verify your own numbers with your own stocks to see if the approach works for you. Generally speaking, the approach described in this article is applicable regardless of the technical analysis indicators that are used. Some technical analysis indicators are better than others in certain market conditions or for different stocks. There is no single answer. You may look at a variety of techniques.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system that allows the trader to react to candlestick technical analysis indicators. The information is presented through candlestick charting to allow the trader to examine and visualize the trend following method in order to understand how it works and how it can be applied to successfully achieve winning trades on a consistent basis.

From Long-Term Investing to Short-Term Trading – How to Profit on the Stock Price Rise and Drop

2009-02-09T23:53:00.008-05:00

In my early days of learning the stock market, I came across expert advice from various sources that said "you cannot time the market" and "it is best to buy-and-hold for the long term". I researched and consulted expert commentary to understand the fundamentals of companies whose stocks I would be investing in.

It was a ton of preparation followed by a buy action on the stock. Then it was time to sit back and wait for weeks (that was my time horizon). This exercise was repeated with different stocks from different sectors (e.g. technology, medical, mining). I monitored my holdings and as often is the case, I was in the red with my positions.

To make a long story short, I did not have success with the longer-term buy-and-hold strategy. Perhaps I did not pick the right stocks, but I did listen to expert analysts. Perhaps I did not buy the stocks at the right price (which means it was not the right time to buy), but again it was based on listening to expert recommendations. Perhaps I did not hold the stocks long enough.

I then embarked on learning about technical analysis and started getting into the mindset of trading the stocks and capitalizing on the rise and drop of the stock price, which most certainly happens all the time. The only other thing a stock price can do is to remain unchanged, but an examination of stocks will quickly reveal that few stocks stay fixed at the same price point over days, weeks or months. And if the stock price does stagnate, the worst outcome is you make no money, nor do you lose.

After examining various technical analysis techniques, I began to formulate some basic questions. What is the direction of the stock price? Is it trending up or down? Where is the top of this current run-up of the stock price? Where is the bottom of this current run-down of the stock price?

After experimentation with interpreting various technical indicators, both in the context of paper-trading as well as actual trading, I came to some basic conclusions. The trend is my friend. If I get the price movement direction correct, my trade will profit. If I buy and sell at the right times, my trade will succeed. Timing is everything. Holding for the longer-term, or for whatever pre-determined period makes no sense - I will hold the stock for only as long as necessary to make my profit - It is the trend from trough to peak that dictates how long to hold the stock.

I do acknowledge that what I am saying about following the trend also applies to longer-term trend lines. I happen to have a trading style to pursue the shorter-term trend lines i.e. on the order of days, rather than months or years.

I have found candlestick technical analysis to be a good foundation for a trend following system. Your style and time horizon for trading may be different but you may want to investigate and consider the approach.

StockTradersPlace (http://stocktradersplace.com) provides a trend following method based on the use of candlestick technical analysis, presented through candlestick charting. You may find this to be a good complement to your trading tools and resources for consistently successful trades.

A Trend Following Method to Guide Your Stock Trading Buy-sell Decisions

2009-02-09T23:24:00.007-05:00

How can the stock trader capitalize on the movement of stocks to gain trading profits? Getting the right reading on the direction of the stock is obviously very important. Determining the entry point (when to buy) and the exit point (when to sell) are equally important in addition to challenging. Related to the entry/exit points, the question of how long a stock should be held is also an important decision.

As with most stock trading topics, there are numerous approaches to the decision making process in terms of when to buy (where is the low point), when to sell (where is the high point), when to hold, or when to be out of the stock altogether.

There are various technical analysis techniques as well as charting systems that identify the up/down direction of a stock, trend lines, low/high price points and other factors important to the stock trader. I think of candlestick technical analysis as a particular expression or representation of a stock's price movement. Furthermore, candlestick charting provides a visual cue for the trader to identify low and high points, whether the stock is trending up or down, and trend reversal points.

More important than the type of technical analysis, the stock trader requires a trend following method with which to guide the buy/sell decisions. If the stock trader can ride the trend, the trade will yield a profit. A good trend following system yields the appropriate buy/sell signals for the stock trader to gain profits on a consistent basis. Such a system takes the guess work out of stock trading.

Candlestick technical analysis provides a good basis to formulate a trend following method. Candlestick charting provides a good visual for the stock trader to easily see the direction, trend and buy/sell signals.

StockTradersPlace (http://stocktradersplace.com) provides a trend following method based on the use of candlestick technical analysis, presented through candlestick charting. You may find this to be a good complement to your trading tools and resources for consistently successful trades.

Execute Winning Trades and Boost Your Trading Success

2009-02-09T19:29:00.015-05:00

Stock trading is complex and risky. There is much information to digest. Sometimes the information can present conflicting conclusions. There is much need to make the right decisions.

It is a daunting task to wade through the myriad of strategies and methods associated with stock trading. There is fundamental and technical analysis to consider. There is much to research in terms of company news and performance. There is a variety of technical trading techniques to investigate.

There are various timeframes for stock trading. Some employ a buy-and-hold strategy spanning years. Some engage in day-trading. And there are many who select trading timeframes between those two options.

Why do people participate in such a challenging endeavour with such high risks? One answer may be that the rewards can be high. With the appropriate level of research along with practice and experience over time, stock trading can be rewarding. However, each person has to evaluate the risk level to achieve a particular reward, commonly referred to as the risk-reward ratio.

How do people proceed to be successful with stock trading? The basic prescription for success involves preparation, practice and execution along with management of risks and expectations. Consult the wealth of information that is available on the web and in printed material.

Let’s consider a technical analysis technique as guidance for trading decisions. With no intention to trivialize the complexities of trading, it can seen that if a trader gets the direction of the stock right, the trade will be successful in yielding a profit.

Candlestick technical analysis provides a good method for following the trend. If the trend or direction of the stock movement can be followed, then that should lead to profit producing trades.

Whether you are a beginner in stock trading or an experienced trader, engaged in short-term or longer-term trading, the trend following method based on candlestick technical analysis available at StockTradersPlace (http://stocktradersplace.com) provides you with a powerful tool to make the correct decisions to execute winning trades on a consistent basis.