Trading many different positions can benefit you greatly. There are a number of reasons why trading many positions at a time can be helpful.
1. It decreases dependency on any one trade. If you have multiple trades open at one time you are not depending that one trade is going to work out. While having one trade can potentially give you higher rewards it can also give you a higher risk and be more stressful if the trade turns against you.
2. It lightens surprises. If one stock gaps in the wrong direction that can be hard for your trading account. But if you have 5 other trades going at the same time the loss you experience can be covered up by your other trades.
3. Trading multiple positions allows you to cover both directions in the market. If you have a bullish trade and the market crashes you will probably lose money on that trade. However if you have a few bearish trades as well as bullish trades the money you make from the bearish trades during a crash can offset the money you would lose from bullish trades. Having multiple trades open can be useful for protection.
4. It gives you less stress. If you only have one position open and it does not do what you expect it to it can be stressful. Getting frustrated is not only a bad feeling but it can work against you in the stock market. If you are stressed you will most likely make bad decisions, (or at least not the best decisions). Now if you have multiple positions open you will not feel so stressed about one trade. That trade could turn sour and you still make money with your other positions. This allows you to make calm rational decisions and lets you sleep easier at night.
For more information about the stock market visit http://www.stocks-simplified.com
Wednesday, August 20, 2008
Tuesday, August 19, 2008
Researching stock trades
It is important to keep track of stock market events when trading. If you do not you may often encounter sudden suppresses.
The first thing you want to be aware of is the federal meetings. Every now and then the feds cut or raise interest rates. This can have a big impact on the movement of the market. Stocks may rally on the news of an interest rate cut and fall on news of an increase in the interest rate. This due to the fact that lower interest rates help businesses and aid growth, higher interest rates can hurt growth.
Another thing you may want to keep an eye out for is earnings announcements. If a company has good earnings there stock is likely to go up. If they have bad earnings there stock is likely to go down. Predicting earnings can be risky, it can be a good idea to stay away from a stock announcing its earnings.
You may also want to check on the company itself to make sure that it is a good company. Every time I place a trade I take a quick look at the company itself to see how they are doing. You do not want to buy a stock that is going to go bankrupt tomorrow.
Finally you always want to check out the technicals of a given stock before you buy it. Is it up trending? Forming any chart patterns or candlestick patterns? That can be very important in deciding which way to trade the stock, or if to trade the stock at all. Checking the trend of the industry group and overall market may be helpful as well.
There is a lot of homework to be done for every trade. Just remember not to overdo it. While it is important to put the odds in your favor, you need to pull the trigger if you want to make money. You can’t wait until everything is perfectly aligned before you act.
For more information about the stock market visit http://www.stocks-simplified.com
The first thing you want to be aware of is the federal meetings. Every now and then the feds cut or raise interest rates. This can have a big impact on the movement of the market. Stocks may rally on the news of an interest rate cut and fall on news of an increase in the interest rate. This due to the fact that lower interest rates help businesses and aid growth, higher interest rates can hurt growth.
Another thing you may want to keep an eye out for is earnings announcements. If a company has good earnings there stock is likely to go up. If they have bad earnings there stock is likely to go down. Predicting earnings can be risky, it can be a good idea to stay away from a stock announcing its earnings.
You may also want to check on the company itself to make sure that it is a good company. Every time I place a trade I take a quick look at the company itself to see how they are doing. You do not want to buy a stock that is going to go bankrupt tomorrow.
Finally you always want to check out the technicals of a given stock before you buy it. Is it up trending? Forming any chart patterns or candlestick patterns? That can be very important in deciding which way to trade the stock, or if to trade the stock at all. Checking the trend of the industry group and overall market may be helpful as well.
There is a lot of homework to be done for every trade. Just remember not to overdo it. While it is important to put the odds in your favor, you need to pull the trigger if you want to make money. You can’t wait until everything is perfectly aligned before you act.
For more information about the stock market visit http://www.stocks-simplified.com
Monday, August 18, 2008
The Do Not Trade List
Most traders keep a watch list, but it is beneficial to keep a do not trade list as well. This is a list that is simply a list of stocks to watch out for. These stocks you want to do your best to stay away from and not trade.
When I was first trading, I would back test and paper trade new systems, which I continue to do. One thing I would notice is that my systems would work extremely well when I was trading some stocks but would work terrible on other stocks.
This is true regardless of how you trade. It makes sense. People move stocks. Every person has a different personality, and most traders have a few stocks that they prefer to trade. Therefore every stock behaves slightly different.
Even though all stocks follow the basic rules of technical and fundamental analysis the way in which they follow those rules vary from stock to stock. In short everyone has a different personality and that is true with stocks as well.
Just like you do not get along with some people you will not get along with some stocks. They may not behave in the way that you may want or expect them too. Of course that can be frustrating.
This is why keeping a do not trade list is very important. If you find that a certain stock is not giving you good results while others are you may want to make a note of it and stop trading that stock. But remember you can’t tell whether a stock doesn’t like your trading method based on one trade. You can only tell after a series of trades.
Keeping a list of stocks that do not agree with you can save you thousands of dollars in trading losses. It is well worth it.
For more information about the stock market visit http://www.stocks-simplified.com
When I was first trading, I would back test and paper trade new systems, which I continue to do. One thing I would notice is that my systems would work extremely well when I was trading some stocks but would work terrible on other stocks.
This is true regardless of how you trade. It makes sense. People move stocks. Every person has a different personality, and most traders have a few stocks that they prefer to trade. Therefore every stock behaves slightly different.
Even though all stocks follow the basic rules of technical and fundamental analysis the way in which they follow those rules vary from stock to stock. In short everyone has a different personality and that is true with stocks as well.
Just like you do not get along with some people you will not get along with some stocks. They may not behave in the way that you may want or expect them too. Of course that can be frustrating.
This is why keeping a do not trade list is very important. If you find that a certain stock is not giving you good results while others are you may want to make a note of it and stop trading that stock. But remember you can’t tell whether a stock doesn’t like your trading method based on one trade. You can only tell after a series of trades.
Keeping a list of stocks that do not agree with you can save you thousands of dollars in trading losses. It is well worth it.
For more information about the stock market visit http://www.stocks-simplified.com
Sunday, August 17, 2008
Using stops VS not using stops
There is a lot of debate out there on the use of stop order. Some people believe that stop orders get you out too early while others say that the loss prevention it provides far outweighs the possibility of getting out to early.
I believe that every trade should have a stop loss order on it. This is especially true when you factor in such things like a market crash. Now I know no one likes to think of the market as crashing. I have even heard people talk as if market crashes were unusual things. No they happen every couple years, it is a natural part of the market and you must be prepared for them.
I have seen strong up trending stocks fall 15% or 20% in one day. In these cases it would be much better to place a stop order and only lose say 5% then to not and have a 20% loss (and if the market gaps down that loss can be even higher).
Stop orders are designed for capital preservation. If you let your trades run wild you can end up losing a huge chunk of your account. Remember when trading capitol preservation always comes first.
You can ride an up trending stock all the way up as long as it doesn’t hit your stop. If it hits your stop you’re out. It does not matter if you believe that this stock is going to keep heading up, you simply cannot afford to let the stock pull back and take away your profits, or even put you in the red.
Most traders will put there stop below the trend line or below the moving average. If you are shorting you may want to put your stop above the trend line or above the moving average. The important thing is that you have an exit planed on all trades.
For more information about the stock market visit http://www.stocks-simplified.com
I believe that every trade should have a stop loss order on it. This is especially true when you factor in such things like a market crash. Now I know no one likes to think of the market as crashing. I have even heard people talk as if market crashes were unusual things. No they happen every couple years, it is a natural part of the market and you must be prepared for them.
I have seen strong up trending stocks fall 15% or 20% in one day. In these cases it would be much better to place a stop order and only lose say 5% then to not and have a 20% loss (and if the market gaps down that loss can be even higher).
Stop orders are designed for capital preservation. If you let your trades run wild you can end up losing a huge chunk of your account. Remember when trading capitol preservation always comes first.
You can ride an up trending stock all the way up as long as it doesn’t hit your stop. If it hits your stop you’re out. It does not matter if you believe that this stock is going to keep heading up, you simply cannot afford to let the stock pull back and take away your profits, or even put you in the red.
Most traders will put there stop below the trend line or below the moving average. If you are shorting you may want to put your stop above the trend line or above the moving average. The important thing is that you have an exit planed on all trades.
For more information about the stock market visit http://www.stocks-simplified.com
Saturday, August 16, 2008
How to Handle a losing streak
Every trader has a losing streak now and then. It is a natural part of trading. The key is knowing what to do when you get into a losing streak.
If you are having a losing streak you should take that time to learn from your mistakes. There has to be a reason for having a large number of losses. It is important to try and figure out what that reason might be.
Try to look at how you are trading know and see what you are doing wrong. Are you getting stopped out too soon? Are you exiting your winners too early? Letting your losses get too big? Figure it out and adjust for it.
Another thing you can do is scale back. Try and make fewer trades and/or have them take up less of your account. Get stricter with your money management rules. It is not fun having a string of bad trades so you should keep your losses to a minimum.
Getting pickier can also help. Only take trades that have everything on your side, good fundamentals, good technicals, good industry group, ect. Maybe check to see if the planets align couldn’t hurt. It is better to take less risk in bad times and save the higher risk stuff for your winning streaks.
And last but not least don’t worry so much. Life is rich take a break. Go do something you enjoy and have fun. Try to forget about trading for a while. Spending all of your time worrying about what the stock market is doing can be very stressful.
Getting stressed out isn’t going to help but clearing your mind will. It is important to remember losing streaks shall pass. What is important is keeping a positive attitude and keeping your losses small, especially during bad times.
For more information about the stock market visit http://www.stocks-simplified.com
If you are having a losing streak you should take that time to learn from your mistakes. There has to be a reason for having a large number of losses. It is important to try and figure out what that reason might be.
Try to look at how you are trading know and see what you are doing wrong. Are you getting stopped out too soon? Are you exiting your winners too early? Letting your losses get too big? Figure it out and adjust for it.
Another thing you can do is scale back. Try and make fewer trades and/or have them take up less of your account. Get stricter with your money management rules. It is not fun having a string of bad trades so you should keep your losses to a minimum.
Getting pickier can also help. Only take trades that have everything on your side, good fundamentals, good technicals, good industry group, ect. Maybe check to see if the planets align couldn’t hurt. It is better to take less risk in bad times and save the higher risk stuff for your winning streaks.
And last but not least don’t worry so much. Life is rich take a break. Go do something you enjoy and have fun. Try to forget about trading for a while. Spending all of your time worrying about what the stock market is doing can be very stressful.
Getting stressed out isn’t going to help but clearing your mind will. It is important to remember losing streaks shall pass. What is important is keeping a positive attitude and keeping your losses small, especially during bad times.
For more information about the stock market visit http://www.stocks-simplified.com
Friday, August 15, 2008
Keeping Losses Small
Keeping your losses small is a very important part of trading. Small losses can easily be overcome by large winners. However many traders gain let their losses run wild.
Too many traders will not exit there trades when they start to turn against them. They will hold onto their stocks and hope it turns around. They might even turn this short term trade into a long term trade. Bad idea, if you enter a trade as a short term deal you cannot switch it to be a long term trade all of a sudden. That mistake can be the death of most traders.
There are many reasons why cutting your losses short can be a great idea.
1. Everybody is wrong sometimes. I have never met a trader who is right 100% of the time. It is better to have small losses then have large losses when you are wrong.
2. Small losses can be easily overcome. If you keep your losses small they can easily be overcome by your winners. One large winner can easily offset several small losses.
3. Taking small losses lets me sleep at night. If I take small losses I quickly forget about it and move onto the next trade. If I don’t cut my losses short they can add up and make me worry. How many times have you seen a stock head against you and you decide to hold onto the position, only to end up regretting that decision later on? Letting your losses run can be hard on you mentally so why let it happen?
4. Taking small losses let me come back. If I only lose 2% of my account on 1 bad trade it doesn’t hurt me that much and lets me come back. However if I lose 50% of my account on 1 bad trade it is going to be hard to come back.
For more information about trading in the stock market visit http://www.stocks-simplified.com
Too many traders will not exit there trades when they start to turn against them. They will hold onto their stocks and hope it turns around. They might even turn this short term trade into a long term trade. Bad idea, if you enter a trade as a short term deal you cannot switch it to be a long term trade all of a sudden. That mistake can be the death of most traders.
There are many reasons why cutting your losses short can be a great idea.
1. Everybody is wrong sometimes. I have never met a trader who is right 100% of the time. It is better to have small losses then have large losses when you are wrong.
2. Small losses can be easily overcome. If you keep your losses small they can easily be overcome by your winners. One large winner can easily offset several small losses.
3. Taking small losses lets me sleep at night. If I take small losses I quickly forget about it and move onto the next trade. If I don’t cut my losses short they can add up and make me worry. How many times have you seen a stock head against you and you decide to hold onto the position, only to end up regretting that decision later on? Letting your losses run can be hard on you mentally so why let it happen?
4. Taking small losses let me come back. If I only lose 2% of my account on 1 bad trade it doesn’t hurt me that much and lets me come back. However if I lose 50% of my account on 1 bad trade it is going to be hard to come back.
For more information about trading in the stock market visit http://www.stocks-simplified.com
Thursday, August 14, 2008
What it takes to be a great trader
There are a number of traits that someone must obtain if they want to be a great stock market trader. These traits are critical to your success as a stock market trader.
1. Controlling your emotions. This is an extremely important part of trading. How many times have you gotten into a stock because everyone was making money with it. You are afraid of missing the opportunity so you jump in only to see the stock crash. Emotions control most traders and often leads to a loss of capitol.
2. Don’t give up with a few losses. Trading is abundant with both wins and losses. If you have one or two bad trades that does not mean that you should stop trading all together, especially if you believe in your system.
3. Cutting your losses short. This is one of the most important parts of trading. Losses are nothing to be scared of. They are a part of trading. The trick is to cut your losses short and let your winners run to make up for any loss you may encounter.
4. Manage your positions. The best trader in the world will go broke if they do not use proper position sizing. You only want to risk a small part of your account for any one trade 2-5%. This way if you are wrong it is not the end of the world. You will still have capitol to make future trades with if you are wrong.
5. Learn from every loss. It is important to learn something from every loss. If you don’t you will just end up losing again on a similar trade in the future. As the old saying goes, “Those who do not study the past are doomed to repeat it”.
6. Never lower your stops. It is natural to want to lower your stop if your stock pulls back, after all no one wants to take a loss. But lowering your stops can often lead to bigger losses, remember cutting your losses short is the best thing you can do when trading.
To learn more about the stock market visit http://www.stocks-simplified.com
1. Controlling your emotions. This is an extremely important part of trading. How many times have you gotten into a stock because everyone was making money with it. You are afraid of missing the opportunity so you jump in only to see the stock crash. Emotions control most traders and often leads to a loss of capitol.
2. Don’t give up with a few losses. Trading is abundant with both wins and losses. If you have one or two bad trades that does not mean that you should stop trading all together, especially if you believe in your system.
3. Cutting your losses short. This is one of the most important parts of trading. Losses are nothing to be scared of. They are a part of trading. The trick is to cut your losses short and let your winners run to make up for any loss you may encounter.
4. Manage your positions. The best trader in the world will go broke if they do not use proper position sizing. You only want to risk a small part of your account for any one trade 2-5%. This way if you are wrong it is not the end of the world. You will still have capitol to make future trades with if you are wrong.
5. Learn from every loss. It is important to learn something from every loss. If you don’t you will just end up losing again on a similar trade in the future. As the old saying goes, “Those who do not study the past are doomed to repeat it”.
6. Never lower your stops. It is natural to want to lower your stop if your stock pulls back, after all no one wants to take a loss. But lowering your stops can often lead to bigger losses, remember cutting your losses short is the best thing you can do when trading.
To learn more about the stock market visit http://www.stocks-simplified.com
Wednesday, August 13, 2008
Why use Technical Analysis?
There are a number of reasons why using technical analysis can be a great way to make money in the stock market.
1. Technical Analysis allows you to cut your losses short and let your winners ride. A good majority of trading is all about cutting your losses short. Technical Analysis allows you to enter trades where you stand to lose a little if you are wrong and make a lot if you are right.
2. Technical analysis is founded on price action. Supply and demand is the real force behind the stock market. If a stock has great Fundamentals, but no one wants to buy the stock it is not going to go up. Using price patterns is the most accurate way to determine how fear and greed are running the markets.
3. Technical Analysis allows you to make short term trades. Because it allows you to make short term trades it allows you to take advantage of compound interest. Someone who can consistently make 5% a month will far outpace someone who can consistently make 20% a year.
4. I can’t compete using Fundamental Analysis. Fundamental Analysis may be a great way to make money in the stock market but it is hard for the average person to compete. This is especially true when you consider big corporations will billions to invest in spending big money to figure out the fundamentals. It is impossible for someone to know as much as they do so why compete with them.
5. Technical Analysis allows you to find the big corporations. If a stock is in an uptrend with high volume it is safe to say someone with big money is investing in that company. Someone who most likely knows more about the company then the average person feels confident to put their money there so why not take advantage of that and trade that stock.
For more information about the stock market visit http://www.stocks-simplified.com
1. Technical Analysis allows you to cut your losses short and let your winners ride. A good majority of trading is all about cutting your losses short. Technical Analysis allows you to enter trades where you stand to lose a little if you are wrong and make a lot if you are right.
2. Technical analysis is founded on price action. Supply and demand is the real force behind the stock market. If a stock has great Fundamentals, but no one wants to buy the stock it is not going to go up. Using price patterns is the most accurate way to determine how fear and greed are running the markets.
3. Technical Analysis allows you to make short term trades. Because it allows you to make short term trades it allows you to take advantage of compound interest. Someone who can consistently make 5% a month will far outpace someone who can consistently make 20% a year.
4. I can’t compete using Fundamental Analysis. Fundamental Analysis may be a great way to make money in the stock market but it is hard for the average person to compete. This is especially true when you consider big corporations will billions to invest in spending big money to figure out the fundamentals. It is impossible for someone to know as much as they do so why compete with them.
5. Technical Analysis allows you to find the big corporations. If a stock is in an uptrend with high volume it is safe to say someone with big money is investing in that company. Someone who most likely knows more about the company then the average person feels confident to put their money there so why not take advantage of that and trade that stock.
For more information about the stock market visit http://www.stocks-simplified.com
Monday, August 11, 2008
Staying calm when trading
It is important that you always stay calm when trading, even when you are having a difficult time in the market. If you do not stay calm in the markets when they are going against you it can be dire to your account.
First of all if you are not calm it will be harder for you to examine the situation and look for the best possible plan of action. That can be as helpful in the stock market as it can be in all areas in life.
Another great reason you want to remain calm in the stock market is because of the effects of not being calm. If you panic you are likely to make many mistakes in the market. The mistakes that you make when trading cost you money. In this case it is best not to panic.
In addition to staying calm it is always better to remain positive at all times. The more negativity you associate with the stock market the harder it will be for you to make money with it. You must be positive in order to become a great trader.
Staying patient can also be a great way to cope with a market situation that may be hard to trade. You can always stay out when the markets get too volatile and get back in when they have picked a direction. This way you will not lose money when you are confused about which way the markets are heading.
Staying calm is really the corner stone to successful trading. As a trader you need to be able to make decisions in all market cycles that can greatly help or hurt you. If you are unable to remain calm it is best to exit your trades and take a vacation. When you feel better then come back and do it again.
For more information about the stock market visit http://www.stocks-simplified.com
First of all if you are not calm it will be harder for you to examine the situation and look for the best possible plan of action. That can be as helpful in the stock market as it can be in all areas in life.
Another great reason you want to remain calm in the stock market is because of the effects of not being calm. If you panic you are likely to make many mistakes in the market. The mistakes that you make when trading cost you money. In this case it is best not to panic.
In addition to staying calm it is always better to remain positive at all times. The more negativity you associate with the stock market the harder it will be for you to make money with it. You must be positive in order to become a great trader.
Staying patient can also be a great way to cope with a market situation that may be hard to trade. You can always stay out when the markets get too volatile and get back in when they have picked a direction. This way you will not lose money when you are confused about which way the markets are heading.
Staying calm is really the corner stone to successful trading. As a trader you need to be able to make decisions in all market cycles that can greatly help or hurt you. If you are unable to remain calm it is best to exit your trades and take a vacation. When you feel better then come back and do it again.
For more information about the stock market visit http://www.stocks-simplified.com
Monday, August 4, 2008
Different option strategies
There is a wide variety of different option strategies, each with their own advantages and disadvantages. Below is a list of the different things you can do with options.
1. Buying short term options. This can be beneficial if you believe that a stock is going to make a big move anytime soon. This strategy is not for the long term but seeks to take advantage of sudden swings.
2. Buying Leaps. Unlike short term options the leap is said to take advantage if the longer term prospective on a stock. Because a leap is normally one to two years out you would have a long term perspective with the power of leverage on your side as well.
3. Selling short term options. This strategy tries to capture an income from the market by Selling out of the money options and collecting the premium. As long as the stock does not go past the strike price of the option the option would expire worthless and you would walk away with the premium.
4. Selling covered calls. This is similar to selling short term options. There are only two major differences. The first one is that you are limited to selling call. The second is you buy the stock first so that if the stock goes above your strike price and you have to sell you do not have to buy the stock at a higher price and sell it at a the strike price of the option. You already have the stock so you will just sell what you already own.
5. Forming a diagonal spread. This is similar to the covered call strategy. The only difference is that you buy the leap or the right to buy a stock at a given price and sell short term calls. If you get called out you can buy the stock with the leap and sell it.
For more information about the stock market visit http://www.stocks-simplified.com
1. Buying short term options. This can be beneficial if you believe that a stock is going to make a big move anytime soon. This strategy is not for the long term but seeks to take advantage of sudden swings.
2. Buying Leaps. Unlike short term options the leap is said to take advantage if the longer term prospective on a stock. Because a leap is normally one to two years out you would have a long term perspective with the power of leverage on your side as well.
3. Selling short term options. This strategy tries to capture an income from the market by Selling out of the money options and collecting the premium. As long as the stock does not go past the strike price of the option the option would expire worthless and you would walk away with the premium.
4. Selling covered calls. This is similar to selling short term options. There are only two major differences. The first one is that you are limited to selling call. The second is you buy the stock first so that if the stock goes above your strike price and you have to sell you do not have to buy the stock at a higher price and sell it at a the strike price of the option. You already have the stock so you will just sell what you already own.
5. Forming a diagonal spread. This is similar to the covered call strategy. The only difference is that you buy the leap or the right to buy a stock at a given price and sell short term calls. If you get called out you can buy the stock with the leap and sell it.
For more information about the stock market visit http://www.stocks-simplified.com
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