| Monday, Mar 01, 2010
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| Fear Factor |
| By Invested Central |
| Monday, Mar 01, 2010 01:38 |
If you are a trader, you need to fear the market at all times. This does not mean you need to wake up every day shaking and trembling. What it does mean is you need to fear it enough to know that out of nowhere it can turn on you and turn your good trades into bad ones fast.
It happens something like this. You take a long position in a stock and ride it up nicely. You get lulled into complacency forgetting that the market has a way of pulling out the rug from underneath you. All of the sudden, the market reverses and your stock goes with it. You don't worry too much about it, and as your stock pulls back you figure no big deal the selling will soon subside.
Unfortunately for you, the selling does not stop; in fact, you will come to learn in the days ahead that it had just started pulling back. Before you know it, the stock falls below your entry price and now you are not happy. In fact, you are so mad that you just dump it, and that great profit you had just a few days earlier is long gone.
This is why you need to keep that fear factor in your consciousness at all times, because unless you do, you will be lulled to sleep. Keep this in mind particularly if you have made a nice profit, stochastics are high and if you are moving towards important resistance.
Do you remember Franklin D Roosevelt's very famous saying, there is nothing to fear but fear itself? When he said that, he forgot the caveat, "unless you are trading in the stock market!" |
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| Thursday, Feb 25, 2010
| Permalink | |
| Raising Stops |
| By Invested Central |
| Thursday, Feb 25, 2010 10:39 |
If you are a disciplined trader, then you will always have a stop loss in mind when you enter a position. You might actually enter a physical stop or simply print the stop loss in your memory bank and watch in case it hits that area.
Whatever the case, if you buy a stock and it moves in the direction you want it to, then you should consider raising your stop along the way.
For example, say you buy a stock at $50 a share with a stop loss of $48. Right after you buy the stock, it moves up to $52. You should consider raising your stop up $1 to guarantee locking in at least $1 in profit. If the stock moves up even higher, say another $2, then raise your stop another $2, then you are guaranteed a $3 profit.
You might be thinking that by raising your stop you have a greater chance of being stopped but so what? What if you don't raise the stop and it pulls back and actually gets stopped out at the original stop loss area? That won't be any fun!
Trading is about one thing only; making money. When you find yourself on the positive side of the ledger, don't be afraid to protect those precious profits that are so hard to find. |
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| Saturday, Feb 20, 2010
| Permalink | |
| Luck versus Skill |
| By Invested Central |
| Saturday, Feb 20, 2010 08:55 |
When you are a trader, you need to make intelligent choices all the time. This means you need to do your homework and to make your decisions based on the best information available at the time of a trade. Some people think good trades are based upon a combination of skill and luck. This may be true, but the fact is if you rely upon luck too often, it won't do anything to fatten your trading profits. Instead, you need to be able to make spur of the moment decisions grounded in facts rather than rely on luck to see you through the trading day. Not that a little luck here and there isn't helpful, but relying on luck in lieu of smart choices doesn't make sense. Learn to make intelligent choices that increase your odds of succeeding. Learn as much as you can about technical analysis and what the successful traders know that you should as well; better good than lucky. |
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