The Art Of Picking A Stop When Trading Stocks

Posted on April 19, 2008
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Anyone who trades or invests in the stock market knows that proper money management requires one to figure out at what level the idea is wrong and should be cut off. This applies to both short sales and buying stocks long. I am going to share a few tricks of the trade for determining the proper stop loss when day trading stocks.

First off, pull up an intraday chart of the price for today. Exact timeframe does not matter, but a 5 minute chart will work fine. Look at the range (high-low) of the stock in the last 20-30 minutes or so. The larger the range, the larger your stop will likely need to be to let the stock have normal oscillations in price and not get you out for no reason. We will call this the micro-range. This micro range will help us create our automatic stop price while day trading. Once this is done, you should look for the last decent up bar (if going long), or the last decent down bar (if going short) in the last 30 minutes or so. To be on the safe side, for buying the price should currently be above the low of this up bar, and if shorting, the price should be below the high of this down bar. This will keep you from trying to guess the turn of the trend, and also is an excellent place to start with the stop. If there is not any decent up bar in the last 30 minutes (or down) to work off of, you can go back a bit more but you never want to go further back than about 60 minutes or so. If there still is nothing good, move on to another name or wait for that to happen so you have something to work from.

Once you have this high or low price, figure out how far from that low or high the price currently is. Compare this number to the micro-range number you had earlier. Ideally you want this micro range number (if subtracted from current price for long) to go decently below that low price, or for shorts, decently above the high price when added to it. This high or low pivot number should provide some support or resistance (if shorting), and that combined with the micro-range number you can figure out a stop. If the micro-range number when subtracted from current price is still above this low point for longs, you need to wait for a pullback to buy to lower the risk. Converse for shorts. Ideally you want the micro range to extent about 1/2 to 1/3 below the low for longs, but no more. Here is the reason - that pivot point will likely provide some support AND if at the same time the stock is getting a bit extended to the downside vs average movement, it is more likely to turn back up, even if it breaks it a bit.

Anyone wanting to watch day trading in action needs to see how a computer does it

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Mastering Technical Analysis

Posted on April 19, 2008
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Technical Analysis relates to the examination of a wide array of indicators and financial charts with a view to predicting future price positions based upon past precedents from comparable historical chart and indicator movements. Some academic studies have concluded that technical analysis can attain a higher degree of a likely outcome compared with just using fundamental analysis on its own.

Technical analysis makes use of all the technical and related information that you can glean pertaining to a traded instrument, be it a stock, option, currency, warrant or other derivative financial instrument. If you want to be successful and profitable over the long-term, you cannot avoid the requirement to educate yourself with a reasonable degree of knowledge of technical analysis as a part of your toolbox.

The good news is that with the advent of the Internet, we can now download a vast range of technical information with only a few clicks on our mouse. Further, there are powerful software solutions nowadays such as StockMarket Plus which can chart and crunch a great degree of data in a millisecond.

These advances should provide even more motivation to learn and master the science of technical analysis. There is an excellent interactive and self-paced technical analysis education program called Intelyze which enables you to master the many different elements to technical analysis at your own rhythm.

The Intelyze programme includes a four phase learning arrangement. Each indicator is first explained in detail. The program then makes available examples to demonstrate the explanation. It then makes available exercises for you to test yourself with, and finally allows you to self-assess your comprehension by comparing your exercise results with the program’s pre-installed result for each exercise.

The Intelyze Technical Analysis programme is data independent. That is to say that it is not connected to, or dependent upon, any other technical analysis software or data feed on the market. It will simply demonstrate how to interpret the output from any other analysis programs such as StockMarket Plus.

If you have clicked the link to the above Intelyze program webpage, you may have noticed a peel away ad in the top right hand corner of the page which advertises Success Uni. That is included on that webpage is because some of the courses as a part of the Success University curriculum cover financial education as well.

The Intelyze programme includes interactive help functions and an interactive manual, in addition to an interactive teacher that directs you through the course with sound and illustrations. The Intelyze programme doesn’t just provide you with video clips or formatted text course material. Rather, it includes a wide variety of navigational elements to bring interactivity beyond that of any other similar product on the market.

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Personal Growth With Success University

Posted on April 11, 2008
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Each passing month, increasing numbers of people are logging online to the Internet for the first time, and searching for information to help them obtain the things they want out of life. These searches cover the gamut of human needs from help to gain better health, relationships, weight loss, alternative therapies, to financial success and wealth creation strategies.

The level of information that people are often seeking goes beyond a 800 word article on a website. Increasingly, people are seeking thorough and structured education, now coined Webucation.

This type of online education is the most significant emerging trend online. It encompasses off-campus university courses, to online pod casts and videos, to membership sites, down to the humble ebook.

One of the most significant sectors in Webucation is the personal development industry. Forbes magazine recently classified Personal Development as an annual $64 billion dollar industry.

If you have ever read just a few personal growth books, you would most likely be familiar with one or more of the following names: Dr. Denis Waitley, Brian Tracy, Jim Rohn, Zig Ziglar, or Les Brown.

These educators are amongst the leading authorities on personal achievement and business philosophy in the world, and all are faculty members of Success University. Their training courses, and that of many others, form the backbone of Success University’s curriculum.

One of the greatest aspects to Success Uni is that it complements so many other industries as it provides low-cost, online access to courses from world renowned leaders in their fields on:

- Communication Skills
- Life Skills
- Leadership
- Relationship Skills
- Motivation
- Financial Success
- Real Estate Investing
- Sales
- Internet Marketing

As well as empowering its members to grow and learn as individuals, Success University provides the means for their members to enable others do the same by referring them to Success University’s website, and to create a long-term passive income for themselves by doing so.

Success University came online in January 2005. It became the no.1 most visited personal development website within 9mths. By the middle of 2007, Success Uni had enrolled eighty thousand students from one hundred and seventy eight countries. People from all walks of life in these one hundred and seventy eight different countries are following Success University’s tried and tested step-by-step system for success, and you can too.

You can enroll for a 14 Day full access trial to the Success University member’s area for only $2 and this is donated to a charity to help feed hungry children. To do so, navigate via the link behind the corner peel away ad which you can see in the top right hand corner of the page on the following personal development website. The 14 Day Trial gives you full member access to the entire online curriculum. The only thing not included is the physical CD and DVD which is sent out every month to full subscribers for the shipping cost.

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Knowing When to Get Out Just Got Easier

Posted on February 16, 2008
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Learning To Sell

Its funny how CNBC tells you what to buyand when, but they never suggest to you when to get rid of a company? Most traders are left with the big question: how to sell stock

Even Market Edge 360 is guilty of that sometimes. Our rationale for not providing any guidance on when to exit from a specific stock is simple: Each investor has their own unique style of trading and their own unique way of weighing in on their own preference for risk and return. Its always best for the individual investor to decide when to pull the chute and exit from a position, since the selling strategy must match their own trading style. However, unlike all those other guys, we can provide a couple of suggestions that will help you know when to get out.

If you talk to any successful trader, they will tell you that picking a stock is the simple part. Its the selling part that is the toughest. You can spend hours investigating a company, you can spend hours looking for the best time to buy, countless more hours watching as it moves higher or lower. Its not tough to gain an attachment after spending so much time together. Its that attachment that makes knowing when to sell all the more difficult.

Here are some suggestions:

After a Stock Moves Higher

a) Don’t let greed take over. Its easy to start counting your new found wealth before its in your bank account. Protect your profits by having a trailing stop loss in place. By placing a stop loss 5-10% below the current price (you can also use tonight’s closing price if you can’t follow the action during the day), you can lock in a profit (or protect yourself from a larger loss). If the price closes at $10, set your stop loss at $9.00 or $9.50 depending on your risk / reward tolerance. If the price dips below your stop loss, you’re out of the market while others are holding onto a stock that is moving lower. Its always a good idea to lower your stop loss the higher your gain. For example, if you buy a stock at $5, you might place your first stop loss at 10% below that price ($4.50). As the stock moves higher, place another stop loss, but at a lower stop loss, perhaps, say, at 5% if the stock moved to $10 (setting your stop loss at $9.50). This trick will help you to keep more of your money. Remember, 10% of $5 is $0.50, while 10% of $10 is $1.00. Multiply those amounts by the number of shares you’re holding, and you can see why we suggest using a smaller amount for your stop loss.

b) Don’t get greedy. If your stock doubles, sell half your position. This way, you can let your winners run without risking your original capital. That’s what the name of the game is. Keeping the capital and adding to it.

c) Now that the price moved up, if you didn’t already own the stock, would you buy it today? When your answer is no, its time to sell. If you wouldn’t buy it at the current levels, why would someone else?

d) Use technical analysis. When your chart is saying its time to sell, don’t question it, just do it.

After a Stock Moves Lower

This should be the easiest thing to do, yet is the hardest. This is where many investors make mistakes, costly mistakes. Don’t let fear and doubt question what you know is the right thing to do.

After you have spent hours looking over every inch of info a company can produce, and you’ve laid down your hard earned money, there is nothing in the world tougher to admit than to say you were wrong. At the end of the day, the market is right. All of the due diligence doesn’t mean a thing if the majority of people don’t agree with your conclusions. A stop loss will help. If you buy a $5 stock, set your stop loss at $4.50 or $4.75 and keep it there. If you get hit, its better to stop your losses at 5-10% than to let them grow higher. Remember, 50% losses started off as 5% losses. If you get stopped out, take your lumps and go back to the drawing board. You missed something, or the rest of the world missed something. Either way, there are not enough buyers ready to buy your shares for more than you paid for them.

Fear will not allow you to make a rational decision. It can and will paralyze you and make you sell at the bottom or hold when you should sell. Stick to your plan. You wont hit homeruns each time at bat, but if you can keep your losses low, when you finally hit that homerun, you’ll have more money to enjoy it with! Stock market investing is not easy - but it can be profitable.

Food for thought:

If you started with $100 000 dollars, you could make set your stop loss at 10% and make 37 trades before running out of money. Set your stop loss at 5%, and you’ll be at bat 76 times. Set your stop loss at 3% and 128 chances are yours. Needless to say, it doesn’t take a genius to figure out that if you can make a profit when you have at least 37 chances, trading is not for you. Not everyone has $100 000 to start off with, so odds are, you’ll have fewer chances. Increase your losses, and you wont be investing after only a few trades.

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