The Shift To Technical Analysis For Successful Trading
Posted on June 30, 2008
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The stock market will get the best of every trader at some point. That is just a fact right? Well…I don’t believe it is and I’ll tell you why.
In my experience, the difference between successful and non-successful traders is self-awareness, not market favoritism. The stock market isn’t a “thing” that pursues personal vendettas…it’s simply a stream of data. And in fact, the only thing that gives meaning to this stream of data is our background knowledge of it, and our own interpretations and experiences with it. Making the best and most consistent use of this knowledge and experience, requires an understanding of our own personal data stream first—that is, knowing who we are, what our tendencies are, our strengths, weaknesses, beliefs, and perspectives.
I am often asked, what went wrong? Why did “this” or “that” trade go against me? Why is this market so horrible for trading? Why does the market hate me? I respond with a question of my own; “Can you explain to me your thinking for entering the trade…let’s start there?” Usually I am met with a response that involves a nod to a particular newsletter or the hint of a stock guru and a hot trade of the week etc. Not surprisingly, this response attempts to explain someone else’s thinking behind a trade more so than the individual’s thinking—and also not surprisingly, this type of trader typically comes to express at some point, that the market is out to get them. But don’t get me wrong, a feeling that the “market is out to get you” is not limited to get-rich-quick hopefuls…it strikes traders with far more experience as well.
In my opinion, the moment we frame in our mind, that it is “us against the market,” we instantaneously sabotage our success as traders. It’s all down hill from that point on because for one, the market doesn’t even know who we are and neither do the stocks. Tell me if this sounds familiar? We buy stock XYZ and hours, days or months later, we sell it for a loss. Then, in an effort to “get our money back,” we re-buy the same poor performing stock in order to exact not only financial recovery but…what? Revenge against a stock that had it out for us? Pride? A moral victory against our nemesis?
This common occurrence may bring a smile to some of our faces—if we are among the fortunate—but that thinking/strategy is all too common and all too often the undercurrent of thinking that ruins a traders future plans, even before they have a chance to discover what the successful trader has learned. And this is: the market is just a stream of data flowing along with or without our presence. Our goal is to find the currents that suit our needs and to ride out those currents with relative ease, not to become the determined salmon fighting every inch of their way against the current in a life or death struggle. The market—or stream—is what it is, and we have the choice to fight it or ride it.
What is our goal when we interact with the stock market? It is a simple question that too few take the time to consider. Add to that, this question—why am I placing this trade? I find that even fewer traders pose this question with the necessary amount of forethought and at the appropriate time. If we don’t know why we are interacting with the stock market, or understand what our fundamental rationale for executing a trade is…then we need to take a step back and take a serious look at these areas of our trade plan.
A trader’s goal is to create profits on a consistent basis. We all know that riding this data stream and becoming a “river-rafting” guru is far easier said than done. But why is this? Why can’t each and every trade make it to the promise land? Why do so many fail, seemingly, even before they execute their first trade? Why are so many frustrated with the results of their trading and the movement of the market? I believe it has a lot to do with this idea of self-awareness, market perspective, and confidence born out of planned consistency. It certainly doesn’t come from pitting ourselves against the market and waging a one-sided fantasy battle!!
In my experience, successful traders are consistent in their own behaviors and execute trades without fear of the result. Not without fear of consequence…but without fear of the result. Among other attributes, I find successful traders to exhibit a confidence in their trading systems and in their own personal philosophies. They begin with trade plans and build confidence systematically, by way of working to grow and improve their trade plans. They develop criteria and checklists that identify potential trades, and then utilize consistent and pre-established rules for executing their entries and exits. They consider their judgments sound—for either a profit or a loss—because they have learned to first trade by plan and not trade by emotion. Successful traders know at all times, what their goal is and why they are placing each specific buy and/or sell.
So how do you become the river rafting professional and ditch the I’m-going-to-be-the-first-salmon-to-reach-the-top thinking? I believe we get there by stepping back regularly, and looking inward. We must consider and review our perspectives of the market and make efforts to reconsider and make changes to, any defeatist attitudes we maintain about the market and our place within it. We must all develop a proper mental structure for interacting with the market. The consistency that we most desire will not be found thru indicators or market information. It is most important to find—and will be found—within our own attitudes and beliefs, regarding the market and the results of our individual trades and plans. We make or lose money on our trades; nobody and no “thing” does this for us—or to us.
So no, success is not about the latest stock market craze or about the most effective technical indicators. Success begins with our internal discipline—not with technique or market knowledge…or by the power of “this” oscillator or “that” moving average. Even with the knowledge of a new and improved trading style, we will still suffer the same pitfalls if we have not set-up the correct mental structure to keep us from repeating reckless and unplanned trades.
Marc Douglas, author of Trading In The Zone, puts it this way. Marc says, “…when you acquire the right mind-set, you will be able to trade without fear. You will no longer be susceptible to the multitude of fear-based errors that come from rationalizing, subconsciously distorting information, hesitation, jumping the gun, or hoping. Once the fear is gone, there just won’t be a reason to make these errors and, as a result, they will virtually disappear from your trading.”
I believe Marc Douglas has hit it spot on. It’s easy to fall under the belief that the market has it out for us and an easy conclusion to reach because it implies there is no more we can do ourselves to correct poor results. It removes responsibility and conveniently points outwards. But there is nothing easy about trading and relinquishing responsibility only serves to create unnecessary turmoil and failure for traders. The fact is…the stock market has no personal vendetta and the data stream itself has no meaning, until we apply our background and experience. If you are in a rut or have struggled with negative feelings and beliefs about the market, fear not, you have come to the right place. Together, we will work to develop winning attitudes (mental analysis) that use effective trade plans (technical analysis) to obtain trading consistency.
How To Cash In On The Stock Market Using Effective Trade Plans
Posted on June 30, 2008
Filed Under Stock Market | Leave a Comment
WHY HAVE A TRADE PLAN:
Each time you fire up the trading software, you transport yourself into the world of global markets. You are traveling! Your purpose for traveling into this world…is profit; returning home with profit is your short-term goal. Long-term, you are likely in search of capital growth, stability, income and longevity. Experienced travelers use travel plans to venture from one location to another, and Accendo Traders strongly recommends trade plans for the stock market traveler.
The alternative is risk attraction. Travel risk directly threatens your short-term goal of profit; but more importantly, it assaults your long-term goals of capital growth and longevity. Whether traveling to an unfamiliar city or into the global stock market via trading, the risks are the same. Risk in the form of: Getting lost, Wasting time, Capital mismanagement and strained decision making, Confusion, Late to the party, Unnecessary surprise, Fear, and even running short of funds before the trip ends. The risks are many and the list continues, but the point is: Effective trade plans inherently acknowledge the risks of trading and prepare you for them.
When we trade, we aren’t simply traveling down the street to our local food market (a short jaunt we can make with eyes closed). No. More accurately, as traders, we are traveling to foreign countries…trips that require maps, research, preparation and planning. This is why keen stock traders develop trade plans. Trade plans provide us with every advantage of the travel plan. Think of yourself as a global market traveler.
Viewed in their most encompassing light, trade plans are the means by which we become self-sufficient traders…they define our personal ownership of intent to succeed. Your macro or master trade plan…creates foundation and future objective by answering questions large in scope: Where do I begin (departure), Where am I going (destination), and How will I get there (your chosen route).
Viewed in their most focused light, micro or daily trade plans…are the means by which we ensure the least risk and safest return on each trip or individual trade. At this level we answer questions smaller in scope, but no less vital than the ones above: What indicators do I use, How much do I purchase, What loss do I accept, What profit is enough etc.
Between the master trade plan and the daily trade plan, you will develop your own unique trade plan philosophy; you will build a foundation, access and make the best use of your experience and resources…develop organization, repeatability and documentation. More than just a valuable trading tool, trade plans become a valuable training tool. In essence, trade plans allow you to learn, grow, adapt, develop pattern and routine, and ultimately prepare you for the day you get lost (it may happen within a specific trade and only last a few hours, or 3 years along into your global market travels and last for months…but at some point we all experience the emotion of ‘lost’). Trade plans provide us with the ability to respond to this emotional reality, in a way that furthers our growth and trading goals.
Does this sound complex, time consuming or daunting? It’s not. Trade plans present themselves more naturally than one would think. Remember, all we are talking about here, is developing a travel plan! For example:
How do I get from my house to my business conference: How much will it cost, will I drive or fly, what will I pack, who will I know? What city will I be in, how does the weather look, what comforts do I require? Translate these questions into trading terminology and you have: How do I get from my computer to a stock I want to buy, how much will it cost, will I buy 200 shares or 2000, what tools will I need and what indicators will I use; will I trade alone or with a group…who do I know? What Stock Exchange will I trade, is current market sentiment sunny or cloudy, what aspects of trading am I most comfortable with, and what comforts do I require?
You see? We desire more than simple strategies when venturing into the global market; Strategies alone will not produce self-sufficiency. Yes…we can charter a bus (find ourselves a stock picker), and allow this person to shuttle us along on a pre-packaged sightseeing tour…these can be fun once in a while; there are even benefits to this strategy. But it certainly isn’t free of charge. And what happens on the day we sleep in and miss the bus? We’ve already paid in full and now we’re left standing outside the motel holding the bag: lost. Well, if you’ve been reading along with interest, you’ve already begun the researching process, developing your trade plan and building the foundation of self-sufficiency; you aren’t planning these trips for fun—but for profit first, and capital growth to follow.
So lets begin the first leg of this trip together, with a discussion of what will become a cornerstone of your trade plan development…maps!
Maps have been a staple of human development since the beginning of time, and the concept of maps in tandem with the development of a trade plan will serve you well as a trader. As a people, we have mapped the stars, the continents and the weather—cities, roads and rivers. We have in fact mapped history! The world of markets is so tremendously large; traveling into the realm of them would be foolhardy without a reliable set of maps. As a trader new to the profession, we use maps for direction. As a trader in the midst of our adventure, we use maps for efficient and effective navigation. As a trader nearing the end of our journey (daily or yearly), we use maps to plot the way back home.
Maps provide 3 key elements: Scale, Compass and Substance
1. Maps provide scale: Sites such as Google Maps operate so seamlessly, it’s easy to dismiss the concept of scale; yet, each time we click ‘zoom’ we view a brand new map with its own unique boundaries. The same rules apply to charting software and to all facets of our trading research. Choosing the proper scale—and zooming between multiple scales—is everything when it comes to trading.
2. Maps provide compass: studying a good map will lead us to ask the most expedient questions and point us in a direction that furthers our travels, our research and our trade plan development. It’s often tempting to view our maps and trade plans “as-the-crow-flies.” However, identifying our starting point and our end goal—or our entry and our exit—is only the beginning. Twists and turns of every magnitude await us in between departure and destination; we require a sound sense of compass to stay on course.
3. Maps provide substance: Each map informs us of something different and valuable concerning where we are in a trade. Weather maps for example, relate well to market sentiment—economic calendars, earnings, upgrades and downgrades—information that affects the climate surrounding our area of interest. But even a great map will get us lost if we use it for the wrong purpose. Learning to evaluate each map’s legend is the key to understanding substance.
In order to demonstrate how the elements of scale, compass and substance work within the framework of trade plans—and how this concept of maps relates directly to traders—we need to begin with an example and common frame of reference. So, lets look at how we may link traders and maps, by developing one vision of a physical backdrop to the world of global markets; the world we intend to travel and trade within:
Countries: Think of our countries as the Stock Exchanges (NASDAQ, NYSE, AMEX, CBOE, etc). All countries have their own unique set of laws, customs and traditions—and exhibit unique behaviors.
States/Provinces: Think of our States/Provinces as market Sectors (Energy, Financial, Health Care, Utilities, Consumer Staples etc).
Cities: Think of our cities as the market Indices. We have large cities like DJI, NDX, SPX…and Smaller cities like QQQQ, DJTA, DJU, and SML.
Towns: Think of our towns as individual Stocks (From YHOO and MSFT to SIRI and AMD).
Roads, Weather, Statistics, and News: Think of these particulars and others like them as our Indicators—everything from longitude and latitude, to population, climate and topography (Bollinger bands, Volume, Oscillators, Moving Averages, Stochastic etc). Indicators fill in the detail. They sell us on a destination and with proper scale, allow us to navigate confidently—covering overall appeal, and right down to the decision of do we turn right or left at the next signal.
The particular combinations of maps we use are unique, personal and change as our trading careers change. And while the above outline provides a starting point, the style of trader we become influences the style and development of the maps we use (and ultimately influences the style and development of our trade plans). An options trader and a day-trader have different plans for an identical stock, just as a mountain climber and a wine connoisseur have quite different plans when traveling to Paris. Yet, the foundations for safe and efficient travel remain the same and before each traveler diverges towards their own specific interest, each reviews many of the same maps, information and travel routes.
For example, how would you research a trip to Embakasi? (Never heard of it? Good. This is a familiar experience for travelers within the world of global trading, isn’t it?) The process is the same when deciding to venture into an equally unfamiliar stock like XYYZ. First we pull up maps, and then we develop trade plans. A map of Embakasi doesn’t tell us much at first—we need to zoom out. Zooming out, we notice the Mombasa Road leading to Nairobi—our first bit of recognition. Pull back further and “aha!” We know exactly where we are, in the East African country of Kenya. Each scale of map has provided useful information, substance, questions, research direction and compass. And we will need each of these elements to develop our trade plan, as we zoom back in and plot our trip to Embakasi.
We use the same starting process to develop a daily trade plan for XYYZ: How do we ‘locate’ this stock within the market and what information do we need? A map of XYYZ doesn’t tell us much about the stock’s location and so we zoom out. What picture does the macro scale reveal? Does it sell us on the trip? Do we have an “aha” moment when identifying the exchange, index or sector? Now we begin zooming back in and organizing the specifics of our trade plan. We pull up detailed maps and pour over our indicators (New high, low volume, great news, upper Bollinger band and an overbought oscillator). Now we can make an informed decision about this trip. Is it a daily trip we’re comfortable making? Is it a trip that makes sense in view of our long-term travel plans? Are we experienced enough and do we have the money and the time etc?
The alternative to acknowledging the risks of trading and preparing for them: is risk attraction. If we wouldn’t dream of waking up tomorrow and boarding a flight to Embakasi—without so much as pulling up a map or packing a suitcase—then we can consider this scenario when the impulse strikes to purchase XYYZ in the middle of our work day. Expand this to encompass an excursion that will last a year, and the case for a master trade plan becomes more concrete! How many twists and turns will present themselves between departure and destination? How will we keep our compass? Who will wire us money on this journey, if we run ourselves broke thousands of miles from home? Lost.
Think! Where am I—at this moment—within the market and within my long-term objectives? This understanding takes you out of the realm of simple strategy…and puts you into the realm of trade plans. Thought of in these terms, it hopefully becomes more clear where you need to start when researching your next move—whether that moves relates to the foundation of your master trade plan, your trade plan for the upcoming week, or your trade plan for a particular buy, sell, or hold. Whether you consider bounce trading, option trading, penny stock, index, or futures trading, you will find and develop maps that help you determine what research is needed in order to execute these trade plans successfully. Don’t rely on instinct…research and plan your travels.
In this way, it is helpful to view your master trade plan as a large map in and of itself—because trade plans embrace all the positive advantages and reliabilities that maps provide. The trade plan and the map improve the odds of reaching a destination safely, they save time, money and resources: they allow us to retrace steps efficiently, to develop travel logs that document and organize various methods and paths of reaching the same destination: trade plans and maps provide flexibility and reference, allow us to compare results, to quickly create alternate routes in case of changes beyond our control: they prevent wrong turns, casual errors, and when we do get lost…they allow us to quickly and safely get back on track.
Trade plans make sense. And when thought of as travel plans, they become attainable and less mysterious. View yourself as a market traveler and develop a trade plan that reflects your experience and means. Travel safely out there…and drop Michael Glass of AccendoTraders.com a postcard sometime.
Evaluating Your Budget Before Taking The Plunge For A Fixer Upper Home
Posted on June 26, 2008
Filed Under Real Estate | Leave a Comment
Many people buy fixer upper homes thinking they will earn a huge profit upon its resale. Although such great fortune can happen, usually you make a smaller profit than what you may think.
This is because some people when buying a home that needs fixing up are unsure of exactly what is entailed and unfamiliar with the kind of budget it will take to do the repairs. Estimating what it could cost you will show a more realistic profit potential and help stop you from actually overspending and thus not making a profit at all.
Initial Considerations
When you first consider buying a fixer upper, be sure to add up every cost that you will need to spend for renovation. This includes large items, such as replacing the roof, to little items like buying a door for a closet. All the little costs that don’t seem like they add up to much can break a budget very quickly if you do not factor them in to the total cost.
Don’t neglect the cost of labor if you aren’t doing the work yourself. As you look at house under consideration, take all these cost factors into consideration before making an offer on the home so that you have any chance of making a decent profit when you resell.
Go for the Smaller Upgrades
You mainly want a home that includes decorative renovations rather than major, time-consuming, and expensive renovations. Such improvements do not cost very much, and they can bring in a substantial profit for relatively little work and investment.
When hiring someone to do the renovations, you will need to supervise them well. Besides potentially doing the renovations poorly - which could quickly add more expense - you need to ensure the person you hire remains on schedule.
This is one of the common losses in profit. If it takes much longer than expected to complete the house work, you could be slowly eating into your profits and may even run into a change in the real estate market.
Determining Market Value
You need to also evaluate the location in which the house resides and figure the house’s market value after all the renovations have been completed. By subtracting the repair costs from that, you should begin to gain a clearer picture of the profit potential and what would be the best offer for the home.
After that, though, subtract yet another 10% to factor in any emergency costs you are not expecting. Those unexpected costs come up more frequently than you might imagine.
By subtracting all these estimated costs, you should be able to figure out your initial offer for the house and determine if it is worth buying as an investment.
Just the Unemotional Facts
If after your homework you anticipate little or no profit, you may need to face the fact that it is not worth it. (Don’t allow an emotional attachment to the house cloud your judgment!) However, if you conclude the profit can be significant while remaining within your budget, then it may be worth making the plunge.
Don’t be afraid to study your budget closely and compare it frequently against what you are spending. It is the best way to be sure that you are making the right choices for maximum profit.
Successful Stock Trading With Our Free Real Time Stock Ticker
Posted on June 26, 2008
Filed Under Stock Market | Leave a Comment
Online stock trading is a money market concept involving buying and selling stocks, equities and shares from large corporations listed in the stock exchange or securities market. The stock trading practice involves investing money in corporate shares provided by either individual, companies, multinational groups or international conglomerates. Regardless of where you invest your money, the profits and losses in online stock trading are determined by the gap between buying and selling prices.
If you are keen on online trading, then you’ve probably heard a lot about stock investing too. Stock investing is different from stock trading, although they may sound similar to a layman. Stock trading is a more hands-on and short-term buying and selling practice (side note: our Real time stock ticker could be interesting to you), while stock investing is more about keeping your funds intact for the long-run. Stock investing is generally done with financial instruments such as mutual funds, but stock trading requires you to input quite a hefty capital. Stock trading also requires the investor to pay great attention to stock market activity, to monitor and detect the best times to get in to and out of his online trading. This is where our free desktop stock ticker will support you. The efforts required in stock trading are vast, because stocks are traded during daytime - a limited time period to be on your toes.
Your ideal solution for making a good profit out of your stocks and shares is to hire a stock broker. A stock broker will be a registered and commissioned individual with extensive expertise in stock trading or online trading in general. The paperwork required, the winded processes, monitoring and analyzing will all be done by the stock broker, so you’ll be free from worry. Stock trading is a precision-based activity and one tiny mistake in judgment could send you plummeting right to the bottom and result in a huge loss. Likewise, the opposite could happen too. One good break and you are well on your way to massive riches. A reliable and honest stock broker will be able to keep the balance in your online stock market trading and make the best out of your investment every time.
Online stock trading is the current vogue in the global money market, with many traders and brokers opting to trade their shares simply based on live statistics posted on reputable online stock market trading websites. This online trading phenomena is relatively new, although the concepts behind online stock trading are the same as in real life. Let’s take a few moment to examine online stock market trading more thoroughly.
Stock trading is risky business, there’s no doubt about it. Understanding the stock market outcome realities is just the frosting on the cake. The actual process involves a lot of skill, research and discipline. Using stock trading to make instant riches is foolish, because nothing worthwhile is ever quick and easy. So, where does online stock market trading come in to this picture?
Online trading is no different to ordinary stock trade in the huge day market. The best benefit available in online trading is geared for the beginner, who can learn, monitor and trade small-time online stock trading activities while in the comfort of their own home. The rise in client demand for online trading has lead many stock brokers and online financial companies to open their doors to the online stock market trading concept. Price indicators, trend analysis, fluctuations and everything else gets automatically monitored within online stock trading websites. This simplicity and utter convenience makes more and more traders to log-in and watch out for the best opportunities and invest their money wisely. But, remember, online trading is not guaranteed to make everything perfect, because the stock market is still the stock market, with its tendency towards extreme volatility.
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