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4 Types of Trades

  
  Education
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4type

Stock trading consists of 4 major types of trades.

The range-bound trade: the stock is tied in a range and will remain there until there is a significant change in the supply/demand dynamics. For this trade you fade any move to the boundaries of the range with a tight stop a little bit below/above the range. If the range is broken, you will lose small amount. It is good for scalpers with shorter trading horizon.

The breakout trade: in order to break from a range, a stock needs to experience a major shift in supply/demand. A dramatic occurrence. News or expectation of news. The news doesn’t have to be connected with the individual stock. It might be something that impacts the whole industry or market. Sudden change in participants’ confidence. Not every breakout will be caused by clear news. Often it will happen at no news at all. In any case, volume should be your tell how genuine the move is. Buy several cents above the range with a stop several cents into the range. (more…)

Improving Trading -4 Points

  
  Education
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  • Eliminate the potential that the market will disappoint you, think probabilities before executing a trade.
  • Don’t look at a trade outcome as being right or wrong, but again in terms of probabilities
  • When a pattern you know presents itself, trade it, don’t think, just respect your stops.
  • When analyzing your trade, how much are you willing to put at risk to see if other market participants will come alongside your view. In other words, look first at the loss potential instead of focusing on gains.

 


Trading: Doing the Homework

  
  Education
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HOMEWORKMany new traders fail in the stock market simply because they rush in without putting in the proper time and discipline in doing their homework. Trading is a professional endeavor much like any other career, you will only get out of it what you put into it. There is no easy money, you will have to earn it by out witting, out playing, and out smarting the majority of other market participants.

You need to learn ten things to be a successful trader:

  1. How to manager your risk per trade.
  2. What systems and methods really make money over the long term.
  3. What system fits your personality and beliefs about the market.
  4. How much heat you can you handle. How big can you trade with out emotions taking over?
  5. You must learn how the market actually works, trends, flows, and functions.
  6. Learn to focus only on what makes money in the market, everything else is noise.
  7. Discover who the greatest traders of all time were and study how they operated.
  8. Find out what the best books on trading are and read them.
  9. Study the charts of the stocks you are trading to understand how it works with trends, support, resistance, and moving averages.
  10. Practice paper trading, simulated accounts, and trading small positions of real money until you have mastered your trading plan. (more…)

Four Basic Points on Technical Analysis

  
  Education
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The true trader, the consistent winner, is not concerned with any price or where prices started from.  He or she is concerned with what it takes for people to believe strong enough, and with enough commitment, that they will place their capital at risk.”  So, with that in mind, the four basics:

1.  A price chart is simply “a pictorial representation of the sum total of all the market’s belief structures.”  No matter what we believe the chart does not lie.

2.  “Because every potential trader in every market is seeing it differently, every printed price will mean something different to everyone.” Our entry may be someone else’s opportunity to exit and vice versa.  We should always remember this the next time we believe we have a sure thing.

3.  Prices eventually have to stop their forward progress, in either direction.  “When every potential trader has executed for an entry, in any time frame, the market is vulnerable. When no one is doing anything, and what’s been done is done, prices must stop.” 

4.  No matter what indicator we use “every technical indicator designed is based solely on combining or dividing prices in some way.”  Volume and open interest, however, “chronicles the true state of what is happening inside the minds of the market participants.” 

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