Shopping Chat

The cracks I've been discussing in this market which indicate the rally may be tiring has yet to develop into a full blown gaping hole as buyers continue to step in and support this market on any dip. The bottom line right now is that there is zero follow through on days of weakness and that has kept the indices firmly above the 20 day moving averages. Heck, we still don't have 3 consecutive down days since the rally began! The somewhat sideways action over the past few weeks has worked off the overbought conditions, so I have been a bit more aggressive on the long side in recent days, but am locking in profits quickly and setting tight stops. At the same time, I've been shorting with leveraged ETF's and a few individual plays when the S&P gets closer to the 875 level which has been key resistance. It's tricky up here.. no question.

There are compelling reasons to believe this market will move higher and compelling reasons to think it will move lower and soon. Let's look at both..

Bullish reasons:
- market remains in up trend and above 20 day moving averages
- market still looking for the positives (case in point today on GDP - not focused on headline number but underlying consumption number)
- Nasdaq breakout from double bottom base
- Dow cleared downward trend line off Oct, Jan and April highs today (by a hair)

Bearish reasons:
- no significant correction after V shaped recovery
- S&P continues to close below 875
- The Q's are right at resistance of the 200 day moving average on the daily chart
- Jim Cramer remains as bullish as ever (oh c'mon we all know now Jim is a contrarian indicator!)
- there are still big economic problems to work through

Lots of conflicting signals right now that indicate the end of the rally may be near but few MAJOR signals of that yet. What I'm looking at for tomorrow is how this market reacts to the move today. Remember that the trading action the day after a Fed move is often the opposite. I'll be keeping a close eye on that S&P 875 level which this market has had a heck of a time with (at least on a closing basis) as well as that 200 day moving average in the Q's around 34 (there was a bit of a reversal at that level today). IF, we follow through on today's strength and the S&P and Q's clear resistance I will continue to look for short term day and swing trades on the long side and would probably close out some hedging as well.

Given the resiliency of this market we can't rule out a move to the 200 day moving averages for the major indices which would occur around S&P 950, Dow 9000 and Nasdaq 1780. If we don't take out the 20 day moving averages quickly over the next few days a run to those levels becomes much more likely. The 20 day moving average levels acting as support are 1650 in the Nasdaq, 8000 in the Dow and 850 in the S&P.

To close out tonight, I'd like to discuss one trade idea and that idea is First Solar (FSLR). After the bell today the company smashed estimates, doubling revenues and more than tripling profits. This all at a time when the overall economy and solar industry struggling AND before any stimulus package catalyst takes effect. Very impressive. So impressive that I did something I rarely do and that's make a trade after hours. I alerted my Gold members to the earnings report and the long trade alert in FSLR at 165.13. Tomorrow I'm looking for it to get back above the 200 day moving average for the first time since last August. I certainly wouldn't chase it tomorrow particularly given the run this market has had but on any pull backs it will offer the opportunity to get in on the kind of company that will be a leader for many years

by Jason Alan Jankovsky

As we have discussed before, this discussion forum is to explore the psychology behind the success or failure to trade successfully. As most traders with any experience know, the ability to “call “ the market is relatively easy in comparison to getting properly positioned within the market, and taking the most amount of money from your observation; that is where the real work of lasting trading success really lies. All of us have found the actual bottom or top of a significant move but failed to capitalize on that opportunity for one reason or another.

This month, I would like to address one of the more common trading errors. Everyone has made the error of overtrading at some point and many continue to make this error despite knowing they have this problem. Just knowing you have a propensity for a trading problem is half the battle but more importantly, you need skills and tools to correct your trading error. One of the more critical skills to develop in my view is to stop and confront the problem of overtrading.

Overtrading is a symptom of a deeper psychological problem which I like to call attachment to results. All traders have a certain degree of results they are pursuing in the markets; that is not the problem. The markets exist to exploit inequalities (real or imagined) in the supply and demand of something or financial instruments. It is a good thing to see an opportunity and assume the risk for the potential that is there. Once that action has been taken the only question is whether or not that inequality you perceived is an actual event that is unfolding over time. Between the time you execute for an entry and the time you liquidate for an exit; the markets will be moving. That movement is where the issue of attachment to results translates into your personal results.

Attachment to results can actually be expressed two ways depending on your personal psychology and trade method. The first way is holding losers and the other way is overtrading. We will discuss the issue of holding losses at a later time but the net effect on your equity is the same whether your problem is holding losses too long or you overtrade. Attachment to you results is the bedrock problem behind either overtrading or holding losses. In the case of overtrading, it represents the psychological need for immediate results (or positive results) without the corresponding willingness to allow time to pass. I think it is safe to say that a certain amount of time is required for any trading style to generate a gain and the unwillingness to let the required amount of time to pass comes out in the markets as constant execution over some timeframe.

If you use an hourly timeframe to pick your points of entry it is safe to assume that more than one hour must pass in order to determine if your executed trade has potential as you see it. Should the market move against your position that is to be expected, it is unreasonable to assume you will “buy the low” or “sell the high” every time you trade. As the market moves, if you are attached to your results, that movement means something to you. It is personally helping or hurting your equity. As your account balance changes from open trade equity, your focus narrows down to how this is affecting you personally. Most traders with this problem now seem to forget the high degree of study, preparation and thought they invested into picking that spot to execute. For some reason, the long-term fundamentals are forgotten, the technical studies are re-evaluated in real time, the protective stop order might be moved and the limit order to take the gain is moved closer to the market. Or any number of things. Then this trader executes to exit the market. Prices remain near their entry or advance. Attachment to results now says “You are missing it! You were right!” and this trader now executes again for an entry. As prices return to the first entry price, this trader again has a small open-trade loss; again the trader’s attachment says the trade is not going to work. This process may repeat itself several times over a short period of time, especially if the market is advancing in the intended direction. The problem is not the market price action; the problem is the attachment to results imposed by the trader creating an urge to action that is not consistent with normal ebb and flow of most market action. The trader has failed to allow time to pass and let the market do what it is going to do. During a major price advance or decline that was properly observed, this trader has small gains or even net losses when his just sitting tight for a period of time would have resulted in a nice gain.

Solving this problem is a factor of learning patience as well as adapting your thinking to better fit with the market you trade. I have observed from working with many developing traders that if they have the problem of overtrading, the simplest solution is to impose a new set of rules on their execution that allows time to pass. I have a very common sense based method that I would encourage you to try for yourself. Simply turn your screen off; the assumption here is that the market will do what it will do whether you watch it or not. The problem is not the market price action, the problem is attaching meaning to that action and executing. If you can’t see the price action, you can’t execute. So the first thing we do is impose the rule: After you execute you have to turn the screen off for at least one bar of your time frame as a minimum.

In most cases, several bars are needed to either confirm or deny a trade potential is developing so often the trader must sit in front of a dark screen for several hours. The market is still moving, but in this case, the stop is also still where it was originally placed, the limit is still where it was placed and the trader cannot reevaluate the trade nor do anything except wait. During this time I also require the trader to write out in as much detail as possible exactly his hypothesis for the trade. This keeps the trader focused on the critical thought required to do the trade as opposed to how the tic-by-tic price action is affecting his equity. After enough time, this self-imposed isolation develops into patience to let the trade work. At some point, the trader will no longer need to be “in the dark” and he has the skill to simply sit still and let the trade work.

Next month we will talk more about attachment to results as it comes out when you hold losing positions. In the meantime, if you have a tendency to overtrade; try this method. I think you will be surprised at how fast you learn to let your trades work

Do you want to trade stocks for a living?
I do not trade for a living.

I get emails from traders wanting to start a trading business. They want me to tell them how to trade for a living. My standard answer is this:

"I don't trade for a living and I don't have any kind of a stock trading business. Sorry I can't help you."

And then comes the usual reply...

"Why don't you do this full time? Don't you want to quit your job?"

And then it hits me...

This person is sick and tired of his "job" and wants to do something that he loves to do - trading stocks! I currently own a small business (not related to the stock market) and believe me - one is plenty! I don't have the desire that this person has because I don't work for someone else. I work for myself.

I can understand the desire to want to trade stocks for a living. I used to have a "job" and to be quite honest - it sucked!

A Job Versus A Business
Having a "job" is the worst method of generating income and the most inefficient way to make money.

Why you ask?

Because your salary is based on time. You can see the problem right away. There is only so much time in a day! In order to make more money you have to invest more time. This makes you miserable, tired, and cranky!

Some other problems associated with having a job..

You can never get paid what your really worth.
You have to work long hours to make someone else wealthy.
You can't make more money unless you beg for a raise.
You have no freedom.
You have no leverage.
And the number one problem? You have to work in order to make money.

Yep. I can see why so many people want to trade stocks for a living!

Now let's look at owning a business. Time is no longer a factor. How much time you spend running your business is up to you. You get paid for the value that you provide to your customers. This is usually in the form of a product or service. If you trade stocks for living, then you are providing liquidity to the markets. This is very valuable. Without traders, the stock market wouldn't work!

Now let's look at the benefits of having a business:

You get paid what for what you are worth.
You get paid to make yourself wealthy.
You decide how much money you want to make.
You have freedom.
You have leverage.
And the number one benefit? You do not have to work in order to make money. You can put on a trade, type in your stop loss order, and go fishing. Assuming the trade goes in your direction, you will make money without working.

As I type this on my computer, I am making money with my current business, even though I'm not doing any work there.

Another thing to consider...

When you own a business, you can get paid over and over again for a one time effort. Let me explain: Let's say you decide to trade stocks for a living. You buy a stock on Monday. This will be a typical three or four day swing trade. When the stock moves in your favor, you will continue to make money over the course of several days, for just that one time effort you put into it on Monday!

This is the same way with any business.

So, when you go into work tomorrow to that dreadful day job, tell your boss that you would like to get paid over and over again for the effort you put in last Monday. He will laugh and think you are crazy! But, HE will get paid over and over again for YOUR efforts!

Doesn't seem fair does it?

Trading Stocks For A Living
Well, I hope I haven't upset you by the above comments. But hopefully it will inspire you to make a change.

Like I said at the beginning. I do not trade stocks for a living but I am observant. I own a business so I can see what other professional full time traders do to make a living.

There a several things that I know you MUST do before you begin a trading business:

You must eliminate all of your personal debt.
You must be well capitalized.
You must have a logical trading system.
You must follow extreme money management rules.
This is true for most any business. You have to have your ducks in a row before you even begin.

But there is one major problem that I can see if you decide to trade stocks for a living. This is no small problem either:

Drawdowns.

You WILL have drawdowns. Every professional trader goes through periods where they lose money. Anyone that tells you otherwise is a liar! How will you deal with this?

How do professional traders deal with this? The answer is right in front of you but I bet you never noticed it.

They teach others to trade, sell books, and create a myriad of other products and services related to the stock market. They create multiple streams of income to compensate for the harsh realities of draw downs.

Think about it. Look around the internet. Every one of them has a product or service to sell. There is nothing wrong with this if what you are selling is valuable and helpful to other stock traders. That's what a business does. It sells value. If it succeeds, then it becomes a total win-win situation for both the business owner and the customer.

Heck, you don't even need a product or have to sell a service to make money on the internet! I know of a couple people who make a living selling other people's products. Not only do they make a living but they make a very nice living.

Check out some of these success stories from the company that I use to build this website. Yes. They make a living from their website. You'll be shocked but inspired.

Anyway, back to my point. If you want to trade stocks for a living you would be wise to come up with other ways to make money to compensate for drawdowns. A LOT of professional traders do it. Very smart.

In Conclusion...
Like I said in the beginning. I do not trade stocks for a living.

The thought of staring at a computer screen watching candles form on a chart does not excite me! But, I wanted to write this page to give you some perspective on it from a business owners point of view - without the hype.

Do not start a trading business just because you want to quit your 9 to 5 job.

Do it because...

YOU LOVE TO TRADE STOCKS!

I certainly do.

Source===> Swing Trade Stock

Have you ever ditched your trading plan? If not, you should read this anyway because you're most likely lying. If you have, why do you think you're so "unfaithful"?

Do you blame it on your personality? Temporary insanity? Or an excuse that its' just part of trading?

You might actually be right. Thare are many factors that could contribute to your lack of discipline.

Depending on your personality, background, training, and experience with the markets, you may have trouble controlling your tendency to act on impulse


For some, impulsivity is in their blood. They have trouble concentrating. They are easily bored. They look for quick thrills for relief. For others, impulsivity is related emotional weakness. Some people have so much trouble controlling their emotions that they react impulsively out of frustration.

Temporary setbacks are inescapable when trading. When the extremely emotional trader encounters one of these setbacks, he or she becomes overly distressed, and may close a position early, or in a fit of frantic, make a major trading mistake that can only be fixed by closing the position.

No trader is perfect though. Any trader can act impulsive at times. Research has shown, for example, that when people are tired, they have difficulty concentrating. As much as your conscious mind cares about sticking to your trading plan, your unconscious mind thinks, "Who cares? I just want to get this over so I can chill out." Your psychological resources have been exhausted. When you push yourself to the limits, you'll have trouble concentrating on your trading plan and obeying it.

Other traders may be impulsive because they lack experience. You can't expect to stick with a trading plan when you don't what the hell you're doing. If you're new to forex, you'll lack confidence and feel uneasy You'll start hesitating to pull the trigger. You won't want to risk your money because you don't have that strong belief that your plan will produce a profit like seasoned traders display.

Trading plans must be clearly defined and easy to follow. When you have a n incomplete trading plan where important parts are left unclear, you'll have trouble following it. A trading plan should consist of clearly defined entrance and exit strategies. Signals that indicate how the trade is going are also important. Don't underestimate the importance of clearly mapping out a trading plan. You can't stick with a trading plan that you can't follow.

The winning trader is the disciplined trader. Disciplined traders stick with trading plans. They don't act on impulse. It's essential that you identify the reasons you find yourself trading on impulse. It could be your personality or it may just be situational, but whatever it is, you must gain awareness of these factors and resolve them. Once you control the urge to act on impulse, you'll trade more profitably.



Source : Babypips.com

Felix Dennis, publishing tycoon, has written a guide to becoming a multi-millionaire. All you need is thick skin, cunning - and a work ethic

It also helps that I am writing while sipping a very fine wine (a Chateau d’Yquem 1986, if you really want to know), nibbling on fresh conch tidbits, ensconced by a window with one of the most beautiful views on earth.

Across the valley, far, far below me, palm trees fringe the fishing boats and yachts nodding in the harbour. Beyond the bay to the west, a turquoise sea ripples out to a purple and pink horizon, heralding another glorious sunset.

I am in Mustique, a tiny island in the Windward Islands of the Caribbean. More specifically in my “writer’s cottage”, a study-cum-library some distance from the main house, built solely for one purpose — to permit me to write whatever I please in peace and quiet.

All of this, as if you needed me to remind you, costs money. It’s what you get, if you want, when you’re rich.

You’ll be suggesting next that it will improve my sex life.

People who grow rich almost always improve their sex life. More people want to have sex with them. That’s just the way human beings work. Money is power. Power is an aphrodisiac. Money did not make me happy. But it definitely improved my sex life.

Just how quickly can I become rich?

I have known it done inside five years, but there are very few “short cuts”. Knowledge learnt the hard way combined with the avoidance of error, whenever and wherever possible, is the soundest basis for success in any endeavour.

The bottom line is that if I did it, you can do it. I got rich without the benefit of a college education or a penny of capital but making many errors along the way. I went from being a pauper — a hippie dropout on the dole, living in a crummy room without the proverbial pot to piss in, without even the money to pay the rent, without a clue as to what to do next — to being rich. And I am certainly no business genius, as my rivals will happily and swiftly confirm.

Yet the odd thing is, I’ve ended up far richer than most of my rivals.

How rich are you, anyway?

I don’t know. Nor does any rich person know. I haven’t cashed in all my assets and I’m not certain what they will fetch. Let’s say $400m-$900m (£215m- £483m) of net worth before tax.

Five homes. Three estates. Fancy cars. Private jets. (The jets are always rented. If it flies, floats or fornicates, always rent it — it’s cheaper in the long run.) Thousands of acres of land. Art on the walls and libraries stuffed with first editions. Bronze statues littering up the garden. Chauffeurs, housekeepers, financial advisers and other personal staff coming out of my rear end. Oh, and thousands of bottles of fine wine in the cellars. Never forget the wine.

Less the debt, of course. Around $30m (£16m) of debt. Rich people always have a certain degree of debt. Apparently it helps to reduce taxes. I’m not so hot on the bean-counting side. But I can’t fly the jets or drive the Rolls-Royces or Bentleys either. I never had the time or the inclination to learn.

Honestly speaking, what kind of people get to become rich?

An interesting topic. There is a confidence that radiates from first-born sons and daughters. Not in all the cases but in too many for it to be a coincidence. A similar confidence is to be observed, more often than not, in people who are rich, no matter whether they were born with it, inherited it or acquired it through their own efforts.

You can see it in the way they walk into a hotel or restaurant they have never visited before. In the irritating disposition of rich women to haggle in an Oxfam shop over a designer dress — unlike any working-class woman, who would be horrified at the thought of doing any such thing, even though she perhaps needs the discount while the rich woman does not

You can see it, too, in the way the children of the rich appear to assume that the world was created entirely for their sole benefit. Money brings a kind of insouciance with it. It is among wealth’s least attractive characteristics.

Whatever qualities the rich may have, they can be acquired by anyone with the tenacity to become rich. The key, I think, is confidence. Confidence and an unshakeable belief it can be done and that you are the one to do it.

Tunnel vision helps. Being a bit of a shit helps. A thick skin helps. Stamina is crucial, as is a capacity to work so hard that your best friends mock you, your lovers despair and the rest of your acquaintances watch furtively from the sidelines, half in awe and half in contempt.

Becoming rich does not guarantee happiness. In fact, it is almost certain to impose the opposite condition — if not from the stresses and strains of protecting it, then from the guilt that inevitably accompanies its arrival.

If I had my time again, I would dedicate myself to making just enough to live comfortably (say £30m or £40m) as quickly as I could, hopefully by the time I was 35. I would then cash out immediately and retire to write poetry and plant trees.

Making money was, and still is, fun, but at one time it wreaked chaos upon my private life. It consumed my waking hours. It led me into a lifestyle of narcotics, high-class whores, drink and consolatory debauchery. As a philosopher might have put it, all the usual dreary afflictions of the seeker after wealth. ()

These afflictions, in turn, helped to undermine my health. But like an old, punch-drunk boxer, I couldn’t quit. It’s no excuse, but making money is a drug. Not the money itself. The making of the money. This sounds like so much hooplah, but it’s true.

Nobody believed that exercise could prove addictive until science stepped in and discovered endorphins. And making money, I assure you, is a hell of a lot more of a rush than jogging.

Up to just seven years ago I was still working 12 to 16 hours a day making money. With hundreds of millions of dollars in assets I just could not let go. It was pathetic. Because whoever dies with the most toys doesn’t win. Real winners are people who know their limits and respect them.

Eventually I found a way out. I handed over day-to-day control of my businesses to younger and mostly smarter boys and girls. I cleaned up my personal life.

I began doing what I wanted to do — not what I felt I had to do. After all, what did I have to prove? Except, perhaps, to myself.

IT IS possible that you will avoid such mistakes when you get rich. I hope so. One thing is for sure: “the usual afflictions” are no reason not to make the attempt. There is no reason on earth why financial success should lead to personal catastrophe

If you wish to be rich, however, you must grow a carapace. A mental armour. Not so thick as to blind you to well-constructed criticism and advice, especially from those you trust. Nor so thick as to cut you off from friends and family. But thick enough to shrug off the inevitable sniggering and malicious mockery that will follow your inevitable failures. Not to mention the poorly hidden envy that will accompany your eventual success.

Consider carefully this shortlist:

If you cannot face up to your fear of failure, you will never be rich.

The truth is that getting rich means sacrifice. And it isn’t always you that’s doing the sacrificing. This is not a calling for the faint-hearted. There is no shame in turning away. After all, if everyone was prepared to make the necessary sacrifices, who would be left to work for my own companies? Quite apart from sacrifice, there is a last brutal truth to be confronted. After a lifetime of making money and observing better men and women than me fall by the wayside, I am convinced that fear of failing in the eyes of the world is the single biggest impediment to amassing wealth. Trust me on this. ()

If you shy away for any reason whatever, then the way is blocked. You will never get started. You will never get rich.

Fear of failure is almost certainly the reason that you have not already begun to make yourself rich. It haunts all of us.

In essence, it comprises two components. The first is our natural desire to avoid letting ourselves or others down. The second is the exposure of that failure to the outside world.

This nastier, stickier second component, the “broadcasting” of our misjudgments or errors, especially to our peers, is often the nub of the matter.

The same factors apply to me, sitting around with colleagues at Dennis Publishing trying to figure out if we should invest millions of pounds to launch a new car magazine, or to a young woman considering whether to take over her father’s used-car business or to invest another two years of her life into obtaining a PhD in bio-engineering.

Neither decision will involve utter financial ruin. But fear of a result that cannot be easily hidden weighs heavily in the balance.

The board of directors that runs Dennis Publishing will talk earnestly and sensibly about the effect on morale for the rest of the company (usually forgetting to mention its own morale) in the event our proposed new magazine bombs.

In reality, Dennis Publishing staff working, say, on The Week or Maxim or Computer Shopper, won’t give two hoots if the company’s new car magazine is a sensational flop. But by discussing the matter in such terms, in code if you like, the board gives itself the opportunity to weigh its own fears while appearing to weigh the fears of others. It is a form of well-disguised cowardice.

On a less corporate level, the young woman believes she might be able to expand her father’s used-car business more aggressively than he has done in the past. On the other hand, a PhD would add status to her life and offers the prospect of a fulfilling career in science.
She must decide. Her father is unwell and cannot wait for her decision. What if she takes over the company and it goes belly up? What if she shoots for a master’s degree and does not achieve it? A failure to obtain her master’s degree could be disguised fairly easily. She could always claim she has become bored with bio-engineering. The decision to take over her dad’s company, however, will be far more closely monitored — by relatives and neighbours, by the people who work there, by rival car dealerships, by the bank manager, and not least by her father. Should she fail, she will run the risk of becoming a laughing stock or an object of pity.

So what is her best option? She is unlikely to get rich as a bio-engineer. But she might well get rich expanding the dealership, especially because she is aware that her father has never invested to the extent that he might have done in marketing and promotion, especially on the internet.

The car dealership is already capitalised, and, although she will have to pay off her father eventually, he is hardly likely to foreclose on her. There is an opportunity, but is she prepared to exploit it? So what should our young college girl do? Normally, I would hesitate to offer any advice. But I happen to know her. I was half in love with her once. She happens to be real and her name is Julie. All this happened a long time ago.

In the event, she took her degree and her father sold the business to an outsider. Julie is a highly competent bio-engineer and has enjoyed her career enormously. But on more than one occasion she has told me she regrets not taking her father up on his offer.

What swung the balance was her fear of failure in such a “public” endeavour. She was frightened that others (especially the male-dominated community of car sales firms) would laugh at her.

It irks her to know that she will never be rich. It always irks intelligent people like Julie. And I can give you other examples. One of them is my mother.

She will be furious (if she ever reads this) that I have mentioned her in such a context. But I know my mother well. I know beyond a shadow of a doubt that everything I have achieved I owe not just to care and love but to her genes.

She could have built herself a fortune had she wished. Her personality combines the resilience, the drive and the restless energy of so many people who become rich. But 60 years ago it was almost unheard of for a woman to act out such ambitions. Her parents would have been scandalised. Neighbours would have viewed such behaviour in the most negative light imaginable. And had she succeeded, horror of horrors, she would have earned their undying enmity. It just was not “done” for a woman to earn a fortune for herself — except, somewhat dubiously, as a movie star perhaps. Or a writer of crime novels.

Single or newly married women from respectable families in the 1940s and 1950s were actively discouraged from involvement in business except for a little light typing or serving in shops and department stores. Especially if they had children. Especially if they lived in the south of England.

Never mind that my mother had more brains in her little finger than half the twerps she worked for as an accountant. Women were not even allowed to sign a hire-purchase form back then. They had to get their husband or their brother or their father to do it.

So she didn’t become rich. She had a decent career. She earned enough to support my brother and me and to provide us with more than just the necessities of life. And she married again and became a pillar of the community. But I know that she could have done it, had she been prepared for the unpleasantness, the sheer nastiness that would have been unleashed upon her if she had chosen to say: “To hell with them. Let’s go!” It was not so much a fear of failure on my mother’s part, I believe, as a fear of upsetting the whole apple cart of the community in which she lived. And now she is an elderly, if formidable lady who quietly walks her dog along English country lanes.

DENNIS'S WEALTH GUIDE

Total assets

£1m-£2m The comfortable poor

£2m-£5m The comfortably off

£5m-£15m The comfortably wealthy

£15m-£40m The lesser rich

£40m-£75m The comfortably rich

£75m-£100m The rich

£100m-£200m The seriously rich

£200m-£400m The truly rich

£400m-£999m The filthy rich

More than £999m The super rich

© Felix Dennis 2006

Many years ago, horsemen invented blinders to keep their horses focused on their work. Blinders are pieces of leather attached to the horse's bridle that prevent them from seeing anything except what's in front of them.

Without blinders, a horse can see almost completely behind itself without turning it's head and can be easily spooked by movement or objects it doesn't recognize. By having fewer distractions the horse is more dependable and stays focused on getting the job done.

As a trader, I always discovered that whenever I started comparing my trading performance with other traders, my performance would usually worsen. This "distraction" cost me lots of money in terms of losses.

While I hardly watch television, I admire Oprah Winfrey so I watched an interview of her on the Biography channel one day. She and the interviewer were discussing her success and she made the comment that comparing herself to other folks in her business always made her take a step backward from her goal. Her words made me realize that even highly successful people experience this.

Don't compare yourself to others. It's tempting in the modern, competitive world to constantly ask, "How am I doing?"

It's easier said than done, but you should NOT allow how well you do compared to others affect how you feel about your inner worth and feelings of success in life.

Comparisons are useless. Run your own race.

Like the sport of golf, you alone are the one who needs to hone your trading skills. You are the one who must find a method that matches your skill level and personality. Comparisons to other traders just make you feel frustrated.

Don't constantly think you are trying to beat others to an imaginary finish line. People who achieve great things work independently and on their own terms.

They don't care how others are doing. They follow their own timeline, follow their own passion, and look INWARD for where to go next.

Notice how I said inward, and not outward. They look inward for where to go next.

How you perform has nothing to do with how others perform. All comparisons will do is torture you. You will feel jealously or envy.

When you see that you are doing relatively poorly compared to a fellow trader, you are likely to think distracting thoughts such as, "Why can't I do as well?" or "I must not be as good of a trader as I had thought."

To maintain motivation, focus on improving your past performance record, rather than looking at how other traders are doing.

You usually don't know what factors created their performance records, so comparisons can only mislead and hinder you. They could just be on a lucky streak or have a market wizard standing right behind them on every trade providing advice.

Put your "blinders" on. Don't look at anyone else's record but your own. Everyone has a different learning curve.

Run your own race.

-- Buying IPOs.

An astonishing number of people don't understand how IPOs work. YOU are not really buying an IPO when you buy the stock on the first day of public trading when it opens at $75. Those who REALLY bought the IPO were those who got their shares for $10, well before the public trading began. For the most part, only institutions or megamillionaire private investors have access to IPOs. There have been a few exceptions, but it's almost universally dumb to buy a hot IPO on its first day of public trading. As for those few times when the average investor IS offered shares in an IPO before public trading begins, my advice is to pass. My rule of thumb on IPOs is: If you want it, you can't get it, and if you can get it, you don't want it.

-- Finding the Holy Grail.

Technicians regularly fall into periods where they tend to favor one or two indicators over all others. No harm in that, so long as the favored indicators are working, and keep on working. But the analyst should always be aware of the fact that as market conditions change, so will the efficacy of their indicators. Indicators that work in one type of market may lead you badly astray in another. You have to be aware of what's working now and what's not, and be ready to shift when conditions shift. There is no Holy Grail indicator that works all the time and in all markets. If you think you've found it, get ready to lose money. Instead, take your trading signals from the "accumulation of evidence" among ALL of your indicators, not just one.

-- Overtrading.

The Picks Port commits this sin on a regular basis, but that's mostly because of the nature of the beast. I have to be more short term oriented than I'd prefer to be because you, my subscribers, tend to be more short term oriented than you probably should be. Daytrading, of course, is the epitome of overtrading. Most people just are not equipped, emotionally, intellectually, or mechanically, to day trade and statistics tell us that most are not successful at it. If you are not making money at daytrading but keep on doing it anyway, you should examine your motives. If it's the action you crave, take up skydiving. It's safer and cheaper.

-- Excessive tape watching.

I get a kick out of people who insist that they're intermediate or long term investors, buy a stock, then anxiously ask whether they should bail the first time the stocks drops a point or two. Likely as not, the panic was induced by watching the tape, or hearing some talking head on CNBC. Watching the ticker can be fun. It can be mesmerizing. But it can also be dangerous. It leads to emotionalism and to hasty decisions. Try not to make trading decisions when the market is in session. Do your analysis and make your plan when the market is closed and the White Noise of the television and the ticker is absent, then calmly execute your plan the following day. You have your stop and your target. So go take a nap, or go to the movies, or mow the lawn. The only time you should be scrutinizing the tape is when you're looking for an immediate entry or exit point for a trade. Otherwise, do your blood pressure a favor and tune out.

-- Being undercapitalized.

If you have less than $50,000 to invest, you'd probably be better off in a mutual fund rather than trading individual stocks. To get proper diversification with a fully invested exposure you need at least 10 stocks. You do the math.

-- Letting the tax tail wag the stock dog.

Don't let tax considerations dictate your decision on whether to sell a stock. Pay capital gains tax willingly, even joyfully. The only way to avoid paying taxes on a stock trade is to not make any money on the trade.

-- Relying on gurus.

I'm spitting in my own rice bowl here, but you should not be letting some self-appointed market "gooroo" dictate or dominate your trading decisions. The most you should expect, or accept, from folks like me are a few trading ideas, a little technical analysis tutoring, and a bit of guidance in maintaining a solid trading discipline. You should not think of a market letter (ANY market letter) as a substitute for a personally managed portfolio. No one knows or cares about your personal circumstances like you do; how much money you have to invest, your tolerance for pain, your goals, your most suitable and comfortable time frame, etc. And you should be doing everything in your power to make Nick's Picks unnecessary and irrelevant to your trading, to learn enough not to need the likes of me anymore. Read some books. Take some courses. Buy some decent charting software and arrange for a data feed.

-- Thinking this market stuff is easy.

Don't confuse genius with a bull market. It's not that hard make money in a roaring bull market. Keeping your gains when the bear comes prowling is the hard part. Don't get cocky, but don't grovel either. You're not as smart as you think you are when everything is going great. But you're not as dumb as you think you are when everything is going to hell either. The market whips all our butts now and then. The whipping usually comes just when we think we've got it all figured out.

-- Thinking rather than looking.

One thing you should be thankful for is that you don't HAVE to come up with a reason for WHY the market is doing what it's doing. The talking heads on CNBC do because that's their job. I do too, because I know you expect it of me. But you don't. Just follow your chart work and let someone else do the pontificating. After all, who REALLY knows why stock ABC goes up 5 points on Monday while stock XYZ, in the same business, goes down 5 points? That's the great thing about technical analysis. You don't have to know. The price action is THE TRUTH. It's all you really need to know. Price doesn't lie. Price doesn't alibi. Price never complains and never explains. It is what it is. When XYZ goes up $5 on heavy volume, let Joe Hairdo on CNBC jabber on about what it all means. We KNOW what it means. It means XYZ went up $5 on heavy volume.

Pant...pant...pant.

These are just some of the mistakes traders make. There are lots more, but this has to end somewhere. These have been mostly generic in nature, applicable to fundamental investors as well as technical traders. One of these days I'll do another diatribe along these same lines, but confine it strictly to TA do's and don'ts. Until then, trade smart.

-- Overbetting.

This gets into the realm of money management. Diversification, the process of spreading your investment capital around in different assets and sectors to feather the vagaries of the market, has gotten a bit of a bum rap lately. Some of the New Paradigm folks think the concept is "old fashioned." These tend to be the same people who have every last dime in a handful of internet stocks. That's not investing, or even trading. It's gambling. Preservation of capital is paramount. If you run out of chips, game over man. You may feel a bit envious the day your neighbor, who has put everything he owns into Zowie.com parks his new Mercedes in the driveway next door, but you'll feel a lot better the day the repo man comes with the tow truck to take it back. Most professionals will allocate no more than 2-5% of their total investment capital to any one position. Ten percent should be your absolute max. One more thing. I've checked the U.S. Constitution and the Bill of Rights, and nowhere in either of them does it say that you have to have ALL of your money in the stock market ALL of the time. Money management also pertains to your total investment posture. Even when your analysis is overwhelmingly bullish, it never hurts to have at least some cash on hand, earning its 5% in the money market. You'll need it when you see that next "can't miss" stock but don't want to sell any of your other "can't miss" stocks to raise the money to buy it. Your exposure should be consistent with your overall market analysis. As the market becomes more overbought, overextended, and overvalued, your cash level should rise accordingly. Then as the market gets more oversold and undervalued, you can raise your market exposure accordingly. Being ALL in the market or ALL out of the market sounds like a good idea, and it may work out wonderfully on paper, but it rarely plays out so smoothly in real life and real investing. But you should still employ a sliding scale of exposure, based on your market analysis.

-- Bottom fishing/Catching falling knives.

Many of the daily e-mails I get are of the following type: "Nick, Zowie.com is down 23 points today. Time to buy?!!!" My answer is almost always the same. "Put your pants on, Spartacus. No!" Don't ANTICIPATE bottoms. It's tempting to try to pinpoint an exact low, especially if you're working with indictors like Fibonacci fan and time lines, cycle studies, regression channels, even plain old lateral support points. But it's almost always better to let the stock find its bottom on it's own, and then start to nibble. Just because a stock is down big doesn't mean it can't go down even bigger. In fact, a major multipoint drop is often just the beginning of a larger decline. It's always satisfying to catch an exact low tick, but when it happens it's usually by accident. Let stocks and markets bottom and top on their own and limit your efforts to recognizing the fact "soon enough." Nobody, and I mean nobody, can consistently nail the bottom tick or top tick. Those who try usually get burned.

-- Averaging down.

Don't do it. For one thing, you shouldn't even have the opportunity, because you should have sold that dog before it got to the level where averaging down is tempting. The pros average UP, not down; they got to be pros because they added to winners, not losers. And speaking of averaging UP, there's a right way to do it. And doubling your position is not it. Rather, you should add 1/2 your original stake. If other words, if you already own 100 shares and want to bolster your position, you buy 50 shares. If you later decide to add more, you add 25 shares, etc. Why you should do it this way is too long to go into here, but that's the way the math works out best for you.

-- Shorting bulls and buying bears.

Yes, there are stocks that will go up in bear markets and stocks that will go down in bull markets, but it's usually not worth the effort to hunt for them. The vast majority of stocks, some 80+%, will go with the market flow. And so should you. It doesn't make sense to counter trade the prevailing market trend. If you're worried about a short term pullback, simply cut back on your trading, take a few profits, and build up your stash of cash. Let that money earn its 5% in the money market until the squall has passed.

-- Confusing the company with its stock.

There are some fine companies with mediocre stocks, and some mediocre companies with fine stocks. Try not to confuse the two. This is, at heart, a fundamental analysis versus technical analysis issue. Some stocks simply have excellent trading characteristics while others don't. Maybe it's a matter of liquidity, or a fanatical message board following, or a daytrading clientele, or whatever. Take Amazon.com for example. Is the company a good one? Who knows? Not me. But the stock is. I wouldn't want to have to hold it for 20 years, but I sure don't mind trading it a few days at a time, the "right" days. That sucker moves. Baby Bells are at the other end of the spectrum. Fine companies for the most part. Wouldn't mind owning one for 20 years. But you have to pick your spots when you go to trade them, because a measly 3 point move in a single session is huge for a Baby Bell. Also remember this: even the stock of a great company can go through a bad patch. IBM is a great company today, with its stock selling at 124, and it was a great company five years ago, when its stock was selling at 13.

-- Falling in love with a "story."

This is related to confusing the company with its stock. There are a lot of intriguing "stories" out there, but they don't always translate into instant riches. Iomega was such a "story" stock. The story was that the company's Zip drive was going to replace the floppy in the world's computers. The stock ran straight up to the sky to wait for the story to come true. And for the most part, IOM's story DID come true (many stories don't, witness the Y2K stocks), but the stock gave back most of its gains anyway. Turns out it wasn't that much of a story after all. In other cases, the story comes true but the stock you've bet on isn't the story teller. Witness the laser vision "story." A number of companies were hyped as the category killer, but only one, VISX, made its stockholders real money. And how about satellite communications? Great story, eh? Tell it to those who loaded up on Iridium's stock.

-- Following the leader.

Just as money tends to flow into last year's top mutual fund (sure to be next year's underachiever), people tend to chase the high flying momentum MO-MO stocks, succumbing to the buzz and getting in AFTER the stock has already jumped 80% and inevitably just before it drops 60% as the early buyers take their profits by selling their shares to the "greater fool," you. Yes, you can make a quick buck chasing momentum, but you can lose it even quicker. You can never be sure there's a greater fool coming in after you, and that could make you the "greatest fool."

Just about everyone knows the grisly statistics about options trading: 90% of all naked option players (no, that doesn't mean they trade in the buff, only that they buy uncovered puts or calls) end up losing money. But hardly anyone knows the equally grisly statistics about equity trading: 80% of all stock investors end up losing money.
But how can that be, you ask? Over time, the stock market is a sure thing, a guaranteed way to make money. It's so easy. All you have to do is buy good stocks and hold them. Everybody says this, pundits, brokers, financial advisors, the media, the historical record itself. No one who simply bought and held the Dow Jones Industrial Average or the S&P 500 has ever lost money over a 20-year time span. Right? Yes, right. Now go find me someone who bought and held for 20-years. You should be able to find a few, about 20% to be precise. The other 80% lose money.

How does this happen? A couple of ways. Primarily, it happens because no matter how resolute people think they are about buying and holding, they usually fall into the same old emotional pattern of buying high and selling low. Investors are human beings. Human beings naturally want to be in the winning camp, and human beings naturally seek to avoid pain. When things are most euphoric in the investment world, at the top of a long bull market, these human beings are in there buying. And when things are most painful, at the end of bear market, these human beings are in there selling. In fact, it's usually the final capitulation of the last remaining "holders" that sets up the end of the bear market and the start of a new bull market. As Sy Harding says in his excellent book "Riding The Bear," while people may promise themselves at the top of bull markets that this time they'll behave differently, "no such creature as a buy and hold investor ever emerged from the other side of the subsequent bear market." Statistics compiled by Ned Davis Research back up Harding's assertion. Every time the market declines more than 10% (and "real" bear markets don't even officially begin until the decline is 20%), mutual funds experience net outflows of investor money. Fear is a stronger emotion than greed. Most bear markets last for months (the norm), or even years (both the 1929 and 1966 bear markets), and one can see how the torture of losing money week after week, month after month, would wear down even the most determined buy and holder. But the average investor's pain threshold is a lot lower than that. The research shows that It doesn't matter if the bear market lasts less than 3 months (like the 1990 bear) or less than 3 days (like the 1987 bear). People will still sell out, usually at the very bottom, and almost always at a loss.

So THAT is how it happens. And the only way to avoid it is to avoid owning stocks during bear markets. If you try to ride them out, odds are you'll fail. And if you believe that we are in a New Era, and that bear markets are a thing of the past, your next of kin will have my sympathies.

But people lose money in other ways, too, even during the strongest of bull markets. Let's look at some of the more common trading mistakes to which people are prone. Many of them are related, part and parcel of the same refusal to pay proper attention to risk management. If you recognize your own actions in some of these, join the club. Over the years, I've committed every sin on the list at least once. Still do on occasion.

-- Letting small losses turn into large losses.

A whole myriad of mistakes accompany this one. Refusing to take a loss at all. Overbetting. Catching falling knives. Averaging down. Etc., etc.. At root, it's probably because the average investor pays little mind to risk management. In a way, it's understandable. The majority of those in the market today have only come into the market during the last 5 to 7 years. They have never really experienced a serious bear market. The only investing world they know is that of an ongoing bull market, where it's ALWAYS okay to buy the dips, where a stock that craters ALWAYS comes back. But SOMEBODY bought UBid at 121. And SOMEBODY bought eBay at 234. I hope it wasn't you. You should only be buying stocks that are in an ongoing uptrend (hopefully not TOO far along however), or those that are bottoming out following a stiff correction. In other words, when you buy a stock it should be with the expectation that it will go up (otherwise, why buy it?). If it goes down instead, you've made a mistake in your analysis. Either you're early, or just plain wrong. It amounts to the same thing. There is no shame in being wrong, only in STAYING wrong. If a stock does not quickly begin to move in the direction you envisioned when you purchased it, you should begin to question your reasons for owning it and you should immediately put it on a short leash. If it doesn't turn in relatively quick fashion, get rid of it. You can always go back in later, when it really turns. This goes to the heart of the familiar adage: let winners run, cut losers short. Nothing will eat into your performance more than carrying a bunch of dogs and their attendant fleas, both in terms of actual losses and in terms of dead, or underperforming, money.

-- Refusing to take a loss at all.

I simply don't understand the way some people think. From whence came the idiotic notion that a loss "on paper" isn't a "real" loss until you actually sell the stock? Or that a profit isn't a profit until the stock is sold and the money is in the bank? Nonsense. Your stock and your portfolio is worth whatever you can sell it for, at the market, right at this moment. No more. No less. People are reluctant to sell a loser for a variety of reasons. For some it's an ego/pride thing, an inability to admit they've made a mistake. That is false pride, and it's faulty thinking. Your refusal to acknowledge a loss doesn't make it any less real. Hoping and waiting for a loser to come back and save your fragile pride is dumb. Your loser may NOT come back. And even if it does, a stock that is down 50% has to put up a 100% gain just to get back to breakeven. Losses are a cost of doing business, a part of the game. If you never have losses, then you are not trading properly. Most pros have three losers for every winner. They make money by keeping the losses small and letting the profits build. You should be almost happy to take a loss. It means that you have jettisoned an underachiever stock and have freed up that dead money to put to better use elsewhere. Take your losses ruthlessly, put them out of mind and don't look back, and turn your attention to your next trade.

Six Lessons for Investors
Be diversified and don't assume past performance will continue
By JOHN C. BOGLEJanuary 8, 2009

There is almost no limit to the ability of investors to ignore the lessons of the past. This cost them dearly last year. Here are six of the most important of these lessons:

1. Beware of market forecasts, even by experts.

As 2008 began, strategists from Wall Street's 12 major firms forecast the end-of-the-year closing level and earnings of the Standard and Poor's 500 Stock Index. On average, the forecast was for a year-end price of 1,640 and earnings of $97. There was remarkably little disparity of opinion among these sages.

Reality: the S&P closed the year at 903, with reported earnings estimated at $50.
Strategists aren't always wrong. But they have been consistent, betting year after year that the market will rise, usually by about 10%. Thus, they got it about right in 2004, 2006 and 2007, but also totally missed the market declines in 2000, 2001 and 2002, and vastly underestimated the resurgence in 2003.

Ignore the forecasts of inevitably bullish strategists. Bearish strategists on Wall Street's payroll don't survive for long.

2. Never underrate the importance of asset allocation.

Investing is not about owning only common stocks. Nor are historical stock returns a sound guide to future returns. Virtually all investors should keep some "dry powder" in their portfolios in the form of high-grade short- and intermediate-term bonds. Investors who failed to learn that lesson fell on especially hard times in 2008.
How much in bonds? A good place to start is a bond percentage that equals your age. Although I don't slavishly adhere to that rule, my bond position accounted for about 65% of my personal portfolio in early 2000. Because returns on my bond funds since then have totaled 50% and returns on my stock funds were negative 25%, bonds are now about 75% of my portfolio, still close to my advancing age.

With all the focus on historical returns that greatly favor stocks, don't ignore bonds. Consider not only the probabilities of future returns on stocks, but the consequences if you are wrong.

3. Mutual funds with superior performance records often falter.

Last year was an extreme example. With the S&P 500 off 37% for the year, Legg Mason Value Trust fell by 55%. Fidelity Magellan Fund, after a good 2007, was off 49%. Funds managed by proven long-term pros felt the pain -- Dodge and Cox Stock down 43%; Third Avenue Value down 46%; CGM Focus down 48%; Clipper down 50%; Longleaf Partners down 51%. (Full disclosure: Four of Vanguard's actively-managed equity funds also lagged the market by wide margins.)

Only time will tell whether the disappointing shortfalls experienced by these and other funds will be recovered in the future, whether the skills of their managers have atrophied, or whether their luck has run out. Whatever the case, chasing past performance is all too often a loser's game. Managers of funds seeking market-beating returns should make it clear to investors that they must be prepared to trail the market -- perhaps substantially -- in at least one year of every three.

4. Owning the market remains the strategy of choice.

Such a strategy guarantees a return that lags the market return by a minuscule amount, and exceeds the return captured by active equity-fund managers as a group by a substantial amount. Why? Because the heavy costs incurred by investors in actively managed equity funds can easily amount to 2% to 3% annually. Typical expense ratios run from 1% to 1.5%; the hidden costs of portfolio turnover often come to 0.5% to 1.0%; a 5% front-end sales load, amortized over a holding period of five to 10 years, adds another 0.5% to 1.0% per year in costs.

As a group, investors are by definition indexers. (That is, they own the entire market.) So indexing wins, not because markets are efficient (sometimes they are, sometimes they are not), but because its all-in annual costs amount to as little as 0.1% to 0.2%.

Indexing won in 2008 by an especially wide margin. Low-cost, low-turnover, no-load S&P 500 index funds outpaced nearly 70% of all equity funds, and (admittedly a fairer comparison) more than 60% of all funds focused on large-cap U.S. stocks. This continues the pattern -- with some variations -- that goes back to the start of the first index fund 33 years ago. The bond index fund did even better. Its return of 5% for 2008 outpaced more than 80% of all taxable bond funds.
In sum, active management strategies as a group lose because they are expensive. Passive indexing strategies win because they are cheap.

5. Look before you leap into alternative asset classes.

During 2006-07, equity mutual funds focused on developed international markets and emerging markets provided strong relative returns to U.S. stocks. During that period, U.S. investors made net purchases of $285 billion in mutual funds investing in non-U.S. stocks, and liquidated on balance some $35 billion from funds focused on U.S. stocks.

This extreme example of "performance chasing" at its worst is hardly defensible. But, disingenuously, it was touted by fund marketers as adding "non-correlated assets," or "reducing volatility risk." In 2008 -- with non-U.S. developed market funds falling by 45% and emerging market funds tumbling by 55%, we learned once again that, just when we need it the most, international diversification lets us down.

Commodities were no different. As the global recession developed, commodity funds sank, the largest such fund tumbled 50%. Always keep in mind: When the investment grass looks greener on the other side of the fence, look twice before you leap.

6. Beware of financial innovation.

Why? Because most of it is designed to enrich the innovators, not investors. Just think of the multiple layers of fees to the salespersons, servicers, banks, underwriters and brokers selling mortgage-backed debt obligations. These new products (credit default swaps are another example) enriched their marketers during 2005-07, only to impoverish the clients who held them in 2008.

Our financial system is driven by a giant marketing machine in which the interests of sellers directly conflict with the interests of buyers. The sellers, having (as ever) the information advantage, nearly always win.

We can't say that we haven't been warned about the perils of ignoring the past. More than 2,000 years ago, the Roman orator Cato noted that, "there must be a vast fund of stupidity in human nature, or else men would not be caught as they are, a thousand times over, by the same snares . . . while they yet remember their past misfortunes, they go on to court and encourage the causes to what they were owing, and which will again produce them."

While the events of 2008 reinforced that message, perhaps these stern and oft-repeated lessons of experience will help investors avoid similar mistakes in 2009 and beyond.

Mr. Bogle is the founder and former chief executive of the Vanguard Group of Mutual Funds. His newest book, "Enough. True Measures of Money, Business, and Life," was published by Wiley in November.

Notice: This site and its methodology work best for those people that can act promptly and without hesitation executing the golden rules and general notes listed below. It is also for those that are preferably on real-time quotes. Many stocks are listed in the nightly newsletter and only those that move quickly, on heavy volume, through the trend lines and buy points, should be considered.

In addition to these 10 rules, please see notes below: And if you are new to trading or investing please see the paragraphs with the * at the bottom.

1. Make sure the stock has a well formed base or pattern such as one described on this web site and can be found on the tab "Understanding Chart Patterns" on the home page, before considering purchase. Dan highlights stocks with these patterns in his newsletter.

2. Buy the stock as it moves over the trend line of that base or pattern and make sure that volume is above recent trend shortly after this "breakout" occurs. Never pay up by more than 5% above the trend line. You should also get to know your stock's thirty day moving average volume, which you can find on most stock quote pages such as eSignal's quote page.

3. Be very quick to sell your stock should it return back under the trend line or breakout point. Usually stops should be set about $1 below the breakout point. The more expensive the stock, the more leeway you can give it, but never have more than a $2 stop loss. Some people employ a 5% stop loss rule. This may mean selling a stock that just tried to breakout and fails in 20 minutes or 3 hours from the time it just broke out above your purchase price.

4. Sell 20 to 30% of your position as the stock moves up 15 to 20% from its breakout point.

5. Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly. Remember stocks are only good when they are moving up.

6. Identify and follow strong groups of stocks and try to keep your selections in the these groups

7. After the market has moved for a substantial period of time, your stocks will become vulnerable to a sell off, which can happen so fast and hard you won't believe it. Learn to set new higher trend lines and learn reversal patterns to help your exit of stocks. Some of you may benefit from reading a book on Candlesticks or reading Encyclopedia of Chart Patterns, by Bulkowski.

8. Remember it takes volume to move stocks, so start getting to know your stock's volume behavior and the how it reacts to spikes in volume. You can see these spikes on any chart. Volume is the key to your stock's movement and success or failure.

9. Many stocks are mentioned in the newsletter with buy points. However just because it's mentioned with a buy point does not mean it's an outright buy when a buy point is touched. One must first see the action in the stock and combine it with its volume for the day at the time that buy point is hit and take keen notice of the overall market environment before considering purchases.

10. Never go on margin until you have mastered the market, charts and your emotions. Margin can wipe you out.

Note: If you are new to trading or investing, I suggest reading these rules many times over until they become ingrained so you can act without emotions.

Stocks that breakout and move up with tremendous volume and close near the highs of the day seem to work out best. However many stocks that move up 15% or more on breakout day often fail. You'll just have to watch your stock's action like a hawk and get to see and understand these things over a long period of time. If trading were easy everyone would be making millions. It's not; it takes years and years of hard work and long hours.

Many traders employ a half hour rule, meaning that for the first half hour of the day many traders do not buy any stock that gaps up in price. If the price holds after the first half hour then often many traders will step in a buy the stock. I find this rule works good after the market has moved up for few strong weeks and is not very effective at the start of a new strong move.

If it's earnings season then it's an absolute must that you know the date that your company reports its earnings. Many traders prefer to be out 100% before a company reports its earnings in case the company misses its earnings or guides lower. Others I know reduce positions substantially before earnings are released to lower risk. The choice is up to you. You can see an earnings calendar on this web site by clicking on the icon Useful Stock Recourses. Please verify this information by calling the company or visiting the company's website which you should be able to find in any search engine.

*The market moves in waves that can last anywhere from weeks to months. Then a correction or setback starts, which can last anywhere from 5 to 8 weeks or even as long at 4 to 6 months. If you are starting a free trial and are a novice you may be lucky to join just as the market gets underway, in which case you will see the full power of charting. If however you start after the move has been going for sometime then things won't look as good as traders are paring down positions. Or even worse the market could be selling down hard and working off the prior up move in which case you will be completely discouraged. The power of charts is through waiting for the correction to end whereby the chart patterns will then be fully developed. After weeks of base or pattern building, stocks will begin to lift off and that's when the big rewards come in. The question is, are you willing to wait and be here for the start of the next big move? The biggest mistake a novice can make is to come back after a move has started.

*Please read a few times my interviews in Stocks and Commodities and Traders' Magazine at the top of the home page of this web site. There are many tips and how - to's that will greatly improve your ability to understand how this works.

More good comments can be found in the FAQ section of this web site in the member login area.

I give setups of stocks that are ready to potentially move. That's my job. Your job is to get to know the stock and its movement along with the general market each day. You are the only one that can do this in realtime during market hours. Then if a stock acts well (i.e. volume is very heavy and the stock is moving easily out of the base) then that is the one to buy. I do not buy most stocks that breakout as most do not meet my heavy volume/price action behavior during the day. Also, I buy only the most expensive stocks as the percent loss is least if the stock pattern fails. High priced stocks are the best quality stocks as a general rule in playing the market. Remember to buy as close to the trendline as possible and the volume should come in at least 10 to 20 minutes after you buy (or even earlier) and if not by then, you know no one wants the stock and might as well check out early.

Thanks, Dan

I spent this past weekend shelling out big bucks for one of those mammoth, motorized people transports you and I call an SUV.

Boy, this sucker is huge!

As I sat in my new (used) car, images of scaling mountains and crossing desert terrains filled my imagination. Hill climbing, rock climbing, mountain climbing, here I come! And then… a tap on the shoulder. The salesman awoke me from my vegetative state of drooling to show me the final all-in purchase price.

Wow! Sticker shock!

The images of grandeur disappeared and now all I could see were all the numbers followed by commas and more numbers and numbers… what a “huge” purchase this turned out to be! No matter what, whether a five dollar roll of toilet paper or a new car, I always feel buyer’s remorse (regret) when making a purchase.

Trading can be very similar. We put our money (real or demo) on the line in the pursuits of financial gain and happiness. Our trades are placed plentiful when the potential for profit is there, and we scurry away with lightning speed when the crowd starts selling off in great numbers. “Hurry, everybody out!”

We don’t want to be stepped on or left behind, right? So with the slightest unforeseen movement, the masses fear the worst is imminent. They get out as fast as they can, and we, of course, follow. This fear (and greed for some) becomes a controlling emotion, dictating their trading decisions and behavior. Just as powerful an emotion as fear and greed is regret.

Regret is similarly controlling in that it can keep us from placing a trade because we don’t want make a mistake. We undoubtedly want to feel good about our decisions and strategies. In our attempt to do feel this way, we find it more painless to steer clear of making a trade all together, avoiding any risk of failure. Taking this mindset of avoidance, however, will definitely not lead us to the potential for profits that we seek.

Regret comes about after we make a decision and we then start picturing the things that could have gone differently. When trading, regret is an easy feeling to have because it can occur both when making a move or when doing absolutely nothing. For instances, you open a trade with the best intentions, only to have it stop out for a loss of your entire account balance. You automatically feel regret for ever taking the position and now being poor.

On the other side of the coin, you don’t take a position because you’re allergic to risk. Your missed opportunity turns out to be the trade of the century, and it would have made you a gazillionaire! Arrrgghh! You seep into a state of utter regret.

For both examples, it’s easy to imagine the could-have-beens. We envision ourselves in those “winning” realities and how everything is so heavenly. But then we come back to Earth where things are definitely not paradise.

We have all experienced the pleasantries of regret (**wink**), but they can actually be good for us. Sometimes regret can give us that extra kick in the ribs to get off the floor and back on our feet. It compels us to get right what we initially did wrong; it can promote action.

Maybe you’ve been driving around in a monster truck SUV like me, consuming Mother Nature’s resources non-stop. Gas prices have hit an all-time high, and all of your closest friends are active members in Greenpeace. You regret ever buying that hunk of junk and not listening to your buddies. So, you trade in your SUV for an energy-efficient hybrid Toyota Prius and send in your membership dues to GP. And just like in trading, when the going gets tough and you lose yet another trade, instead of crying in the corner of your bath tub, the response to your mistake is too reevaluate your strategy and the market. You do more testing and try your skills on another new trade. You want that losing trade back!

In the last example, we used the regret we felt for our errors to motivate and encourage ourselves to try again. Taking this new perspective when things don’t go as plan will have a positive impact on your mental attitude and your trading as a whole. Don’t get hung up on the loss. Forget about it and move on!

That said, some traders have an issue with feeling regret even before a trade is made. No action has been taken, but you worry starts to consume the mind, and all they can think about is making a mistake. In this instance, the possibility of a regrettable outcome is stopping them from acting. To help, we must remind ourselves that it isn’t the end of the world and that there’s still time to fix what’s not working. We can’t change our past trades but we can definitely make new ones to take those profits back.

Again, the key here is action; the point is to make the trade. Don’t let regret hold you back from progressing by means of action. And remember, not all risk is bad; Taking risks that are minimal and calculated are integral to growing into a successful trader.

by Dr. Pipslow

It's easy to get caught up in daily defeats. Your trading strategy isn't working. You're losing money hand over fist even though you know your system works and you're following all the rules.

If you aren't careful, you could get discouraged and feel like giving up. When you aren't making the profits you desire, you could end up feeling like a failure, thinking you'll never make it as a trader.

When you are discouraged by everyday setbacks, it's crucial to keep your eye on the big picture. You could be losing a battle here and there, but you may end up winning the war.

Many traders make the mistake of letting their feelings of worth be determined by everyday trading results.

You think, "If I make profits today, and every day this week, I'm doing well. But if I end up losing most days, then I'm doing horrible!."

This kind of thinking is based on how people view compensation for a conventional 9-to-5 job. You put in your 40 hours, do a good job, and you get paid handsomely. You feel good for working diligently and productively for the week.

But when you trade, you may not always receive sufficient compensation for your efforts. When you don't reach the profit goals you set, you can feel as if you didn't get paid enough for your efforts.

It's going to be tough, but as a trader, you must avoid thinking in these conventional terms. An extremely productive week may produce ZERO profits. When you are trying to achieve a certain level of income in a given timeframe, you are setting "performance goals" that you may not be able to achieve.

A better kind of goal to set is a "learning goal."

You may not be able to achieve a particular performance goal during a given week; that is, you may not always be able to achieve a particular dollar amount, but you can achieve a particular learning goal.

Every day you trade, you gain valuable experience regarding how you approach the markets. You see various setups and learn how they can or can't lead to a profitable trade. Don't undervalue these learning experiences.

Every day, you are achieving learning goals. Your daily efforts may not directly lead to profits, but indirectly, they do add to your wealth of experiences. You may only win a battle here and there, but when you add up the battles you do win, over the long haul, you end up mastering the markets, and winning the war in the end.

If you merely focus on how much money you make as a trader, and use a conventional payment schedule, you'll work your butt off but fail to get the conventionally defined "paycheck" you expect, and feel ripped off. But if you define your paycheck in unconventional terms as the amount of experience you gained, you'll feel rewarded for making a series of trades, profitable or not, and feel you've accomplished something.

And regardless of how much money you actually make, you will have indeed accomplished something: You will have further honed your trading skills.

In the big scheme of things, winning these minor battles will help you win the war. You'll master the markets and become a winning, profitable seasoned trader.