Fortunepeople

Stocks -What Key Factor Separates A Winning Trader From A Losing Trader?

Often, I receive requests from members of my stock market trading discussion group to give my views on technical analysis of stocks that they are watching. In the course of discussion, I discovered one common factor which separates the winning traders from the losing traders.

In general, both group of traders like to scan their lists of active stocks to uncover possible trading candidates. However, the traders in the winning group are specific about their trading, and have their entry and exit points well spelt out in a specific trading plan.

In their trading,they have precise entry and exit points…so that the trade is unemotional. After they have entered a trade, either they are correct and ride the trend or they are wrong and you exit with a loss that has been predetermined. There is nothing vague in their trading.

In contrast, those who are losing money in their trades invariably do not have a trading plan, or at least a semblance of a trading plan. This group of traders jump on tips provided by others without being able to check or verify the tips from some analysis, whether technical or fundamental. They do not have any idea of when to enter the trade or to exit with a stop loss.

Again, when the winning traders have computed their entry and exit and stop loss points, these traders can approach their
trading day with guarded optimism, watching whether an expected rally is on the cards or not. By watching pre-determined price points, the trader can know whether a rally has in fact begun and to start to trade in a more aggressive manner or to stop trading on wrong expectations which comes soeasily by being influenced by tips here and there. If the trade goes against them and hit their stop loss, they take their loss unemotionally and are out of the market, thus limiting their losses.

Remember, you involve hard earned money into your trading and investment.There is nothing VAGUE about trading. Every entry and exit points is calculated before hand to enable you to control your risk, if you are to become a successful trader.

Learn how to do this well and you will be a consistent trader. Test every tip and breathe specifics into your trades and you can make profits. In every profession, it is the specialist who makes the most money. Learn to excel in your trading and you will be profitable.

The first quarter of 2006 is over. Now is a good time to reflect on stock prices and the opportunities they present.

Bargains are scarce. Equities are expensive. In recent weeks, Ive heard several fund managers say valuations are still attractive. I dont agree. Generally speaking, valuations are unattractive. Returns on equity are higher than historical levels. A market-wide return on equity of 15% is unsustainable. Price-to-earnings ratios may not fully reflect how expensive stocks are. Price-to-book ratios are more alarming.

There are two additional concerns. Most discussions of the relative attractiveness of equities focus on the S&P 500 and forward earnings. The S&P 500 is not the most representative index. It may not be the best index to consider when looking at market-wide valuations.

Forward earnings are (necessarily) estimates. Where current returns on equity are unsustainable, projected earnings that use similar returns on equity may overstate the earnings power of equities in general. This can occur even where the estimates appear reasonable given current earnings. If you start with unsustainable base earnings, you are likely to overestimate future earnings even if you truly believe you are assuming very modest earnings growth.

Assets in general are pricey. Value investors have few places to turn if they continue to insist upon a true margin of safety.

Bonds are unattractive. Long-term inflation risks make U.S. treasury, corporate, and municipal bonds a fools bet. There is little to gain and much to lose. The know-nothing investor who buys a top-quality bond today and holds it for decades may very well find his purchasing power diminished.

There may be some select opportunities in foreign equities. But, these are difficult to evaluate. Foreign government obligations are also difficult to evaluate, but that isnt much of a problem for value investors, because most foreign government debt is priced to perfection. Youll have to be willing to take a lot of uncompensated risks if you want to own such bonds.

Of course, there are exceptions to every rule. There may be a few bonds out there that are attractive. There certainly are a few attractive stocks out there. But, even those stocks that look very attractive relative to their peers dont look nearly as attractive when compared to past bargains.

Value investors face a difficult choice. They can assume stock prices will return to historical levels, and hold cash until the correction comes. Or, they can accept the reality they currently face.

There is no logical reason stock prices must necessarily return to historical levels. During the twentieth century, real after-tax returns in diversified groups of common stocks were very high relative to other investment opportunities. There have been various reasons given for why this occurred. Many have said these returns were possible, because of the higher risks involved in holding equities. Over the long-term, risks were somewhat higher than todays investors seem to remember, but they were hardly severe enough to justify the kind of performance spreads that existed during much of the twentieth century.

True, if you bought at inopportune times, it was possible to remain in a fairly deep hole for a fairly long time. But, if you gave no real consideration to the timing of your purchases or the prospects of the underlying enterprises, you did better than many bondholders who chose their investments with the utmost care.

This is a disconcerting problem. It may be that most investors are overly sensitive to the risk of an immediate paper loss in nominal terms, and therefore overlook the much greater risk of a gradual loss of purchasing power. Issuing fixed pound obligations may be the best bet for any business or government that seeks to swindle investors.

For the sake of the common stockholders, I hope many of the best businesses continue to issue such obligations when money is cheap. Corporate debt gets a bad name, because it tends to be overused by those who dont need it and shouldnt want it (and, of course, by those businesses that do need it but won’t survive even if they get it). The businesses that would benefit the most from the use of debt usually appear to have more cash than they could ever need. But, its best to think ahead. For truly high quality businesses, the cost of capital will fluctuate far more wildly than the likely returns on capital.

If, during the last hundred years, stocks really were far cheaper than they should have been, is there any reason to believe stock prices will return to past levels? The past is often a pretty good predictor of the future but, not always. Its difficult to say whether, over the next few decades, valuations will, on average, be higher or lower than they are today. However, it isnt all that difficult to say whether, at some point over the next few decades, valuations will be higher or lower than they are today. The answer to that question is almost certainly yes. They will be higher and they will be lower. Maybe for a few years or a few months. Maybe for a full decade. I dont know.

What I do know is that value investors will have opportunities to make investments with a true margin of safety. But, should they wait?

Thats the most difficult question. Today, I am not finding opportunities that look particularly attractive when compared to the best opportunities of past years. But, I am still able to find a few (in fact, a very few) situations where the expected annual rate of return is greater than 15%.

That will be more than enough to beat the market. It will also likely be enough to provide a material increase in after-tax purchasing power. Thats not guaranteed, but it hardly seems holding cash would offer the better odds in this regard.

So, is an expected annual rate of return of 15% good enough? Is it reasonable to bet on the good opportunity that is currently available instead of waiting for the great opportunity that may yet become available?

Ill leave that for you to decide.

Stocks And Shares – How To Trade Profitably In A Bear Market

Trading in a bull market is easier than trading in a bear market. Many traders find they can make money trading in bullish markets, but when there is a major correction underway or when the market is bearish, they literally freeze and are unable to trade successfully or find profits in their trading.

First,when a market has collapsed, it is important to accept the fact that the market trend has changed from bullish to bearish. It is human nature to find scapegoats or to find a reason or to rationalise away the fact that the market trend has changed. But unless the trader accepts the fact that he is solely responsible to trade his way out of a bearish market, he will find his position untenable and discover losses that add up daily as the market bearish sentiments continue. It does not pay to refuse the responsibility of your own trading action and put the blame on your broker or your friend who has given you the “tips” that led to your losses.

If you are faced with losses from a sudden collapse in prices, accept that it is your responsibility to now institute action to get out of this situation with profits.

Secondly, while in bullish markets it is easy to trade by just buying stocks that are in initial outbreaks and just holding them and coming back again after a few days to reap profits, you cannot do the same during bearish markets.

In bullish markets, you trade with the trend, and as long as the trend is up, you stand to make easy profits. On the contrary, in bearish markets, the market goes into consolidation, and trends are shorter in duration or the market will go into a sideways direction, with prices oscillating between ranges. During bearish markets, we are more biased towards range trading rather than trend trading. So if you do not know how to change from using trend trading to range trading, you can be caught with short term trend changes and suffer whipsaws and lose money trend trading during bearish markets.

Dealing with traders who have gone through a series of major market corrections since 1987 has led me to conclude that there is no room for lackadaisical trading during bearish markets. The margin of error for a trading signal is much lower when trading in a bearish market. I have seen traders who are able to quickly change or adapt from longer trend trading to trading shorter swings in the market or range trading to be able to make money from their trades. In bearish markets, they are contented with smaller profits, but trading more often and in higher volumes. To aid in their margin of profits, they are able to negotiate the lowest brokerage terms possible with their brokers or to use discounted online trading platforms.

In bearish markets, the trader who range trade will be the one who is best positioned to take advantage of the shorter and faster rebounds that occur as stocks get oversold and retrace upwards. Accepting personal responsibility and adapting to range trading will improve his chances to make money during bearish markets.

Stocks -A Winning Way To Scan For Stocks That Are In Uptrends

With thousands of stocks listed in the stock exchange for trading, how does a trader go about his stock selection? I am not refering to the fundamental approach where the trader studies the fundamentals of the company, and research the performance results of the company, check its price-earnings ratios or check its balance sheets and turnover and its dividend yield.

By and large among those successful traders who really make their living off by trading professionally in the stock markets, their preferred method seems to be the technical analysis approach.

By this, they use charting, and technical indicators applied to the stocks. They will devise filters or explorations, to scan for stocks that meet some selected indicators to show that the stocks are beginning to move or have started to move.

Professional traders who trade for a living have an array of trading tools to help them, but one of the most common tools they use to good effect is the indicator called On Balance Volume.

Popularised by Joseph Granville, the On Balance Volume or OBV in short is actually cumulative volume, where the underlying principle is that similar OBV should support equivalent price. By using this indicator, short term traders will be able to identify when there is a difference in this setting, or where OBV has outbreak already but price has still lagged behind, giving rise to the situation where an impending price jump is expected.

But how large is the impending jump? If there is indeed an OBV outbreak, and by inference the price should follow in the next few trading sessions, one must also ensure that the impending jump is of sufficient size to warrant a good margin of profit attractive enough for him to trade.

Added to this trading indicator, traders add yet another trading stipulation to nail those giant moves. We know in Elliot wave theory that the 3 and 5 waves of any stock are the impulsive and strong waves up.

I have seen much success from traders who scan their stocks with an OBV outbreak and are in their impulsive 3 and 5th waves which are their longest and strongest waves.

Armed with this understanding, when a stock is found to have just undergone an OBV Outbreak upwards and is moving within either its 3rd or 5th wave, you have an excellent candidate that will probably run away in price, and letting you reap a handsome profit within a short trading period.

A lot of investors fail in stock trading because they lack adequate knowledge and experience. Todays stock market is definitely a difficult atmosphere where volatility is heightened. Before the availability of Stock Assault 2.0, traders relied greatly in random chance and guess works for gaining profit. But now, things have changed a lot.

Thanks to the internet, traders can now do their transactions online. However, the process followed in the online transaction is the same as offline trading. The only advantage is that they can buy or sell stocks without leaving home or their office. As long as there is a fast internet connection, you can conduct stock trading online.

There are various kinds of software programs sold in the market. The different software programs are designed to perform specific tasks. If you want to purchase a stocks trading software, Stock Assault 2.0 is among the best. Why? Read on and you will find out.

Stock Assault 2.0 is a program used by some traders to eliminate the fear in buying or selling stocks. This program is exclusively designed for investors of private equity. You can watch the trade online and determine the winners and losers or you can also do some of your tasks on the computer while the market is meticulously and carefully analyzed.

How does this program work? With the Stock Assault 2.0, you can get real time information, which means you can get the current days stock information. The program also allows the user or trader to access previous stock performances thereby helping you to predict future trends. Aside from that, the program automatically chooses winning stocks for you but its still up to you whether you buy the stock or not. The program will also scan other companies and selections. Alerts are also given by the program when its finally time to sell your stocks.

The Stock Assault 2.0 is a very good deal and you can purchase it at a very affordable price. Its a very useful investment and it can help you with your day to day stock trading. New traders are advised to purchase this software program so that they will have some sort of guide in trading stocks. The stock market is not as easy as you think. You cant control or manipulate it and so you must know effective techniques in order to gain more profits in the future. Now, you can trade at home or in the office with the use of this program. So what are you waiting for? Hurry and search for this very useful program on the internet. After youve purchased this program, you can sit down and relax as you watch how the market is working. You can learn a lot by simply watching online.

There are still other software programs available which can help stock traders in doing their job. Still, you should not rely entirely on the program for success. As a responsible trader, you should be knowledgeable as to how the trading process works. Stock Assault 2.0 is one of the best programs in the market. Get it now and see more profits rolling in. You dont need to have a huge account in order to start trading. By simply knowing the risks involved and by using the program, you can already trade stocks.